Exemption may widen scope for levy

New planning guidance that removes affordable housing obligations from small-scale residential developments is likely to have the consequence of increasing such schemes' liability for Community Infrastructure Levy (CIL) charges, according to experts.

Small housing sites: guidance could switch burden from affordable homes to levy [pic Alamy]
Small housing sites: guidance could switch burden from affordable homes to levy [pic Alamy]

Communities secretary Eric Pickles said the new guidance is intended to stop small builders and developers being "hammered" by section 106 agreements on affordable housing, which the government estimates average £15,000 for each new home.

The guidance exempts developments that comprise ten or fewer homes from section 106 affordable housing contributions. A lower threshold of five units or fewer has been introduced for designated rural areas, which include national parks and areas of outstanding natural beauty.

However, planning obligation experts maintained that, while the guidance would reduce the provision of developer-funded affordable housing, its removal of a major development cost from small sites would expand the scope for charging CIL on such projects.

Adrian Kerrison, project manager at consultancy Nationwide CIL Service, said: "Affordable housing contributions in marginal areas can often render the application of the levy unviable.

"The release of this significant development cost on small sites may alter the viability and offer an alternative CIL-based income stream.

"For local authorities in tightly constrained areas where small site and infill development makes up a substantial proportion of housing delivery, this may be quite a significant change."

Simon Drummond-Hay, principal of consultancy HDH Planning and Development, said he expects that local authorities that have adopted CIL early – and that are now looking to review their charging schedules – will be particularly interested in the new guidance.

"CIL has to be set in the context of the prevailing policies and with regard to viability," Drummond-Hay said. "If the viability increases – perhaps because of the removal of affordable housing requirements – there will be a different view of those sites."

Stephen Webb, partner at law firm King & Wood Mallesons, said local authorities would seek to ensure that small sites continue to "pay their way", either through existing or emerging CIL requirements.

He added that contributions via section 106 agreements that do not relate to affordable housing also remain an option.

Umbrella group the Local Government Association strongly opposed the removal of section 106 affordable housing contributions from small-scale housing schemes, arguing in a consultation response earlier this year that an area-by-area approach would be the best response.

It cited the example of Shropshire, where it said 80 per cent of homes have been delivered on sites of five units or fewer, as a location where affordable housing provision would suffer as a result of the new guidance.

HDH’s Drummond-Hay suggested that the guidance makes it more likely that local authorities will favour larger-scale housing development in the countryside as a way to meet their targets for affordable housing.

Other experts maintained that some councils may choose to ignore the latest section 106 guidance if they have robust enough local policies.

Stephen Ashworth, partner at law firm Dentons, said the Department for Communities and Local Government has offered no evidence or impact assessment to support the new guidance and also appears not to have considered state aid issues.

"If there is a development plan policy that is in conflict with the latest guidance then the development plan should win, certainly at a local level," he said.

Margaret Baddeley, a planning director at consultancy Nathaniel Lichfield & Partners, said councils with specific development plan policies on affordable housing contributions could argue that the guidance did not apply if their local policies were "drawn up recently and based on sound calculations".

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