The Community Infrastructure Levy (CIL) is still in its early infancy. 45 authorities are charging, 19 authorities are in the twilight zone between examination and adoption. It is, clearly, too early to credibly talk about its effects on the delivery of either development or infrastructure. Almost 100 more authorities have published CIL proposals though. It is, clearly, time to engage with the workings of the Levy to ensure it works for sites big and small.
One of the key issues, for charging/ planning authorities committed to growth and delivering the associated infrastructure, is certainty of funding. One of the purposes of CIL is to ensure that landowners make a full contribution towards infrastructure costs and authorities need to be hesitant before adopting an approach that undermines that. Authorities must balance the risks to delivery of the public sector taking on a greater role in funding and procuring infrastructure with CIL receipts against the wider risk that delivery left outside CIL and in planning agreements will be subject to a greater degree of viability-based landowner-led value engineering than ever before.
Is it delivering?
Savills and the HBF have just published “CIL: Is it delivering?”. There is a great deal that could be said about the pamphlet. It would be helpful to see the data sets that lie behind some of the conclusions. This blog concentrates on one issue though – the stated preference for a “developer-led” approach to infrastructure delivery for large scale schemes. In this model Savills propose that developers deal with infrastructure provision on- and off-site under section 106 agreements and charging authorities charge a zero CIL rate. That is, clearly, one possible approach and one that some authorities are pursuing. It can work very well.
There are, however, risks and so there are also alternatives. At the opposite end of the spectrum is an “authority-led” approach to CIL in which the authority takes responsibility for all infrastructure bar the on-site provision, and a high CIL rate is charged. That reflects the desire to avoid value engineering of major consents which ultimately undercuts the infrastructure investment that can be made. Despite objections from Savills, Wokingham promoted this approach and it has recently been endorsed by the CIL examiner as “in full accord with the legislative purpose and the associated guidance related to CIL“.
One of the arguments Savills mention is the gap between the amount raised by CIL and the cost of the infrastructure necessary to support development. There is clearly a gap – all the examination evidence to date makes that clear. What is also clear is that that gap will not be filled in the developer-led approach. Indeed, if it were affordable under a section 106 agreement it would also be affordable commuted as part of CIL.
In reality there are benefits and disadvantages to both approaches. Under the developer-led approach it is argued that developers may be able to procure more efficiently, although there is limited real evidence that house builders are particularly well suited to delivering schools, health facilities or major roads. If in control, then developers are better able to control the programme of delivery, to manage costs and to take the risk of cost overruns.
However, an authority-led approach avoids the risk that strategic sites are subsequently split up allowing developers to argue that they should not be responsible for the major infrastructure, much of which will fail to satisfy the Regulation 122 and 123 tests.
There is an answer to this. In Milton Keynes a framework agreement was put in place ahead of any planning applications. That set the framework for infrastructure provision and contributions and will be taken into account when CIL emerges in Milton Keynes. Properly it will justify a low CIL rate not least because the Council is obligated already to provide the infrastructure. The framework agreement will give the local planning authority comfort that individual developers cannot salami slice large sites and then take advantage of a low CIL rate.
Surely a sensible framework agreement or framework policy should be a pre-condition of a developer-led/zero-CIL approach? The absence of such a framework should make authorities very wary of supporting a low CIL/high s106 model.