How the restored ability to pool developer contributions could boost regeneration

Removing a ban on combining five or more section 106 planning gain payments to pay for infrastructure will allow councils to speed up delivery on large strategic sites, experts predict.

Infrastructure: tariff changes in the pipeline
Infrastructure: tariff changes in the pipeline

Back in 2015, the government introduced a restriction on the "pooling" of section 106 payments from multiple planning permissions. This prevents councils from collecting more than five separate planning obligations to fund a project. The aim was to encourage councils to instead adopt the Community Infrastructure Levy (CIL). However, last month, in its response to a consultation on reforming the system of developer contributions, the government said it intends to lift the prohibition.
In the March consultation, the government said it accepted the conclusion of its CIL Review Panel last year that the pooling restriction "can perversely lead to the refusal of otherwise acceptable planning applications". In its report, the panel had said the limit is a "particular issue on large strategic sites that are often brought forward under separate planning applications and/or by different landowners". The five-obligation threshold, it added, "is often reached without it being possible to ensure that all parts of the site contribute to the infrastructure required to mitigate the impacts of the development". 
"There was a recognition that the existing pooling restrictions were causing problems for both applicants and local planning authorities, and an unnecessary level of bureaucracy in trying to monitor the number of relevant obligations," said Stephen Ashworth, partner at law firm Dentons. "There were few observable benefits to the restrictions."

 In its formal response to the consultation, issued alongside last month’s Budget, the government said it has decided to lift the restriction across the board, dropping initial consultation proposals that would have applied the freedom only in areas where it is difficult to introduce a levy, or on "strategic sites". Such a move could "create uncertainty for developers and local planning authorities about where and when the restriction applies", it said.

Removing the pooling restrictions will make the delivery of large regeneration projects much quicker and easier for councils, according to planning consultant Gilian Macinnes, who sat on the review panel. She said: "Authorities with strategic sites will not have to be concerned about how that can limit the number of planning permissions to achieve the infrastructure. This may be even more important if sites are subject to greater subdivision in order to facilitate greater number of outlets to maximise the speed of delivery." 
According to Matthew Spilsbury, head of development viability at consultancy Turley, the revised rules could have a major impact on large sites being developed through multiple planning permissions. The lifting of the pooling restriction, he added, could also lead to the renaissance of instruments such as Milton Keynes Council’s "roof tax", where a fixed planning gain charge is imposed on every home built via section 106 agreements,. "For very big sites, held by more than five landowners, you will be able to spread these charges across all homes built," he said.

Eddie West, principal policy officer in the spatial planning policy team at Shropshire Council, said the move will also enable authorities to pool contributions from a larger number of smaller and unconnected sites that could all benefit from a single piece of infrastructure, such as a road. "Councils will not be restricted on the amount of section 106 agreements they can negotiate to support a single piece of infrastructure," he said.
Experts believe that this means most, if not all, councils are likely to make use of the new freedoms on pooling. However, some are worried about the lifting of pooling restrictions when combined with another proposal in the consultation response. The government said it will repeal the current ban on councils spending section 106 receipts on their "regulation 123 lists" of infrastructure items that can only be funded from CIL. Nicola Gooch, senior associate at law firm Irwin Mitchell, said: "This makes the prospect of double-dipping, where councils charge for infrastructure from both section 106 agreements and CIL, more likely. This is a big worry for developers."

The government said it intends to deal with this practice by requiring councils to be transparent over how developer contributions from both sources are being used through new annual "infrastructure funding statements". How it implements the measure, as well as its promise to ensure mechanisms are in place to "incentivise uptake and continued use" of CIL, will become clearer when it publishes related regulations, which it has promised by the end of the year.

Five key promised changes to developer contributions

• Allowing combined authorities with strategic planning powers to take forward a strategic infrastructure tariff.

• Removing a ban on councils using section 106 money to contribute towards infrastructure itemised on their "regulation 123 lists", which can only be funded through CIL.

• Changing planning guidance to "support local authorities to adopt and revise CIL charging schedules". 

• Requiring reporting of CIL and section 106 income and spending through new statutory "infrastructure funding statements", in an effort to improve transparency.

• Allowing local authorities to seek a fee from applicants towards monitoring planning obligations.

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