The Government's White Paper on its proposed changes to the planning system was released earlier this month to much excitement in the planning and development world, which it is reasonable to say, has had its fair share of #PlanningReformDay's over the decades since the introduction of the Town and County Planning Act 1947.
This briefing looks at the proposals to change the way that infrastructure and affordable housing are delivered. The headlines are, in summary:
- Replacing of the Community Infrastructure Levy (CIL) and the use of section 106 agreements by an all-encompassing Infrastructure Levy (IL)
- Use of payments raised through IL for the provision of affordable housing, rather than section 106 agreements.
From CIL to IL?
The new IL seeks to remove the issue of viability (seen as a road block by some to the full implementation of CIL) by introducing a mandatory, nationally-set rate based on a proportion of the development value above a certain threshold on developments. If those developments do not meet the minimum threshold, IL would not be payable. Furthermore IL would only be payable on the proportion of the value that exceeds the minimum threshold.
In addition to the introduction of the IL, the proposals discuss preventing the use of section 106 agreements for the provision of infrastructure. Payments for, or the provision of, for example, open space, community facilities, GP surgeries etc. are often secured by a section 106 agreement. Under the new regime, these could only be secured by the IL.
The White Paper does not touch on any proposed changes to section 38 or 278 of the Highways Act 1980, which are regularly used to secure adoption of new estate roads, and works to the existing highway carried out by developers, together with commuted sums for their maintenance. As it stands, these mechanisms for securing these types of site specific infrastructure will remain the same.
However it's not clear how site-specific infrastructure, that is required for the functioning of the individual sites, would be secured. Whilst there would likely be a requirement to spend IL receipts on sites close to the charging development (the Neighbourhood Share) the White Paper proposes greater flexibility for local authorities in spending IL receipts and it is not clear how these receipts could be applied on a site-by-site basis.
Whilst CIL deals with financial payments only, section 106 agreements are often used to require developers to provide necessary on-site infrastructure as part of the development or make land available for its provision, and it is not clear who will be responsible for the delivery of these much needed facilities under the new proposals. If all infrastructure will be provided off-site, how will local authorities secure the land to do so?
Provision of affordable housing
Section 106 agreements are currently used to secure the on-site provision of affordable housing but under the new proposals affordable housing will be provided through the IL. The proposals state that registered providers (RP) will be able to purchase affordable housing from developers, at a discount from market rate. The difference between the price sold to the RP and the market rate will be off-set against the final IL liability to the local planning authority.
Whilst this proposal is likely to be encouraged by developers, who may be able to reduce their overall IL liability as well as have fewer ongoing obligations in relation to the site that we would normally see in s106 agreements, how this will work in practice is unclear.
The IL appears to rely on RPs purchasing affordable housing from the Developer as is currently the case. However removing the use of s106 agreements may have ongoing implications for RPs and their funders, and RPs ability to purchase the units in the first place. In particular, there is industry standard wording and a process that RPs, their funders, LPAs and developers can follow that assists RPs in funding schemes, which is covered under the s106 agreement. Without the s106 agreement in place, it may cause valuation issues for RPs, making it more difficult to obtain funding and ultimately provide the affordable housing. In addition, once the affordable housing is provided, the proposals do not set out how this will be secured in perpetuity with no s106 agreement to bind the land. The traditional ways used by RPs and LPAs to protect existing stock appear to be diminished in these proposals.
We have highlighted just some of the points where further clarification of the proposals is needed. Given the importance of deliverable infrastructure for unlocking development and particularly for the delivery of much needed affordable housing, the planning and development world will wait with baited breath to see the Government's response to the current consultations. We should note however that both CIL, and the nascent Planning Gain Supplement that preceded it, were heralded as replacements for s106 agreements. If these new proposals are taken forward and the introduction of the new IL is anything like the introduction of CIL over 10 years ago now, we are likely to see s106 agreements around for some time to come.