Savills News

Simplifying developer contributions – final outcomes of government consultation

The Government’s ‘fixing our broken housing market’ agenda has long targeted the simplification of developer contributions. Following consultation in autumn 2018 and then again in January 2019, changes to the Community Infrastructure Levy regulations have now been laid before Parliament.  It is the Government’s intention that these will come into force on 1 September 2019.

The most recent consultation has resulted in some further changes relative to previously published proposals but the key amendments now proposed for the regulations are as follows:

 

The return of S106 obligation pooling

  • As expected, the Government is removing the current pooling restrictions such that more than five S106 obligations will now be able to contribute toward the costs of the same piece of infrastructure.
  • Infrastructure can therefore more easily be delivered through a combination of S106 and CIL.

Annual Instructure Funding Statements and removal of the Regulation 123 List

  • Regulation 123 Lists will be replaced by authorities producing an annual infrastructure list setting out the infrastructure projects or types of infrastructure which it intends will be, or may be, wholly or partly funded by CIL.
  • The annual report will also include information on CIL receipts and expenditure, alongside the reporting of S106 obligations (both monetary and non-monetary). 
  • Unlike most of the other changes put forward, this approach will not be applied until the end of 2020.

Simplifying the approach to production and review of Community Infrastructure Levy Charging Rates

  • The previous two-stage consultation process for Charging Schedules has been removed, with the requirement for a single consultation only (Draft Charging Schedule). 
  • The minimum consultation period has also been removed, with the Government indicating that guidance will “encourage” a four-week consultation period.

Amendments to Indexation

  • The previously proposed changes to indexation, with separate indexes for residential and commercial floorspace, have not been taken forward.  Instead, from 2020 a new bespoke national CIL Index produced by the Royal Institution of Chartered Surveyors (RICS) will be used to calculate CIL liability.    
  • Authorities must also publish in December every year, an ‘annual CIL rate summary’ which provides the updated CIL rates for the subsequent year.

S106 obligation monitoring

  • The regulations will introduce a new test for the inclusion of monitoring fees within a S106 agreement.  Monitoring obligations must ‘fairly and reasonably relate in scale and kind to the development’, and should not exceed an authority’s estimate of actual monitoring costs over the lifetime of a particular obligation.

Other technical changes

  • The updated regulations also introduce a number of technical changes intended to simplify the use and application of CIL, notably in regard to S73 applications, the procedures around exemptions from CIL and reducing the number of forms that need to be submitted in most cases.

What are the implications of the new regulations?

The most significant change relates to the removal of the S106 pooling restriction and the deletion of the Regulation 123 List.  Savills expressed support for this proposal in principle in its response to the consultation in 2018 and early 2019, recognising that S106 obligations are typically the most proficient mechanism to capture planning gain on larger scale and complex schemes and ensuring that any developer makes a fair and proportionate contribution.

However this was caveated by our request that there must be a mechanism to prevent ‘double-dipping’: the process through which developers are potentially liable to make contributions twice for the same infrastructure requirements through both funding schemes.  Whilst the Government noted the concern was raised by Savills and a number of other respondents to the consultation it does not propose to introduce any specific mechanism to prevent this from occurring and as such the risk remains.   

Savills’ National Lead on CIL, Nigel Dexter, comments:

‘We welcome the simplification of the CIL Regulations notably clarification in relation to S73 applications and procedures relating to claiming exemptions.

Whilst the decision not to pursue separate rates of indexation for residential and commercial floorspace is positive, the introduction of another tweaked approach still has the potential to create uncertainty in regard to how CIL rates may change over time.

The consultation response also acknowledges the lack of a consolidated version of the CIL Regulations. However, the opportunity is not being taken now to remove the current fog surrounding the implementation of CIL that arises from the regulations being set out across multiple pieces of legislation. This seems at odds with the intention of simplifying developer contributions.’

Subject to receiving the necessary time in Parliament for debate, the further changes now being proposed will be implemented from 1 September 2019.

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