A planning lawyer’s wish list for reform of community infrastructure levy
The Community Infrastructure Levy Review Panel’s report on reforming the community infrastructure levy (CIL) is due later this year. In the meantime, I have some suggested reforms of my own.
Need for consolidation
Since the CIL Regulations were first introduced in 2010, there have been five sets of amending regulations and a sixth set is now widely anticipated. A single consolidated set of regulations may not solve any of the problems with the regime, but it would at least ensure we were all arguing about the same version.
Impact on affordable housing
In the absence of an “exceptional circumstances” policy, CIL cannot be reduced on viability grounds. Cuts can only be made to obligations that are secured through section 106 agreements – usually affordable housing. This is a particular issue in London, where remediation costs tend to be significant and affordable housing is scarce. Introducing a general discretion for charging authorities to reduce a scheme’s CIL payments on viability grounds would allow a better balance between CIL and other planning contributions. This would, in turn, improve the provision of affordable housing.
Tendency to undermine national policy
In its current form, CIL undermines government policy to increase housing supply. The highest charging rates are generally levied on residential development. There is a direct inverse relationship between high CIL rates and levels of affordable housing. “Starter homes” do not currently qualify for mandatory CIL relief and are often taxed as market housing. And the developers who are most likely to run into difficulties with CIL are self-builders and small development companies – the very developers that the government is currently encouraging back into the market. The obvious solution to this would be abolition, but that is probably wishful thinking.
Definition of “commencement of development”
In section 106 agreements, it is standard practice to exclude site preparation and remediation works from the definition of commencement. These exclusions do not apply to CIL, which defines commencement in relation to section 56(4) of the Town and Country Planning Act 1990 – a provision originally drafted to ensure that developers needed only to carry out very nominal works to keep their planning permissions alive (pegging out the intended alignment of an as yet non-existent access road has been held to be sufficient). As a result, CIL is triggered very easily and very early in the development programme. There is a lot to be said for including many of the “standard” exclusions used in section 106 agreements (such as demolition, site clearance and ground remediation works) in the statutory definition of commencement in the CIL Regulations.
When you can appeal
It is normally only possible to appeal a CIL charge before commencing development. If development commences part way through the appeal process, the developer is deemed to have accepted the amount of the charge. As a result, it is very easy to lose the right to appeal. An appeal process that is available for six months from the date of the liability notice would be significantly fairer and more certain.
Rules around exemptions
The circumstances in which it is possible to lose the benefit of an exemption are in desperate need of review. It is currently possible to lose the entirety of an exemption because a form was filed late or a lay client misunderstood the meaning of “commencement”.
Lack of a delivery timescale for infrastructure
The infrastructure projects that a local authority intends to fund through CIL are set out in its “Regulation 123” list. The list controls how the projects are to be funded, but does not require them to be delivered. There is no ability to reclaim CIL receipts which are not spent. There should be an obligation on councils to deliver the projects listed on their Regulation 123 lists – or, if they fail to do this, to repay the funds to developers.
Definition of “overpayment”
While it is possible to seek a refund of an “overpayment” which arises due to a miscalculation by the charging authority, it is not possible to claim a refund if you do not build your entire consented scheme. If a developer seeks planning consent for 10 units, then the CIL liability for those 10 units will need to be paid, even if only eight of them are built. This provides a windfall for charging authorities, which can obtain CIL receipts for new floorspace which is not delivered. Linking CIL payments to completion instead of commencement would resolve this.
Impact on commercial arrangements
It is sometimes necessary to amend a development, or the terms of a disposal, to prevent unintended consequences arising out of CIL. For example, if a site is to be sold to more than one housebuilder, it is sensible to ensure that each disposal relates to a separate phase of development. This reduces the risk that housebuilder A would trigger the CIL liabilities for housebuilder B. CIL should be payable on the completion of a development, or phase of development, instead of on implementation of the planning permission. This would reduce the need to draft around it.
Lack of clear guidance
There is very little in the way of guidance on how to interpret CIL and there are few High Court decisions on the proper interpretation and application of the regulations. The Department for Communities and Local Government (DCLG) does publish anonymised valuation office appeal decisions, which are helpful, but you have to review them all individually to understand how they were decided. A comprehensive set of guidance, endorsed by DCLG, would be helpful, particularly to those who are attempting to navigate CIL without the benefit of professional advice.
Nicola Gooch is an associate in the planning team at Irwin Mitchell
