Walking The Development Viability Tightrope: MHCLG publishes new national guidance on CIL, s.106 & Viability
Monday was a potentially momentous day in the world of development finances. Not only did the latest set of CIL amendment regulations come into effect,* but MHCLG published a whole new set of national planning policy guidance, dealing with the implications for:
The revised guidance is both extensive and comprehensive, so I am not going to review it all in detail. There are, however, some themes running through the revised guidance that are worth spending some time on:
1. The need to take a holistic approach to developer contributions and viability
The importance of considering the combined effect of developer contributions on the viability of development proposals is stressed at various points throughout the new guidance. Although the emphasis is on ensuring that the development plan, as a whole, remains deliverable, as opposed to specific sites or schemes within a borough.
For example:
Para: 003 Reference ID: 23b-003-2019901: Plan makers should consider the combined total impact of such requests so they do not undermine the deliverability of the plan.
Para: 002 Ref ID: 10-002-20190509: Viability assessment should not compromise sustainable development but should be used to ensure that policies are realistic, and that the total cumulative cost of all relevant policies will not undermine deliverability of the plan.
and
Para: 021 Ref ID: 25-021-20190901: Development costs include costs arising from existing regulatory requirements, and any policies on planning obligations in the relevant plan, such as policies on affordable housing and identified site-specific requirements for strategic sites.
2. A firm commitment to viability assessments being carried out at a local plan level - as opposed to on a site by site basis.
Whilst the guidance does stress the need to ensure that policy requirements for CIL. s.106 and other developer contributions are:
- realistic; and
- viable
- deliverable
The onus is on the Council do this as part of creating their local plan. This is made abundantly clear in Para: 004 Ref ID: 23b-004-20190901, which states:
Policies for planning obligations should be set out in plans and examined in public. Policy requirements should be clear so that they can be accurately accounted for in the price paid for land.
Such policies should be informed by evidence of infrastructure and affordable housing need, and a proportionate assessment of viability.....
It is not appropriate for plan-makers to set out new formulaic approaches to planning obligations in supplementary planning documents or supporting evidence base documents, as these would not be subject to examination.
Whilst there remains a role for site specific viability assessments, MHCLG appears highly skeptical about their value. Expressly stating that:
"Where a viability assessment is submitted to accompany a planning application this should be based upon and refer back to the viability assessment that informed the plan; and the applicant should provide evidence of what has changed since then.
The weight to be given to a viability assessment is a matter for the decision maker, having regard to all the circumstances in the case, including whether the plan and viability evidence underpinning the plan is up to date, and site circumstances including any changes since the plan was brought into force, and the transparency of assumptions behind evidence submitted as part of the viability assessment".**
3. A lack of appreciation of the problems that this causes where a Council already has CIL & a recently adopted Local Plan.....
The guidance does not, however, provide any detail on how local planning authorities are supposed to approach requests for s.106 contributions, or site viability issues, where:
- The Local Plan was adopted before the revised regulations came into effect, and therefore assumes that s.106 contributions and CIL cannot be used to fund the same infrastructure projects; and
- The Council's CIL Charging Schedule was also adopted on the basis that s.106 contributions and CIL cannot be used to fund the same infrastructure projects; but
- The infrastructure needs of the Council means that it would make sense to ask for a contribution for something that would previously have been covered by CIL - such as school places.
In this situation the viability testing of the local plan policies (and indeed the CIL rates themselves) would not fully reflect the cost of complying with the Council's developer contributions. Which would, logically, give rise to a need for more site specific viability testing. Something which the NPPG Guidance is actively trying to discourage.
The guidance does repeatedly emphasise:
- the need for requests for developer contributions to comply with Reg.122 of the CIL Regulations,***
- the importance of clarity and transparency - both at policy level and through publishing infrastructure funding statements; and
- the need to ensure that these requests do not undermine the deliverability of the plan as a whole
but this does not assist where the policies are not being set at the same time, which will be the case across a large proportion of the South East (and all of London).
In the absence of a large scale review of adopted charging schedules and local plan policies across the country, I suspect that the most immediate result of these revisions is a resurgence in site specific viability appraisals... not least as both developers and local councils can now blame MHCLG for the fact that they are needed.
* more information on these can be found here, here and here. We have talked about them a lot. There was a lot to say.
**Paragraph: 008 Reference ID: 10-008-20190509
*** i.e. that they are (a)necessary to make the development acceptable in planning terms;(b)directly related to the development; and (c)fairly and reasonably related in scale and kind to the development.
Developers may be asked to provide contributions for infrastructure in several ways.
This may be by way of the Community Infrastructure Levy, planning obligations in the form of section 106 agreements .... and section 278 highway agreements (under section 278 of the Highways Act 1980 as amended)....
Local authorities should ensure that the combined total impact of such requests does not undermine the deliverability of the plan (see paragraph 34 of the National Planning Policy Framework for details).
Where the levy is in place for an area, charging authorities should work proactively with developers to ensure they are clear about the authorities’ infrastructure needs.
Authorities can choose to pool funding from different routes to fund the same infrastructure provided that authorities set out in their infrastructure funding statements which infrastructure they expect to fund through the levy.”
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