Changes to developer contributions: the sector reacts

Proposals on developer contributions contained in this week's blizzard of policy announcements have prompted very different reactions from planning experts.

Infrastructure: proposals to lift “pooling” restrictions | Graeme Yuill/Geograph
Infrastructure: proposals to lift “pooling” restrictions | Graeme Yuill/Geograph

In a separate consultation launched alongside the draft revised National Planning Policy Framework (NPPF) on Monday, the Ministry of Housing, Communities and Local Government is proposing to lift the current "pooling" restriction that prevents local planning authorities from using more than five section 106 obligations to fund a single infrastructure project.

The restriction was originally introduced to push councils into drawing up and adopting Community Infrastructure Levy (CIL) charging schedules, and to that end it has been largely successful. However, the government’s CIL review panel report, published in February last year, identified several issues with the restriction, not least that it can hold back development on large strategic sites. According to housing secretary Sajid Javid, the new approach set out in the consultation, alongside proposed new NPPF policies on viability assessment, will ensure that "everyone is clear about what affordable housing and infrastructure will underpin new development".

"Ironically, CIL can sometimes make it harder for councils to deliver strategic objectives because it has to be paid and there is no flexibility," said Nick Sharpe, planning and development partner at property advisers Montagu Evans. "If they are well thought through, section 106 obligations can be used more flexibly as an instrument to overcome barriers to development." In light of such concerns, the government is proposing to lift the pooling restriction in areas with an adopted CIL schedule, where land values are so low that it cannot feasibly be charged and where development is planned on several strategic sites.

The idea has been broadly welcomed. "The restriction obviously stands in the way of authorities being able to creatively pull together contributions from different sources and apply them where needed," said Roger Hepher, a director at HGH Planning and Development Services. Daniel Farrand, managing associate at Mishcon de Reya, said that limiting section 106 contributions to five was arbitrary in the first place. "There’s no logic to it," he said. "It makes absolutely no sense and just prevents sensible planning. Let’s get rid of it."

While agreeing that the pooling proposal is a "pragmatic response", Anthony Lee, head of development consultancy at BNP Paribas Real Estate, pointed out that it may prove problematic for developers when acquiring land. "It undermines the principle of CIL, which is that you know what you’re going to be paying when you buy the land," he says.

If lifting restrictions on the pooling of section 106 contributions have been broadly welcomed, the same cannot be said for another eye-catching suggestion set out in the consultation paper. The government suggests that in the future contributions could be set nationally and made "non-negotiable". This is open to interpretation, but if a national tariff is set at a flat rate experts fear it would lead to far lower contributions and inadequate infrastructure support.

"It would clearly have to be viable for the least viable area," said Lee. "They’re putting simplicity over intelligence. Any tariff would have to be very low and the amount of money it would raise would be commensurate with the level it’s set at. So in areas that are creating more value, particularly in the South East, this would gather very little for infrastructure – far less than would be required to make schemes sustainable."

Others are even less impressed. "I’m always worried by one-size-fits-all viability assessment," said Farrand. "Circumstances vary so much. I can see why they want to do it, because negotiation looks like a way to pull the wool over somebody’s eyes and not contribute what you should. But even at a local plan level, there is no way you could assess every site properly." According to Hepher, however, the wording of the proposal is sufficiently ambiguous that variable tariffs could be laid down by central government. "That’s OK, but it rather cuts against localism and local determination," he said.

Nicola Gooch, a planning lawyer at solicitors Irwin Mitchell, described the consultation paper as a "fairly mixed bag of comparatively modest proposals combined with promises of a radical rethink of the entire system at some unspecified point in the future". She added: "Making the delivery of infrastructure so direct a responsibility of central government is unlikely to be a vote winner. It would mean that every pothole, traffic jam or school placement shortage would be the direct responsibility of whichever government department pulled the short straw."


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