The government needs to follow up its pro-growth rhetoric by taking action on the damaging community infrastructure levy, says Marnix Elsenaar.
I doubt any of us have seen a more contentious debate in the property and construction sector this year than the ongoing call for government to change Community Infrastructure Levy legislation.
When the property market was strong, CIL seemed a good idea. It would reduce the need for lengthy section 106 negotiations and raise valuable revenue for local authorities. But implementing it during a downturn is bad news for development. The government talks growth but the additional costs of CIL for developers and the additional work for already stretched local authorities are not a recipe for a thriving construction sector. The CIL Regulations are also catching planning permissions and development that no one (including the government) anticipated would be liable to CIL.
The property industry is lobbying hard for the CIL legislation to be changed. The government is aware of the problems and limited changes to legislation are expected in the autumn. However, we are not sure how far the changes will go and whether some of the unexpected effects will be remedied.
Those unexpected effects include CIL being due on an entire development when relatively small changes to a scheme are made. Permission for changes to planning conditions is usually sought by a “section 73” application. But the result of a section 73 application is a brand new planning permission so that, seeking a change to permitted loading times can result in CIL having to be paid on the whole development. Developers are delaying starts on site as the CIL bill makes the works unviable. It is anticipated that this loophole will be closed in the autumn; the government needs to get a move on.
The formula for calculating how much CIL is payable is also causing problems. CIL was always intended to be chargeable on new built floorspace but the CIL formula means that it is payable if an existing building was empty for longer than a specified period.
This means that CIL is potentially payable on the refurbishment of a building, a change of use and following destruction by fire. Again, unexpected costs and more difficult viability assessments. Is this a pro-growth policy?
And then there are the CIL rates set by local authorities. The viability of new development should be a key consideration for local authorities setting their charging schedules but there is real concern that in some areas CIL will render development unviable. An additional problem is that there is no scope to seek a CIL reduction if a viability assessment at the planning application or implementation stage suggests that the sums just don’t add up.
Some authorities have decided not to implement CIL for the time being and they may well be the beneficiaries when developers look around for new sites. In the meantime, the message to government is clear: pro-growth rhetoric needs to be matched by action.