Developer Contributions Regulations Update

With the Community Infrastructure Levy (Amendment) (England) (No. 2) Regulations 2019 due in force on 1 September 2019 (“the 2019 Regs”) it has been a long road to reach this point.

Starting with the independent review into the Community Infrastructure Levy (CIL) and its relationship with planning obligations back in November 2015 a report published in February 2017 concluded the system of developer contributions was not as simple, certain or transparent as originally intended.

The Government’s response, its 2017 Autumn Budget, led to consultation on reforming developer contributions for affordable housing and infrastructure (March 2018).

The consultation focussed on short term reform and formed part of the Government’s multi-pronged approach to delivering more homes to enable home ownership. The consultation proposals focussed on:

• Reducing complexity and increasing certainty for all stakeholders;
• Supporting quicker development;
• Improving the market responsiveness of CIL;
• Increasing the transparency of how contributions were spent; and
• Introducing a new strategic tariff.

Whilst CIL established the payment of contributions for additional necessary infrastructure caused by the cumulative effects of development via a more standardised approach, contributions outside the remit of CIL have remained secured by negotiated planning obligations. The former was intended to be faster with greater certainty.

Nonetheless, despite what is committed through planning obligations is not necessarily collected, due to renegotiation or lapsed permissions, the uptake of CIL has been sporadic to say the least and has not met its originally envisaged objectives. Its application around the country has been, at best, like a patchwork quilt with some very big holes in it and its existence next to planning obligations does not always sit easily.

One major claim against both contribution mechanisms is that they have not kept pace with increases in land and house price value thereby failing to capture an adequate proportion of development value for wider public and community benefit. The flip side of this unresponsiveness is to render development unviable in struggling market conditions.

The Government’s autumn 2018 response followed and hot on its heels the technical consultation on draft legislation to amend CIL (December 2018) and most recently the Government’s response (June 2019).

Blinking now into the legislative light are the 2019 Regs crystallising the reforms the Government is taking forward to make developer contributions less complex and more transparent.

Much is welcome.

The improved flexibility in approach to consultation requirements for setting and revising charging schedules, clarifying the bodies to be consulted (including the Mayor for London Boroughs) and backing the changes with updated guidance.

Then there is one of the headline changes, the removal of the pooling restriction across England and Reg 123 lists. The encouragement by the Government to consult on the impacts of ceasing to charge is little more than lip-service to what should be widely welcomed having caused much uncertainty and delay for planners, lawyers, their clients and authorities alike. Despite concerns raised during consultation over double dipping the fact is that the flexibility to be able to use both mechanisms will help address the problems encountered with the timing of CIL receipts which has caused delay to key infrastructure, the authorities unable to procure timely delivery, and has been long recognised and accepted as an problem.

The harsh application of CIL is softened, slightly, with the replacement of the loss of relief or exemption for relevant developments with a grace period for service of commencement notices and a mandatory penalty charge, of up to £2,500, unless the costs of recovery outweigh the charge.

Further softening is seen in relation to the balancing of overall CIL liability for phased development first permitted before CIL was in force in an area but then amended and to be further clarified through amended guidance.

The requirement for Infrastructure Funding Statements, eventually by the end of 2020, is also welcome.

However, certain nettles remain to be grasped. Most notably addressing the need to capture an amount which better represents infrastructure needs and the value generated through planning permissions. This was proposed via amendments to indexation but this has not been pursued because of concern about its complexity. Nonetheless, Government commitment to this issue remains and a new CIL Index to be produced by RICS.

The strength of planning obligations has always been their flexibility justified on a development by development basis. Over the years the stricter CIL regime has had to acknowledge some of the flexibility required for planning and developing in the real world and the 2019 Reg amendments are a further welcome reflection of this fact.