New developments, whether commercial or residential, make demands on the infrastructure around them – but they rely on the facilities of the local community for the comfort and wellbeing of their occupiers. It is essential that local authorities enhance and maintain schools, transport links, green spaces and, in some areas, facilities such as flood defences – all of which comes at a cost. Developers need to understand their liability to contribute towards infrastructure maintenance and improvement, and be aware of upcoming changes to regulations affecting the Community Infrastructure Levy (CIL).
CIL is a levy that local authorities can charge on new developments, the proceeds of which are used to enhance the surrounding infrastructure. It was introduced by the Planning Act 2008, with the aim of ensuring that most developments make a contribution. Before CIL, such contributions were made through section 106 agreements between developers and local authorities. Section 106 agreements are planning obligations under the Town and Country Planning Act, which place certain obligations on the developer in order to make their proposals acceptable in planning terms. This often relates to the inclusion of affordable housing and sometimes, but not always, requires contributions towards infrastructure. These agreements are specific to each development and the amount payable is decided on a case by case basis. As a result, only a small proportion of developers were contributing towards mitigating the impact on local communities, and this tended to be only the largest developments.
The benefits of CIL are that local authorities can more easily and consistently charge a levy, and it arguably gives developers more certainty in terms of how much they will pay. It operates on a rates system, whereby each local authority produces a charging schedule that details their levy rate based on the needs of the local area and the economic viability of developments. The amount payable is calculated on the size and type of property being built.
However, the introduction of CIL has not been without its problems and criticisms. Among the many issues is that local authorities cannot charge CIL unless they have drawn up a charging schedule, which can be a protracted procedure and therefore one that not all local authorities have pursued. To encourage the adoption of CIL, since 2015 local authorities have not been able to pool funds from five or more s.106 agreements to fund a particular project or type of infrastructure – commonly known as the pooling restrictions – but this added another layer of bureaucracy and delay to the subsequent funding and delivery of infrastructure.
So, what’s changing? A report published in 2017 highlighted the limitations and constraints of CIL, prompting a consultation on reform. Dovetailing with the Government’s requirement to increase the number of homes being built across the UK, the proposed reforms and further consultations culminated in the Community Infrastructure Levy (Amendment) (England) (No.2) Regulations 2019, which come into force on 1st September 2019. Key changes are intended to address the complexity and delays associated with CIL, acknowledging that flexibility is key to efficient planning and funding decisions. Among the changes is the simplification of the process required to implement a charging schedule, no longer requiring two rounds of consultation by local authorities.
One of the major changes affecting developers is that the amendments lift both the pooling restrictions and the Regulation 123 lists, which before September 1st required authorities to list the types of infrastructure projects that CIL receipts would fund. Previously, whilst both CIL and s.106 could be used to claim contributions, they could not both require the developer to pay towards the same things. CIL is often seen as a contribution towards broad infrastructure requirements whilst s.106 may be directed towards supporting specific local community requirements such as schools and green spaces, particularly since it is a development-specific charge. Instead of producing Regulation 123 lists, authorities will have to publish an annual statement that outlines how revenue from CIL and/or s.106 will be used. This has caused some concern among developers that they may end up paying twice to fund the same element of infrastructure, however it is intended to give authorities much greater flexibility to address problems caused by delays in the receipt of CIL and knock-on delays to infrastructure projects.
Other changes come into force on 1 September 2019 in relation to the indexation of CIL, a less harsh approach to CIL liability as a result of changes to planning permission, and the loss of relief from CIL if a commencement notice is not submitted in time. The long-term impact of these changes is still under discussion, but the short-term impact on developers cannot be ignored. If you are currently developing or intending to in the future, it is essential that you seek specialist advice on CIL to ensure you understand your rights, obligations and deadlines.