Planning for infrastructure and connected places

13 Aug 2020

Planning and Environment

By Mark Lowe QC

A few weeks ago I was drafting the first chapter of the Second Edition of Cornerstone on the Planning Court and I wrote fondly of the 1990 Act and how well it stood up to scrutiny on its 30th birthday. Well, I should have known better.

But on re-reading the White Paper I have come to the view that however radical the desired outcomes of the proposals, the new toolbox will be pretty familiar to any student of the 1947 or the 1990 Acts. The LPA lives on. We will still have local development plans albeit simpler in form and digital in format. Planning permissions will be granted but those in Growth Areas are likely to be deemed permissions in some form or other. Those permissions will be subject to conditions whether under the deemed process or attached by the LPA. Enforcement will remain and be strengthened, but by what means we know not. But one area of significant proposed change is that relating to the provision of infrastructure needed to support new development and its funding. The familiar territory of the s.106 agreement would go and a new consolidated CIL would stand alone in its stead. This forms Pillar 3 and is the subject of this short paper.

Presently most large development proposals fund the infrastructure needed to support them through financial contributions, secured via s.106 agreements tailored to the individual development. The intention was that the use of CIL would become universal, removing the need for the negotiation and drafting of site-specific s.106 agreements. But that has not come about. Its shortcomings in terms of inflexibility, the timing of when the payment is made and the lack of accountability in the hands of the LPA are set out in the White Paper. Arguments about the need for and cost of infrastructure and the appropriate contributions to it are a major factor in delaying the grant of permission and, on occasion, are the reason for the refusal of permission.

The White Paper sets out to establish a fairer system that secures for the community a greater share in the increased value of the land brought about by the release of permission, a more transparent system so that the community knows what infrastructure will accompany development, a more consistent and simplified system to remove delay and support competition in the housebuilding industry and, finally, a buoyant system reflecting the ups and downs of the market without renegotiation being necessary.

These are all laudable aims. How are they to be achieved? The first proposal (proposal 19) is to charge a consolidated infrastructure levy [CIL (heard that before?)].

This will be a fixed proportion of the development value above a threshold, with a mandatory nationally set rate or rates. The current system of obligations will be abolished.

It is a ‘one size fits all’ solution. The amount raised is dependent upon the level of surplus achieved by the sales value of the final development product, mainly the new house of flat, over a notional base value needed to secure viable development. A national rate poses many problems and appears quite unrelated to the cost of individual items of infrastructure required to support the development in point.

Nothing new in this, in the sense that viability is always at the heart of s.106 negotiations, but unlike the current system there appears to be no scope for the LPA to refuse permission on the basis that the proposals will not secure the required infrastructure. Indeed, it is contemplated that in some areas “some or all of the value generated by the development would be below the threshold, and so not subject to the levy”.

How is the infrastructure to be provided in such areas? Is it to be at the sole cost of the planning authorities? If so, how are they to be funded? Surely the proposal to allow local authorities to borrow against future CIL revenues will not assist here, since by definition such areas will not be receiving CIL?

Proposal 20 is that the new CIL is extended to capture changes of use through use of PD rights. That sounds sensible but is unlikely to produce revenue at such a level to make up the gap between need and affordability referred to above.

Proposal 21 signals another major change which is to require the new CIL to deliver affordable housing provision. This could be delivered through in-kind delivery on site, presumably some new form of s.106 obligation will be required to secure this although there is no mention of mechanisms in the White Paper. The White Paper recognises that this will put local authorities more at risk if values fall between the beginning of the development and the sales to the AH providers. In that case, the scheme would provide for a ‘flip’ of units back to market units which the developer can sell but, in the reverse case, the developer could not recover overpayments. Concern is expressed over the quality of affordable units delivered by this means and there is a suggested backstop provision by which the authority could require the developer to make cash contributions if no provider was willing to buy the homes because of their quality.

Finally, proposal 22 is to give local authorities more freedom on how they spend the new CIL receipts. Once infrastructure obligations have been met they could be spent on other policy priorities including the improvement of services and the reduction of Council Tax (a legislative reversal of Wright ). However, the Neighbourhood Share would be retained and better community engagement is proposed in decisions as to how it is spent. The proposed alternative is to ring-fence the CIL receipts, as at present, to the provision of infrastructure and affordable housing.

These are radical proposals but they are also largely inchoate. Without knowing more about how additional value is to be calculated it is difficult to have a properly informed consultation. The avoidance of debate on the viability of the individual scheme is much to be supported. How much inquiry and local authority time is spent on the arcana of these impenetrable speculations? But to substitute with a national rate requires some delicacy in striking the balance to incentivise the market to produce the required new homes and in the provision of the infrastructure needed to secure their wider acceptability and support for the new system. Where are the provisions for securing that suggested transparency around the infrastructure that will be provided? Will this be in the new local plan and, if so, what assumptions could sensibly be made at that plan-making stage as to the affordability of the proposals? A simpler system? Probably, but do remember the same was claimed for CIL. A more buoyant system – yes and possibly all the better for that.

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