Planning gain is the value added to the land following development on it.
Section 106 agreements are a way of extracting money from developers, to provide affordable housing, for example. Developers aim to maximise profits, whilst councils aim to provide more affordable housing. This often causes friction and disputes. One problem is that councils often make more profit on affordable housing, which some developers feel is unfair.
At the height of recession England developed policies (Planning Act 2008) to make improvements to infrastructure that would otherwise have been difficult under the previous system. The Community Infrastructure Levy (CIL) is a capital cost payable by developers towards the cost of local and sub-regional infrastructure to support development (Communities and Local Government CIL report 2008). CIL is available to support the transport network, but will be able to improve the environmental and social infrastructure, schools and parks.
The coalition government decided to retain the CIL and attempt to improve it.
The aim of the CIL is to improve: -
Local authorities will be empowered, but not required to levy a charge on most types of development within their area. The LA’s can continue to enter into Section 106 planning agreements to secure planning obligations for on-site contributions. Affordable housing should still be provided by existing systems of negotiated planning obligations. The levy is expected to complement the existing section 106 arrangements.
In setting the levy authorities will need to follow two steps. The first is identifying what infrastructure is needed and how much it will cost. The second is working out what contribution each development should make to that cost. Arrangements will be put in place for independent testing of the proposed levy. It is accepted that an authority may want to impose different levels of charges because of specific local conditions so there may be different levies charged by an authority in respect of different parts of a town or district. CIL charges will be based on simple formulae which relate the size of the charge to the size and character of the development paying it.
Mid Devon Council was the first authority to test the CIL. The planning committee will consider plans to fund the Cullompton relief road using the levy.
The benefits of CIL include: -
• More legal certainty enabling sub-regional infrastructure
• Mitigation of cumulative impacts
• A broader and fairer range of developments
• Improvements in transparency
• Greater certainty over amount of CIL and when required
• CIL loosens the relationship between the development and the amount charged since the charge by definition is an average cost distributed evenly across a number of developments
• Supports the development of the area rather than the specific development
• Larger sub-regional infrastructure can be funded by CIL in a way that planning obligations struggle
• Easier to levy contributions from less major developments
• Widening of contributions base, moving away from skew to large developments
• Less “lumpy” and more predictable (previously some large developers did not pay as they were not the last to contribute to the problem).
• Planning obligations can be negotiated, CIL is fixed
• Transparency and increased community participation
Unfortunately we are at such an early stage that it is difficult to assess its chances of success. Only 22% of councils would implement CIL, according to a Drivers Jonas survey earlier this year (Local Government Chronicle 2009). It may be the case that funding becomes so difficult to find that councils will have no option but to employ the CIL.
There are two particular controversial areas on which the Government still has no clear position:
• The extent to which developers could be fully or partially exempted from CIL on the basis that CIL payment would make the development unviable; and
• The extent to which payment in kind could be taken into account and credited against CIL liability.
It is clear that in both of these areas, the Government is concerned that giving charging authorities too much leeway will encourage continuation of the current practice where some developers are able to negotiate levels of planning gain downwards. In addition, there is a fear that the intended standardisation provided by CIL could be significantly watered down.
In relation to the viability exemption, on the one hand the consultation paper notes that the viability assessment required to set levels of CIL ought to make an exemption on the basis of viability unnecessary. On the other hand, the paper suggests a possible model whereby charging authorities could establish options from a limited range established under
• Reducing CIL to a level which would allow development to commence, on the basis of an independent assessment;
• Delaying payment of CIL; or
• Making allowances for costs incurred under a planning obligation.
The Government appears even more trenchantly against payments in kind citing, in particular, the need for objective assessment and possible problems with EU procurement regulations. The Government seeks further views without suggesting a possible model for payments in kind. Without a payment in kind system, a basic problem remains for applicants: if they see a particular piece of infrastructure as necessary to the success of the development and that infrastructure is to be provided by CIL, they will have no way of forcing the authority to provide it within any set timescale. This may lead to applicants double-paying, e.g. through signing up to S278 highways agreements.
Without specific restrictions on the types of infrastructure that could be included within planning obligations, there may well be disputes as to whether certain infrastructure should be paid for through CIL or by planning obligation.