Developer Contributions under review: Government suggests a major overhaul of CIL and s.106 Agreements... but consults on tweaks to the system

MHCLG has clearly had a busy few weeks, as today has seen the launch of not one but two consultations on major changes to the UK planning system. There will be a lot of analysis of the proposals to the draft NPPF over the coming days*. This post deals with the second, and arguably less exciting, of the two consultations; which has following rather catchy title "Consultation on reforming developer contributions to affordable housing and infrastructure".

I was genuinely not expecting this to be released just yet, so the fact that we have the consultation document at all is a rather pleasant surprise. Its content, however, is a fairly mixed bag of comparatively modest proposals combined with promises of a radical rethink of the entire system at some, unspecified, point in the future. 

In summary, the Government is consulting on the following:

•  Streamlining and simplifying the rate setting process to make it much easier and quicker for local planning authorities to adopt CIL - by scrapping the two defined stages of public consultation.
• Allowing the same viability evidence to be used for plan-making and setting CIL rates.
•  Removing the 'pooling' restrictions, which prevents more than a limited number of contributions being put towards the same item of infrastructure for authorities charging CIL; Councils that cannot adopt CIL because of poor development viability in their areas; and areas with a large number of strategic sites.
• Introducing a 'grace period' of two months from the date of commencement for serving commencement notices, so that exemptions are not lost immediately in the event that the commencement notice is served late or overlooked.
• Extending abatement provisions so that phased permissions which pre-date CIL can use the abatement provisions to balance or set off changes to phases which are made post the adoption of CIL, in the same way as consents granted after CIL was adopted.
•  Changing the indexation provisions so that CIL rates for residential developments are linked to house prices indexes and commercial developments to the CPI or some other appropriate measure - it is also intended that indexation would apply both ways - as opposed to being upwards only.
• Allowing LPAs to base CIL rates on changes to the Existing Use Value of the site as a result of a consented development i.e. the uplift in value caused by a change from agricultural to residential use;
• removing 'erroneous indexation'** from all applications to amend or vary a planning permission using s.73 of the TCPA- not just those where the original planning permission pre-dates the adoption of CIL*^.
•  Scrapping regulation 123 lists, which state which items of infrastructure will be funded through CIL, entirely and replacing them with Infrastructure Funding Statements which explain how CIL and s.106 contributions have been spent.
•  Allowing Combined Authorities to set Strategic Infrastructure Tariffs, which would operate in the same way as Mayoral CIL in London. These SITs would sit along side and be addition to local CIL charges and s.106 Contributions and should be used to fund specific strategic or cross boundary planning requirements.

Some of these proposals are actually extremely sensible. The proposals to allow abatement across all phased consents, the move to remove 'erroneous indexation' entirely, and the 'grace period' for serving commencement notices are all aimed at removing, or at least softening, some of the harshest edges of the CIL Regime - and have actually come out of some very hard, real life, examples of problems with the system.

Others, however, are simply barking. Given the intention of the proposals are to simplify an already complex and confused system, the introduction of charging rates set by reference to changes in land value caused by changes to the land's existing use seem counter productive. The consultation document itself recognises that this has the potential to over complicate things and that 'the Government recommends authorities only set differential rates based on the existing use of land where there is a strong case for doing so'; but underestimates just how horrendously complex this could become - for example, it assumes that it is always possible to ascertain the existing use of a site in the first place, something which is often far from certain. 

I am also not a fan of simply scrapping Regulation 123 lists without replacing the rules against double-dipping. Whilst Regulation 123 lists are far from perfect, at least they set an expectation that Councils should not be charging developers twice for the same items of infrastructure - i.e. both through CIL and s.106 contributions. Without the Regulation 123 list, there is no easy way for this to be checked or enforced by developers who have to make the payments. In addition, as the CIL regulations do not make any allowance for sums to be returned to developers once they have been paid, if double dipping is revealed in an Infrastructure Funding Statement after the contributions have been paid, there is very little redress available to any developer who has been charged twice for the same item of infrastructure.

That said, I doubt these proposals will be the last that we hear from the Government on the topic. They are badged as being a 'springboard' for further reviews of the system. In the foreword to the consultation it is stated that the Government intends to 'explore options to create a clearer and more robust developer contribution system' in the future - which may include centralising the entire thing - so that all requirements are set at a national level - and making all required contributions completely non-negotiable! It is also hardly a secret that they are looking at mechanisms for land value capture.

As such, I strongly recommend engaging with this consultation and trying to persuade the Government that making the delivery of infrastructure so direct a responsibility of central government is unlikely to be a vote winner - It would mean that every pothole, traffic jam or school placement shortage would be the direct responsibility of whichever government department pulled the short straw.... 

* which is best dealt with by wiser heads that mine.

** not my phrase - I stole it from a fellow planning solicitor in another firm - but a handy shorthand for the fact that the regs as originally drafted allowed indexation uplifts to be sought in relation to floorspace which was either exempt from CIL entirely (because CIL did not apply to the original application) or on which CIL had already been paid. 

*^ a correction which came into effect on 9 February 2018

Consultation on reforming developer contributions to affordable housing and infrastructure.

This consultation closes at

11:45pm on 10 May 2018

Following the announcements at Autumn Budget 2017, the government is seeking views on a series of reforms to the existing system of developer contributions in the short term. These reforms will benefit the local authorities who administer them, developers who pay them and the communities in which development takes place.

Details of how to respond to the consultation are included in this document, and there is a link to an online survey at the bottom of this page.”