Posted on April 16, 2013

I hope that you have found the previous blogs interesting.  So what have we learned? The purpose of this blog is to set out some of the issues that remain outstanding in terms of CIL (below).  This will be the last blog on CIL for a while as we are currently busy doing CIL and Local Plan Economic Viability Reports!  However, we’d love to hear your comments on the blog or via email to info@aspinallverdi.co.uk

CIL and Affordable Housing – by giving affordable housing tax relief and continuing with the S106 regime this will have a number of effects.  Firstly, it will not improve the predictability and certainty for developers, because there will still be the uncertainty and risk around S106 obligations. Secondly, it is unlikely to speed up the development process and supply of housing because removing only part of the ‘S106 risk’ does not create certainty.  And thirdly, it will not help to resolve the accountability and transparency concerns around affordable housing contributions and it weakens the ability for developers to pass the incidence of the tax down to landowners.  You need to remove 100% of the planning gain risk to improve certainty.

Pooled S106 – The relationship between CIL and S106 is also going to be important. We know  that government is trying to reduce the role of S106s to give CIL the best chance of success.  But there are circumstances when a Local Authority might want pooled S106’s in its toolkit.  The Regulations limit the number of S106s to up to 5.  However, the distinction should not be the number of S106s, but whether a particular piece of infrastructure is quoted in the Infrastructure Schedule (Reg 123 List). So for example, if CIL is being used to raise funds for a specific new by-pass, this should be excluded from any local S106’s.  But say, if smaller estate roads are required to link into this which are not in the Schedule, it should be available to the Authority to ‘pool S106’ contributions to deliver this.  It is not about the number of pooled S106s – but the definition of what’s in and out of the Infrastructure Schedule.

The link between the ‘gap’ funding of Infrastructure and the CIL Rate – In the days of the old ‘pooled S106’, there was a direct link between the cost of the infrastructure and the development floorspace / S106 Rate.  It is quite correct that the emphasis for CIL is on the viability, but how is the ‘appropriate balance’ between viability and the funding gap being tested? If the reality is that CIL is simply a locally set development tax, will government cut other sources of funding further once CIL is adopted?

Uneven Playing Field due to Timing and Implementation – By taking the tax away from site specifics, CIL solves the valuation problem that PGS suffered.  But setting it locally, with different authorities on different timescales, has the potential to distort the land market to such an extent that landowners and developers simply ‘do nothing’.  Note that CIL is not to be used as a policy tool and the rate should be set at a level that is justified on the economic evidence (e.g. not £0 rate for employment uses to attract inward investment).

CIL is not site specific – It takes an area based approach.  You can set differential rates based on geographical zones or by reference intended uses.  Therefore care needs to be taken to identify zones which have similar characteristics for example, predominantly greenfield e.g. Wards with large urban extensions or predominantly brownfield e.g. Inner area Wards or regeneration areas. CIL is charged on the net increase in floorspace ‘so as not to discourage redevelopment’  on brownfield land – but, the precise mechanisms for this are still unclear (e.g. ‘lawfulness of use’). It might be better if you could allocate charges based on ‘greenfield sites’ and ‘brownfield sites’ rather than zones.

Neighbourhood Plans – The ‘Boles bung’ is to pass a ‘meaningful proportion’ of receipts (25%) from CIL into new Neighbourhood Plans, which will involve the parish or community councils receiving the funds to invest in their local areas. By ‘slicing’ off a section of CIL for neighbourhood funds, you are diluting the power of CIL to fund the major infrastructure projects that are required – which was the purpose of CIL in the first place!

It is still early days for CIL and the success of it will shortly be tested as more Charging Schedules are adopted.  In the context of an economy that lacks growth judgement needs to be careful based on market evidence.  Amendments continue to be made, which suggests a commitment to CIL by government and we will continue to engage and inform the process.  Note that DCLG is consulting on further reforms until 28 May 2013.