Changes to the community infrastructure levy
January 2011
Our infrastructure experts summarise the key issues and share their thoughts on potential developments.
The uncertainty over developer contributions has now been clarified by the Coalition Government. The previous Government’s regulations for the Community Infrastructure Levy (CIL) came into force in April 2010. Since the Coalition Government was formed in May 2010, the indications were that whilst a CIL-type regime would remain, it would perhaps be re-badged as a Single Unified Local Tariff (SULT). In fact, the changes were far less radical.
So what has been changed about CIL?
The current CIL regulations came into effect following a long and controversial process to reform planning obligations and the delivery of infrastructure through CIL. Despite some key changes to alleviate concerns from the development industry, such as the allowance of exceptions, issues of practicality and implementation remained unanswered. The Regs remain in force and already are having their effect on the way obligations are negotiated.
Through the Localism Bill, which started its way through Parliament in December 2010, changes to CIL were outlined:
Through the Localism Bill, which started its way through Parliament in December 2010, changes to CIL were outlined:
- LPAs will be entitled to use CIL funds not only for the establishment of new infrastructure, but in addition for their provision "on an ongoing basis." This will help to pay for the maintenance of such infrastructure, and appears to be a sensible addition.
- As part of the wider shift of power to the neighbourhood level, there is provision to require CIL funds to be passed to communities in which the development in question is taking place, where it is to be spent on the provision of infrastructure.
- The role of the independent examiner in the process for adopting charging schedules is to be diluted; LPAs are to be given more autonomy, including the power to adopt their own measures to address an examiner's recommendations.
- The timing of payment of the CIL charge was altered to facilitate staged payments. This shows the importance of project planning and viability and taking account of ‘when and how’ questions relating to growth.
Meanwhile, a comprehensive account of the Government's plans for CIL may be found in its recent publication: The Community Infrastructure Levy - An overview, published last month. This document, which is not guidance, explains the key features of the new charge, its rationale and how it will work in practice. It is a useful indicator of the Government's plans for CIL, and the best source of information currently available.
What implications does this have for LPAs considering a CIL charge?
In terms of the fundamentals of CIL, the changes have little effect. The transitional period for putting a CIL in place still applies, meaning that by April 2014 the ability to charge for infrastructure needs outside of a CIL will be extremely limited. The overarching aims of the CIL are unchanged as well. Where it could have implications are in more subtle ways. For example, the ability to charge for the “ongoing costs of infrastructure” relates in particular to the maintenance and operation of that infrastructure. In many cases such costs will be considerable and will need to be addressed because public funding will not be available to fill the gap. This may result in a lower level of infrastructure being provided because such ongoing costs make full provision prohibitively expensive.
In addition, the provision of CIL receipts to neighbourhood groups may have unintended consequences. Whilst these people may be best placed to know what infrastructure is required to address historic deficits in their communities, CIL is explicitly intended to address the effects of new growth only. Local spending may not be directed towards the type of infrastructure that can best serve the needs of new residents. Perhaps on a more positive note though, by setting aside money for local needs, CIL will ensure that smaller items of infrastructure that are often fundamental to community wellbeing can be delivered. Under the current system, such needs which some see as non-essential may fall off the radar in areas where viability is under scrutiny. Plus this continues to incentivise support for development in local communities who will feel that they can now directly receive the benefits. Meanwhile, the local authority will be receiving benefits of their own in the form of the New Homes Bonus where there is residential development.
So what is the timescale for change and what should LPAs be doing?
The Localism Bill has started its long journey through the Parliamentary process and is expected to be given Royal Assent in late-2011. Once it has become an Act of Parliament, the CIL Regs will need to be updated. So we would expect this to take effect at some point in early 2012.
Meanwhile, LPAs should be continuing to think about and prepare a CIL charge for their area. Even if uncertain about whether to put a CIL in place, the need to plan and deliver infrastructure continues, particularly for authorities still wishing to have their Core Strategies examined. The Planning Inspectorate (PINS) produced a much needed second ‘Learning from Experience’ document in September 2009, which recommended local authorities should:
- identify critical dependencies between infrastructure provision and key policies
prioritise to avoid the “wish list” approach
-
consider “what if” questions where there is uncertainty (such as in market conditions over the plan period)
This document is still highly relevant. The fundamentals for effective infrastructure planning remain and still need to be addressed. In terms of using developer contributions to help fund infrastructure, whether LPAs choose to put in place a CIL or not, they will need to consider their particular requirements, which include:
- the extent to which infrastructure needs are cross boundary
- whether pooled contributions, in conjunction with mainstream funding, will be sufficient to fund necessary infrastructure
- differences in viability in an area - not just between uses and locations, but also the types of sites in terms of issues such as abnormal costs and existing use values
The planning system will also need to adapt to the growing challenges presented by effective infrastructure planning and funding, in particular the viability of development. For example, PINS is already requiring viability evidence where developer contributions will be used to fund key infrastructure requirements.
Our recent study into how training in this area should be improved, undertaken for a commissioning body of private and public sector stakeholders led by the British Property Federation (BPF), is to be followed up by guidance from the RICS on how to test financial viability in planning. In addition, we are currently leading courses on viability in planning on behalf of the Planning Advisory Service. These highly popular courses are aimed at local authority planners and increasingly recognise the need for planners to get to grips with the principles of development.
We are here to help.
Chris Bowden, Andrew Clarke and Shilpa Rasaiah
