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Community Infrastructure Levy: How will it impact on development?

Why have a levy?
The theory behind the Community Infrastructure Levy is that the impact of development is twofold:

a) There is an impact on the local community.
b) There is an increase in the value of the land.

The intention is to ask the people with the benefit of the increased land value to financially mitigate the impact on the local community.

As land values rise with development permission, the Government see this as suitable justification to ask for contributions without removing the incentive to develop.

How will it be calculated?
Community Infrastructure Levy will be imposed on any residential development as either an amount per bedroom, or based on floor area and for non-residential development it will be based on floor area. This should be set at a realistic level to assist infrastructure without frustrating development by making it economically unviable. Clearly, if the Community Infrastructure Levy is placed at a prohibitive level, land will not come forward for development.

Under Section 106 of the Town and Country Planning Act 1990 (Planning Obligation regime), only 14% of all housing planning permissions were required to make any contributions in 2003/2004.. Community Infrastructure Levy is intended to seek community benefit from all developments regardless of size. The methodology for calculating the levy is yet to be resolved and is the major problem with the concept as it stands.

Will this be better for Developers and Landowners?
The Government state that CIL is welcomed by developers as it will provide certainty. From the outset a developer or landowner will be able to calculate the amount of contributions that they will be required to make and therefore this could speed up the process of obtaining planning permission. However, CIL is not intended to replace section 106 obligations which may still be required and may still therefore delay the planning process.

How will the money be spent?
The paper states that CIL is “about making certain the very things that make the quality of life good in a neighbourhood are provided – or are not lost or weakened but are maintained or improved when an existing community grows”.

CIL is intended to encourage development and to improve the community foundations within which the development is to take place.

Regulations are to be introduced setting out requirements to report on how the money is being spent by each Local Planning Authority.

CIL money must only be spent on infrastructure pressures that are aggravated by new development, this does not necessarily mean new infrastructure but it must relate to the new development for example, works to improve existing facilities would also benefit from the CIL funding.

What about affordable housing?
Any definition of “infrastructure” is likely to include affordable housing so that it could be brought into the CIL requirements at a later date, if necessary. However, initially it is intended that affordable housing will be considered separately and therefore it is likely that Section 106 Obligations will still need to be entered into in order to provide suitable levels of affordable housing on housing development sites, if not dealt with my way of a condition.

Affordable housing is just one example of a non-financial obligation, which is likely to remain controlled by way of Section 106 Obligations.

When will CIL be paid?
Indications are that CIL would be payable upon the commencement of development. It would be calculated once a planning permission is fully effective, ie once full planning permission has been granted or an outline plus reserved matters approval.

Who will pay?
It is intended that the Community Infrastructure Levy liability will attach to the land (and be registerable as a local land charge) so that the landowner is liable. However, there are problems with this as it may be difficult to compel payment where land is not registered or where there are offshore landowners. Therefore the Government are proposing that the developers themselves could also be made liable for the Community Infrastructure Levy payment.

What if CIL is not paid?
The bill clearly sets out enforcement action which can be taken by the Local Planning Authority if Community Infrastructure Levy payments are not made.

The Government is suggesting that failure to pay CIL could result in a legal requirement to halt development.

As stated above, CIL may be registered as a Land Charge so any subsequent purchaser of the land would be made aware that the liability has not been discharged. Enforcement action could be taken against subsequent purchasers of the land.

What types of development will be covered?
Although house builders are those most likely to be initially impacted by CIL, both residential and commercial development is intended to be covered in the long term. There will be a de minimis threshold so that individual household development is not covered but it has not been discounted that such development including possibly that within the permitted development rights could be included.

The Department of Communities and Local Government have confirmed that the consultation on the draft CIL regulations is expected to take place from Autumn 2008.

If you require any further information with regard to Community Infrastructure Levy or its potential impact on development, please contact Louise Whitehead of the Planning and Development Team on louise.whitehead@harveyingram.com or 0116 257 4452.