In March we reported on the government's consultation on the reform of the current system of developer contributions. The government's response to the consultation, released at the end of October, confirms that change is on the horizon. The key themes of the consultation were centred around a desire to make the system simpler and more transparent, in order to make development quicker. So what changes can we expect to see in 2019?
A local authority can only charge the Community Infrastructure Levy (CIL) if it has adopted a charging schedule. The process for putting a charging schedule in place is currently fairly lengthy, with local authorities required to undertake two consultations on their proposed CIL rates.
The government's view is that this protracted procedure is part of the reason that some local authorities have not adopted CIL charging schedules. The Community Infrastructure Levy Regulations 2010 (the CIL Regulations) will be amended so that, in certain circumstances, two rounds of consultation are not required.
In order to reduce the time spent on the process, the consultation had proposed making the process more streamlined by aligning the requirements for evidence on infrastructure need and viability with the evidence needed for making a local plan. The publication of the revised National Planning Policy Framework (NPPF) in the summer, includes policy and guidance on undertaking viability assessments and on the evidence of infrastructure need that is required for plan-making. Guidance will be amended to provide local planning authorities with certainty around the level of detail needed to establish an evidence base for the setting of CIL rates.
Since April 2015, local authorities have not been able to fund an infrastructure project or type of infrastructure by pooling contributions from 5 or more separate section 106 agreements. This pooling restriction was designed to encourage local authorities to adopt CIL charging schedules. However, the government acknowledges that, in some circumstances, it can stifle development.
The consultation had proposed removing the pooling restriction in specified circumstances. However, the government has decided to lift the pooling restriction in all areas, but, so that CIL remains an effective mechanism for obtaining funds for infrastructure, the government will put measures in place to incentivise the uptake of CIL. There is no indication at this stage of what those measures will be.
Under the current system, entitlement to a relief from CIL is lost if a commencement notice is not submitted before the development begins. Those who are not accustomed to dealing with CIL can find themselves having to pay CIL where they should have been able to claim relief.
Owing to concerns about the complexities of introducing a grace period, the government has decided to change the penalty for failing to submit a commencement notice prior to development being started. This will be set at a 'proportionate level' and will not result in the whole liability becoming payable immediately.
Although local authorities can set different CIL rates for different areas, and also different rates depending on the development type, there is currently no scope for rates to be set based on differing existing land uses. The government had proposed changing this to enable local authorities to charge a rate which better captures the infrastructure needs and value generated through planning permissions.
Owing to the complexities that would result from this proposal, it will not be taken forward.
Earlier this year, The Community Infrastructure Levy (Amendment) Regulations 2018 came into force. These clarify what should be done in relation to permissions granted under section 73 of the Town and Country Planning Act 1990.
However, there is still concern that the indexation provisions in the Community Infrastructure Levy Regulations 2010 (CIL Regulations) do not work as well as they should. CIL charges are currently indexed to the Building Cost Information Services (BCIS) All-In Tender Price Index. This reflects changes in contractor costs, and is used to account for changes in the costs of delivering infrastructure. However, house price inflation does not rise at the same rate as contractor costs.
Respondents agreed that the current indexation provisions should be amended. The government will be consulting on changes to the indexation of CIL rates. Transitional measures will be taken into account in introducing these new indexation measures.
Regulation 123 of the CIL Regulations provides for charging authorities to set out a list of those projects or types of infrastructure that it intends to fund, or may fund, through CIL. Although charging authorities are required to report annually on how much CIL has been received, and how it has been spent, there is huge variation in the depth of information provided by authorities.
To improve transparency, the government proposed replacing Regulation 123 lists with a requirement for local authorities to provide an annual statement in an open data format. Views were sought on the details that should be included in the annual statement.
Viability guidance now sets out the government's recommended approach to reporting on developer contributions through an Infrastructure Funding Statement. An Infrastructure Funding Statement is in a standard template, and requires the local authority to set out anticipated contributions from both CIL and section 106 obligations, together with how these funds will be used.
In relation to monitoring fees, the government is to take forward proposals to make it clear that local authorities can seek a fee from applicants for monitoring planning obligations. This fee will be set at an 'appropriate level'.
Following recommendations in the CIL Review, the government proposed that Combined Authorities be able to charge a SIT. It was suggested that this should operate in the same way as Mayoral CIL and would be used for strategic infrastructure projects.
The government has decided to modify the proposal set out in the consultation so that:
Clearly the latter will only be effective where neighbouring authorities have CIL charging schedules in place.
In the longer term, the government intends to allow joint planning committees to charge SIT, and will review options for giving other groups the power to levy a SIT.
The response sets out that various consultations will be released in the coming months. We will monitor and report on these.
Contributor: Alexandra Holsgrove Jones
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