The housing white paper was a chance to reform the Community Infrastructure Levy – but the government failed to act.
The government’s long-awaited housing white paper was disappointing on a number of levels.
It failed to come up with many credible initiatives genuinely capable of delivering a quantum shift in the number of houses being delivered.
One of the greatest disappointments was the failure to immediately endorse the recommendations of the Community Infrastructure Levy Review Group, which had issued their report to government in October 2016. Instead, the government preferred to kick it into the long grass and respond to the recommendations as part of the Autumn Budget.
CIL Review Group findings
Chaired by Liz Peace, the CIL Review Group consisted of a selection of genuine CIL experts and practitioners who were tasked with assessing the extent to which CIL does or can provide an effective mechanism for funding infrastructure, and to recommend changes that would improve its operation in support of the government’s wider housing and growth objectives.
CIL has had a troubled history since the original regulations were introduced in 2010. It was intended to be a fairer, faster, more certain and transparent system of securing contributions to infrastructure and was to work alongside scaled-back section 106 agreements, which were to be limited to mitigating site-specific, rather than cumulative, impacts.
The levy was initially optional for local planning authorities, but failure to put a CIL in place by April 2016 meant the use of s106 planning obligations to secure infrastructure contributions was heavily curtailed, particularly for larger sites where pooling of contributions was restricted to only five planning obligations.
The initial 2010 CIL regulations appeared to have been drafted by Treasury tax lawyers and designed as tax regulations without sufficient thought about the operation of the planning system.
The result of these unnecessarily complex regulations was a series of five further amendment regulations in an effort to make the failed regulations fit for purpose. After the fifth attempt at fixing the regulations, the government finally accepted that a full review was required.
The CIL Review Group spent months considering written evidence, looking at case studies and listening to oral evidence in an effort to come up with a series of genuinely meaningful and helpful recommendations.
How should the government fix the problem?
As the review group suggested, CIL should be replaced by a much more straightforward hybrid system of a broad and low-level local infrastructure tariff (LIT) alongside a less restricted s106 system for larger developments.
Combined authorities should also be able to set an additional mayoral-type strategic infrastructure tariff; the Crossrail mayoral CIL is widely regarded as having achieved its objectives, for example.
The LIT would be linked to the Local Plan process and ideally feed into wider infrastructure plans, and should be calculated on a national formula based on a local market value set at a rate of pounds per square metre.
Ideally, it should be extended to commercial development. Unlike CIL, there should be very few exemptions and any reliefs should be simplified.
Importantly, the requirement to set out the infrastructure on which monies can be spent in Regulation 123 lists should be removed and spending of the LIT would be reported via annual monitoring reports.
“It is now time to call time on CIL and look forward to a regime that can deliver the much-needed infrastructure to support our country’s necessary housing renaissance”
The relationship between LIT and s106 would be made much clearer, too.
Small developments of 10 units or less would only pay the LIT and no other obligations should apply. For larger, strategic sites, local authorities should be able to negotiate bespoke s106 agreements which would be subject to the usual Regulation 122 tests.
The Regulation 123 restriction on pooling would be removed, which would enable local authorities to revert to the established practice of securing contributions from a range of developments towards common and necessary pieces of infrastructure.
Local authorities would also be given the flexibility to offset the LIT against s106 and other requirements for their larger, strategic developments and to make infrastructure provision in kind.
Fundamentally, a simplified set of regulations is urgently required, together with transitional arrangements, to enable the system to be operating by 2020.
It is refreshing to see such a thorough and positive set of recommendations from an expert panel. The CIL Review Group is to be congratulated on a job well done. What a shame the government hasn’t immediately acknowledged it.
It is now time to call time on CIL and look forward to a regime that can deliver the much-needed infrastructure to support our country’s necessary housing renaissance.
Stephen Webb is planning partner at Clyde & Co