Councillor briefingDeveloper contributions:Community Infrastructure Levy, S106 obligations, viability

Date: April 2015 www.pas.gov.uk

What is PAS ?• PAS is a DCLG grant-funded programme but

part of the Local Government Association

• Governed by a ‘sector led’ board

• 11 staff – commissioners, generalists, support

“PAS exists to provide support to local planning authorities to provide efficient and effective planning services, to drive improvement in those services and to respond to and deliver changes in the planning system”

Programme

Presentation:– Viability as a consideration– Types of developer contributions– S106 Planning Obligations – Community Infrastructure Levy

• Questions & discussion

When you need to consider viability:

• Local Plans

• Other policies affecting the cost of development proposals

• Community Infrastructure Levy

• Planning applications

• S106 obligations

It is all about delivery

• Growth• Viability – including developer/landowner motivation

• Mitigation - Infrastructure

• Community expectations• Policy requirements – e.g. affordable housing

Basic elements of viability assessments

Policy costs

Including:

• materials

• sustainability codes

• BREEAM

• Affordable housing

• On-site 106 contributions

Developers costs• Contaminated land

• Poor ground conditions

• Green field costs – connecting to infrastructure and services.

• Materials

• Fees

• Marketing

• Profit (risk)

• Finance

Money money money

There is only so much - how much?

• What will bring development forward?

• You need to have information on viability

• You have choices

Developer and other contributions

• S106 obligations

• Community Infrastructure Levy (CIL)

• Highway contributions ( s38 and s278 Highways Act)

• New Homes Bonus

• Retention of business rates

S106- Planning Obligations

www.pas.gov.uk

s106 obligations can:

• restrict the development or use of the land in any specified way

• require specified operations or activities to be carried out in, on, under or over the land

• require the land to be used in any specified way; or

• require a sum or sums to be paid to the authority (or, to the Greater London Authority) on a specified date or dates or periodically.

S106 can:

• be subject to conditions, • specify restrictions definitely or indefinitely, • And in terms of payments the timing of these can be

specified in the obligation.

If the s106 is not complied with, it is enforceable against the person that entered into the obligation and any subsequent owner.

The s106 can be enforced by injunction.

S106 Obligations

• S106 is not replaced by CIL but…

• Viability - reality – pre 2008 and post 2008

• Legislation -pre and post 2010 CIL regulations and now post April 2015

S106 - tests

• If the development is capable of being charged CIL, the S106 obligation must meet these legal tests:

• NECESSARY to make the development acceptable in planning terms

• DIRECTLY RELATED to the development • FAIRLY AND REASONABLY related in kind and scale to

the development

• These are also now the policy tests in the NPPF

Do your s 106 obligations currently meet these tests?

• Most basic tariffs are contrary to the regulations (they do not meet the legal tests)

• If they don’t meet the regulations you are in danger of legal challenge to your decision making.

S106 obligations

• Site specific mitigation measures

• For pooled contributions up to April 2015/CIL adoption

• Then for up to 5 developments where infrastructure not funded by CIL

• NPPF- planning obligations should take into account changes in market conditions over time and, where appropriate, be flexible to prevent stalling (para. 205)

S106 changes – pooling restrictions

• From April 2015 you will only be able to pool S106 on a very limited basis

• Without a CIL in place your council is at risk of significantly reducing income from developer contributions

• Without a CIL in place you may not have a mechanism to obtain necessary mitigation for a development.

Renegotiation of s106 A

• Amended Regulation (Feb 2013) to set out a procedure for amending any planning obligations entered into between 28 March 2008 and before 6 April 2010.Section 106A of the Town and Country Planning Act 1990

• where the s106 - "no longer serve a useful purpose" or "continues to serve a useful purpose equally well“

• Sunset- April 2015

Renegotiation of s 106BA

• Changes in the Growth and Infrastructure Act that require a council to renegotiate previously agreed affordable housing levels

• viability of affordable housing requirements only

• not reopen any other planning policy considerations or review the merits of the scheme

Appeals

• Under Section 106B of the Town and Country Planning Act 1990

• Under section 106 BC- Appeal on affordable housing viability – revised level of Affordable housing for 3 years

Recent changes

Ministerial statement in November 2014 introduced changes to

- Size of development for which you seek affordable housing contribution

- Size of development for which you can seek a financial contribution (tariff)

- Treatment of vacant buildings

Affordable housing threshold

• 10-units or less, and which have a maximum combined gross floor space of 1,000 square metres, affordable housing and tariff style contributions should not be sought (also applies to all residential annexes and extensions)

Rural designations

• In designated rural areas authorities may choose to implement a lower threshold of 5-units or less, beneath which affordable housing and tariff style contributions should not be sought.

• If the 5-unit threshold is implemented, payment between 6-10 units should be sought as a cash payment only and be commuted until after completion of units within the development.

No change:

• Not applicable to rural exception sites

• Affordable housing and tariff style contributions should not be sought in relation to residential annexes and extensions.

Vacant buildings credit

• A credit, equivalent to the existing gross floor space of any vacant buildings brought back into any lawful use or demolished for re-development, should be deducted from the calculation of any affordable housing contributions sought.

• Does not apply to vacant buildings which have been abandoned.

Speeding up s 106

• Autumn Budget statement

• Consultation -Section 106 Planning Obligations – speeding up negotiations

• March 2015 changes to PPG- Extensive additional advice to improve implementation of s106 and add clarity

s106– starter homes - change March 2015• Starter homes- LPAs should not seek

affordable housing contributions ( but can still seek contributions to mitigate the development including infrastructure)

Community Infrastructure Levy

www.pas.gov.uk

What is a Community Infrastructure Levy (CIL)?

• A mechanism for developer contributions

• To contribute towards infrastructure needed to support the development of the area

• A charge per square metre of floorspace

• Not mandatory

What is CIL for?

• To help pay for infrastructure needed to support new development

• But not to remedy existing deficiencies unless the new scheme will make it worse

• Councils must spend the income on infrastructure – but you can decide what (and that can change over time)

Charging CIL – some basics

• £ per square metre on net additional (internal) floorspace

• Rates can vary by geographic area, use, or scale ( or a combination)

• Due when the development starts

• It is index linked

• The landowner is responsible for paying it

• The local planning authority is the charging authority (& sets the CIL)

When does it apply?

• To all development that involves ‘buildings that people normally go into’

• Development >100sqm gross internal floorspace

• A single dwelling (even under 100sqm) (but not subdivisions of dwellings)

• Includes permitted development

• Once set, you can’t pick and choose which developments to charge

• Exceptions include self build: annexes and extension

Why set a CIL?

• Money for infrastructure through charging nearly all new development -a little from almost everyone (so fairer)

• There is a lack of government or other money

• It is set out in a schedule based on evidence (so more transparent)

• Developers have certainty

• Changes to s106 – legal tests and pooling

CIL- positive economic effect

• “The levy is expected to have a positive economic effect on development across a local plan area. When deciding the levy rates, an appropriate balance must be struck between additional investment to support development and the potential effect on the viability of developments.”

para. 9 - CIL Guidance – April. 2013

Setting a CIL

• Identify the aggregate infrastructure funding gap - is a CIL necessary?

• What rate is viable to charge?

• Understand the impact of the rate on key uses

• Ensure the rate is backed by evidence

• Consultation required

• Independent examination

What you need to set a CIL?

• Up to date development plan is desirable

• Evidence on infrastructure funding gap

• Evidence on viability

• All evidence is ‘appropriate available evidence’

• Rates should be consistent with viability evidence across the area

Strike the appropriate balance

Between

– the desirability of funding the infrastructure gap to support the development of the area

and– the potential effects (taken as a whole) of the

imposition of CIL upon the economic viability of development across the area.

Viability - rate setting:

• Strategic approach• Look at the effect on the whole area• The rate may put some development at risk• No requirement to use any particular models• Can set differential rates – but rate changes

can only be differentiated on viability grounds.

Note: If there is a CIL, a rate must be set for every use.

Differential rates

• Different between uses (not just use classes)

• Different across the geographic area

• Different by scale

• All or none

• All differential rates must be based on viability evidence (not policy objectives)

Different rates for different authorities

£70 per sqm – flat rate – based on residential growth

•residential charges: – rural - £80m2, urban -£40m2

•office/industrial uses – £0m2 charge.

•4 residential rates, 3 employment rates– high level of differentiation by area and use.

Members role

• Make sure you know what is necessary to aid delivery of growth in your area. Make sure your priorities are clear.

• Get involved in deciding how ‘risky’ your rates are going to be - strike the appropriate balance for your area.

Exemptions etc

• Social housing relief

• Buildings used for charitable purposes- exempt

• Discretionary relief for charitable investments

• Self build

• Instalments policy

• Exceptional circumstances (where scheme can’t afford to pay it) but conditions apply

Exceptional Circumstances

• It is very difficult to get

• It is not a negotiated amount

• Should not be considered when setting rates

How is the levy paid?

• Usually cash contribution but can be payment in kind - infrastructure and/or land

• Falls due on commencement of the development; you can agree to payment by instalments

What has PAS learnt from the early CIL authorities?

Those that succeed have:

• Councillor and management team support

• Effective project management

• Project team

• Project plan

What has PAS learnt from the early CiL authorities?

• There is no one way to DO a CIL• Remember the basics• Infrastructure – Local Authorities should use

what they have • Viability and balancing risk are key to the rate• Keep it simple

Source: Savills (as at 23rd March 2015)

Progress on CIL Implementation (England & Wales)

Spending CIL – For Charging Authorities• It must be on infrastructure needed to support the

development of the area• It can be spent on infrastructure outside the CA’s

area, and spent by another body• Doesn’t have to spent on the infrastructure referred

to in your charge setting evidence but.. the links should be clear

• It is advisable to publish a list of the infrastructure you intend to use CIL for (Reg 123 list)

• You cannot spend CIL on affordable housing.

Purpose of the Reg 123 list

• “double dipping” is a concern for Developers

• Reg123 is the requirement for a published list of infrastructure projects or types of infrastructure that the Charging Authority intends will be, or may be, wholly or partly funded by CIL, those infrastructure projects or types of infrastructure.

• …put another way you cannot collect s106 to spend on items within your Reg 123 list

• Golden thread

GOLDEN THREAD

From plan to delivery

Devising CIL spending list:A draft Reg 123 is now partof the examination

123 LIST- Post Examination

• Reg 123 list - should be based on the draft list examined with the charging schedule

• Need to explain the reason for any change• Appropriate local consultation• Where a change to the regulation 123 list would have

a significant impact on viability evidence requires a review of the charging schedule

The greater demand on and for Council resources to deliver

Implications on Council Resources

Education

Education Transport

Education Transport

Community Facilities

Green spaceHealth

The more comprehensive the Reg 123 List

Neighbourhoods

Localism Act:

•localism principles – the money should benefit those who take the development. (incentivisation)

CIL and Neighbourhood Planning

Member involvement in delivery

• Get involved early in Infrastructure prioritisation

• Decide how best you can use all income from development to aid growth

• Understand the implications of s106 vs CIL

• Work with neighbourhoods and local communities

Is CIL right for you?

Decisions

• What will you seek from CIL ?

• What will you seek from s106 ?

• How will you spend your new homes bonus and business rate retention on?

• Who do you need to be working with? County Neighbouring authority Parish

Tough decisions

• CIL might give you enough money for that politically popular item BUT

• is that the best way to make your new development sustainable and acceptable to the community?

• or should you give the CIL money to your neighbouring authority for a new transport link in their area that improves access for the new growth in your area?

Governance

• Review your infrastructure priorities

• Set up your council procedures and delegation agreements for CIL

• Create the necessary CIL management structure.

• How will you work with other organisations.

• Enter into memoranda of co- operation with other bodies e.g. neighbouring authority

What should be happening

• Working on your Local plan

• Infrastructure planning

• Viability

• Are you and your officers talking to your:– county and parish – developers– communities– neighbours– infrastructure providers

PAS web siteCommunity Infrastructure Levy - web pages:

http://www.pas.gov.uk/community-infrastructure-levy

Case studies:

http://www.pas.gov.uk/web/pas1/3-community-infrastructure-levy-cil/-/journal_content/56/332612/6073804/ARTICLE