Why rowing back on land value uplift has relieved the sector

The government's change of tack on allowing councils to base infrastructure charges on existing land value has saved the system from unnecessary extra complication, experts have concluded.

Infrastructure: charges will be based on land value
Infrastructure: charges will be based on land value

Back in March, in a consultation paper floating improvements to the regime for securing developer contributions towards local infrastructure, the Ministry of Housing, Communities and Local Government (MHCLG) set out proposals for allowing Community Infrastructure Levy (CIL) rates to be based on the existing use value (EUV) of sites granted planning permission. The thinking behind this was that councils could claim a bigger share of the value uplift on lowervalue sites, notably farmland, to pay for necessary infrastructure.

On paper, the notion proved popular. According to the MHCLG’s official response to the consultation, issued alongside last week’s Autumn Budget statement, 173 respondents backed the proposal, with only 56 against. However, the response acknowledges concerns over the "inherent complexity" of the proposal. Instead of taking it forward through regulatory amendments, ministers now propose to update Planning Practice Guidance (PPG) to "support" councils in setting differential rates "more effectively" using "existing flexibilities" in the existing CIL regulations.

The announcement has relieved many in the planning sector. "The original proposal would have made the system more difficult to understand for applicants and landowners and more difficult to administer for local authorities," said Graham Jones, who leads on viability issues for the Planning Officers Society. "Differential rates based on EUV would have to be justified through examination, adding considerably to the viability assessments needed. Our view was that, if the government wants to pursue land value capture, this should be through a separate national initiative that would apply whether CIL is in place or not, rather than adding it to the burden on councils."

Planning and placemaking adviser Gilian Macinnes pointed out that many CIL charging schedules already differentiate between urban and rural zones as well as different types and quantities of end use. "This generally picks up the potential to ‘tax’ land value uplift, because greenfield EUV will generally be a lot less than in urban areas," Macinnes said. "Most local authorities I’ve spoken to thought differentiating rates by EUV would cause no harm, but they doubted they would use it."

Stephen Webb, a partner at law firm Clyde & Co, said legislating for land value capture would "inevitably be complicated". "Helping local authorities to implement differential CIL rates to capture some additional land value would be a much better use of resources. Encouraging use of section 106 agreements to deal with land value capture where appropriate through agreement with landowners and developers would be a much more cooperative approach," he said. Roy Pinnock, a partner at law firm Dentons, agreed: "The proposed approach would have been mind-bendingly complex, even by CIL standards."

Tom Dobson, a director at development consultancy Quod, said: "Anyone who has had to deal with large-scale phased developments or mixeduse schemes where a CIL charge is in place can confirm that the changes proposed would have led to endless arguments around the current and proposed mix of uses, how they relate to individual phases of a multi-phase scheme and so on. If the objective is to capture land value uplift from greenfield sites, it is easier to define those sites and set rates for uses within them based on viability."


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