Amongst all the reaction to the proposed revisions to the NPPF, the consultation on Developer Contributions has, to some extent, gone under the radar, although most of the proposed changes had already been outlined as part of 2017 Autumn Budget.
Some of the more significant proposals are summarised below:
Lifting the pooling restrictions
The Government proposes to remove the restriction on pooling Section 106 contributions in areas where the council has adopted the Community Infrastructure Levy (CIL). This seems logical, given that the rationale for the restriction in the first place was to incentivise councils to adopt CIL.
The proposal goes further by suggesting the removal of the restriction where authorities fall under a threshold based on the tenth percentile of average new build house prices. This is a consequence of the fact that CIL uptake has been quicker in areas where land values are higher. In areas with lower land values, some councils have concluded that they would need to set rates at a very low (or zero) rate in order for development to remain viable.
It is also proposed to remove the restriction where development is planned on several strategic sites, although it is not yet clear how “strategic sites” will be defined, and the consultation invites views in this respect.
Setting CIL rates based on existing land use
This proposal is designed to encourage the use of a specific single CIL rate for large strategic sites, charging on the basis of the majority use where 80% of the site is in a single use or where the site is small. Complex sites would be charged at a generic rate set without reference to the existing land use, or have charges apportioned between the different existing uses.
The rationale for this is that the ability to set CIL rates for different areas within the authority does not give councils sufficient scope to capture either the infrastructure needs generated by a particular development within a charging “zone”, or the value generated by the grant of planning permission.
For example, land previously used for agriculture and industrial land could sit in the same charging zone, and yet the value generated by the grant of planning permission for the sites may be significantly different, as might be the infrastructure requirements that they generate.
Removal of requirement for Regulation 123 Lists
It is suggested, rightly, that Regulation 123 Infrastructure Lists do not provide clarity or certainty in respect of how CIL monies are spent.
It is proposed that these are replaced by “Infrastructure Funding Statements” that will explain how the spending of forecast income from CIL and Section 106 obligations over the next 5 years will be prioritised. While it is suggested that councils will have to report annually on where the income from CIL has been spent, there is no suggestion that the specified spending priorities would be binding or enforceable.
This proposal is aimed at addressing a perceived lack of transparency over the use of CIL monies. Whilst negotiations over Section 106 contributions are a source of frustration, they at least provide developers with some input (during the application process and Section 106 negotiations) into where money is spent, which is usually related in some way to the application. Additionally, the standard repayment clauses commonly inserted into Section 106 Agreements will bite if funds are not allocated to the specified purpose. There are no corresponding safeguards in the present CIL regime.
CIL charges are currently indexed in accordance with the BCIS All-In Tender Price Index. This is intended to capture increases in contractor costs, but it will not always reflect house price inflation. It is proposed to index residential development to regional or local authority house prices.
Interestingly, this approach would potentially lead to a reduction in CIL during an economic downturn, which is a positive for house developers, if not for councils.
Introduction of a Strategic Infrastructure Tariff
Inspired by the Mayoral CIL used to fund Crossrail, the Government proposes to allow combined authorities and joint committees (where they have strategic planning powers), to introduce a Strategic Infrastructure Tariff to fund particular infrastructure projects. Little detail is provided, but it is a proposal designed to facilitate more cross border cooperation in the provision of major infrastructure.
Simplifying the setting and revision of charging schedules
It is proposed to replace the formal consultation requirements with a requirement to publish a statement on how an authority has sought an “appropriate level of engagement”.
This would be considered through the examination process and is intended to allow authorities to set and revise charging schedules more quickly.
There is certainly sense in some of these proposals. The lifting of the pooling restriction in the circumstances described is logical, and it also seems sensible to remove it in areas where low land values make the introduction of CIL unfeasible.
Streamlining the procedure for the introduction and revision of charging schedules is also to be welcomed, as is the introduction of more flexibility over the service of commencement notices and a more proportionate approach to the application of exemptions, although it is worth noting that exemptions would still have to be obtained before development begins.
Interestingly, the consultation document also seeks views on the introduction of fees payable to councils for the monitoring of Section 106 obligations although, in practice, the incorporation of substantial monitoring fees into Section 106 Agreements remains commonplace, notwithstanding case law that suggests that the circumstances in which such fees should be sought are limited.
The criticism levelled at CIL Infrastructure Lists is fair, although there is insufficient detail yet to say if “Infrastructure Funding Statements” will provide any more certainty for developers (at the point of payment) in respect of where monies will be spent.
The proposals for simplified charging in respect of larger strategic sites and amending the indexation provisions to reflect local property prices both have some attraction in terms of making CIL charges more responsive to market conditions and site specific circumstances - although house price variations should probably be measured at local authority rather than regional level in order to better capture what can be significant variations within regions.
As always, the devil will be in the detail (and the drafting), and the consultation document confirms that further reforms set out in the Autumn Budget are being contemplated, including setting national and non-negotiable contributions in respect of affordable housing and infrastructure.
The consultation period ends on 10 May 2018.