Levy looks to flexibility

With six months to go before its introduction, controversy surrounds detailed arrangements for the government's mechanism for securing developer contributions, writes Mark Wilding.

Concern is mounting over the community infrastructure levy (CIL). When a tariff system was proposed nearly two years ago, it received a broad welcome from the property sector. But since draft regulations were published this summer, a wave of dissent has been building.

After months of discussions between central government, local authorities and the development industry, what went wrong? The British Property Federation (BPF) held a seminar on the levy last week and it soon became clear that many feel that the government has failed to take key messages on board.

BPF assistant director of planning Jonathan Seager maintained: "It is extremely disappointing that our concerns are the same issues that we raised back in 2007." BPF CIL committee chairman and Denton Wilde Sapte planning partner Stephen Ashworth told Planning: "We have been in the same room but the DCLG hasn't been listening."

A lack of flexibility and the potential impact on development viability are major concerns, amplified by the state of the economy and its effect on section 106 negotiations. The government has set CIL in the planning system, denying councils any element of discretion once a charging schedule is set. This leaves two scenarios - too high a charge will make development unviable while too low a figure means that infrastructure funding will be restricted.

DCLG deputy director of planning economics and social policy Miles Gibson admits that it will be hard to strike the balance. "There is a bit of rough science," he says. "There is no right level, but there is a level that works. Even in a downturn it will still be possible for the majority of development to go ahead. But if councils see the economy slowing in their area they should consider re-examining their charging schedule."

Resetting rates will theoretically allow authorities to respond to changes in the economy or the need for infrastructure. But there is serious doubt about the speed at which this can be done. Charging schedules take a long time to prepare. They must also go to independent examination under the local development framework system.

"CIL will need to be reviewed but it cannot realistically be done more than every two years," argues RPS director John Rhodes. "Even if it happens, there still needs to be scope to renegotiate. Unless councils have the ability to re-examine charges, the levy will have to be set to the lowest common denominator."

Home Builders Federation planning director Andrew Whitaker agrees that the levy will have to be low to avoid restricting development. Local authorities will need to take possible downward trends into the economy into account when setting the charge, he says. "Section 106 means councils pushing obligations to the edge of viability. You cannot do that with CIL. You have to set it at a level that does not render most development unviable."

Others believe that a higher charge should be set, with local authorities allowed to judge individual cases on their merits. Ashworth maintains that local authorities must balance the benefits of development against the need for infrastructure. "The levy removes an important level of discretion from the system that has allowed schemes to go ahead in the past," he says. "It introduces unnecessary rigidity."

Regardless of the level at which CIL is set, Rhodes points out that there will always be some schemes that are unable to pay. "Highly beneficial development might become unviable because of CIL. We all know that planning decision are not black and white. There will always be extraordinary situations where planning consent should be granted. There has to be some degree of flexibility," he insists.

An exceptions policy is central to this debate and the government has declared that it is against the concept. However, it has already conceded a blanket exemption for charities and now the affordable housing sector is also pressing hard to be excluded. It appears that the door may still open for local authorities to exempt developments that bring significant benefits but are rendered unviable by the levy.

Rhodes argues that introducing exceptions would allow a higher rate to be set without jeopardising exemplary schemes. "You can be more sensible about the rate if you have an exceptions policy," he says. "Developers should be able to make a case for exceptions and it should be up to the local authority to make a decision as to whether that argument is well made."

Ashworth supports this. "There should be an exceptions policy. You have to have something that allows you to deal with the difficult developments," he contends. He remains a supporter of the CIL concept and is urging colleagues to press for changes to make it work. "There is the framework of a workable system in the regulations," he believes.

Gibson confirms that exemptions are still being considered, although this is only one of several significant sticking points. The task of examining responses to the consultation process is not an enviable one. But no-one has shown signs of abandoning hope just yet.

"The industry maintains support for obtaining contributions for infrastructure from developers. The way that the regulations are currently drafted means that we cannot support the levy, but we have not given up on it," Seager insists.

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