Viability and Developer Contributions: A Guide for Local Planning Authorities

1. Councillor briefingDeveloper contributions:Community Infrastructure Levy, S106 obligations, viability Date: July 2013 www.pas.gov.uk

2. What is PAS ? • PAS is a DCLG grant-funded programme but part of the Local Government Association • Governed by a ‘sector led’ board • 10 staff – commissioners, generalists, support “PAS exists to provide support to local planning authorities to provide efficient and effective planning services, to drive improvement in those services and to respond to and deliver changes in the planning system”

3. Programme Presentation: Viability as a consideration Types of developer contributions Community Infrastructure Levy Your choices Questions & discussion

4. Growth and Infrastructure

5. When you need to consider viability: Local Plans /core strategy Other policies affecting the cost of development proposals Community Infrastructure Levy Planning applications S106 obligations

6. It is all about delivery • Growth • Viability – including developer/landowner motivation • Mitigation - Infrastructure • Community expectations • Policy requirements – e.g. affordable housing

7. Basic elements of viability assessments

8. Policy costs Including: materials sustainability codes BREEAM Affordable housing On-site 106 contributions

9. Developers costs Contaminated land Poor ground conditions Green field costs – connecting to infrastructure and services. Materials Fees Marketing Profit (risk) Finance

10. Money money money There is only so much - how much? What will bring development forward? You need to have information on viability You have choices

11. Developer and other contributions S106 obligations Community Infrastructure Levy (CIL) Highway contributions ( s38 and s278 Highways Act) New Homes Bonus Retention of business rates

12. S106 Obligations • S106 is not replaced by CIL • Old reality – pre 2008 • New reality-post 2008: • Times have changed – viability • Times have changed - legislation

13. S106 - tests If the development is capable of being charged CIL, the S106 obligation must meet these legal tests: NECESSARY to make the development acceptable in planning terms DIRECTLY RELATED to the development FAIRLY AND REASONABLY related in kind and scale to the development These are also now the policy tests in the NPPF

14. S106 obligations • Site specific mitigation measures • For pooled contributions up to April 2014/CIL adoption, then for up to 5 developments where infrastructure not funded by CIL (There is currently a consultation about moving the deadline to April 2015) • NPPF- planning obligations should take into account changes in market conditions over time and, where appropriate, be flexible to prevent stalling( para. 205)

15. Renegotiation of s 106 • Amended Regulation (Feb 2013) to set out a procedure for amending any planning obligations entered into between 28 March 2008 and before 6 April 2010. • Changes in the Growth and Infrastructure Act that require a council to renegotiate previously agreed affordable housing levels in a S106, or enable PINs to assess the viability arguments and change the requirement

16. Questions?

17. What is a CIL? • A mechanism for developer contributions • To contribute towards infrastructure needed to support the development of the area • A charge per square metre of floorspace • Not mandatory

18. What is CIL for? • To help pay for infrastructure needed to support new development • But not to remedy existing deficiencies unless the new scheme will make it worse • Councils must spend the income on infrastructure – but you can decide what (and that can change over time)

19. Charging CIL – some basics • £ per square metre on net additional (internal) floorspace • Rates can vary by geographic area or use ( or both) • Due when the development starts • It is index linked • The landowner is responsible for paying it • The local planning authority is the charging authority (& sets the CIL)

20. When does it apply? • To all development that involves ‘buildings that people normally go into’ • Development over 100sqm gross internal floorspace • A single dwelling ( even under 100sqm) (but not subdivisions of dwellings) • Includes permitted development (it doesn’t have to follow a planning permission) • Once set, you can’t pick and choose which developments to charge

21. Why set a CIL? • Money for infrastructure through charging nearly all new development -a little from almost everyone (so fairer) • There is a lack of government or other money • It is set out in a schedule based on evidence (so more transparent) • Developers have certainty • Changes to s106 – legal tests and pooling

22. CIL- positive economic effect • “By providing additional infrastructure to support development of an area, the levy is expected to have a positive economic effect on development across an area” para. 8 - CIL Guidance – April. 2013

23. Setting a CIL • Identify the aggregate infrastructure funding gap- Is a CIL necessary? • What rate is viable to charge? • Check out the consequence of the rate on key uses • Make sure that the rate is backed by evidence • Consultation required • Independent examination

24. What you need to set a CIL? • Up to date development plan • Evidence on infrastructure funding gap – aggregate gap • Evidence on viability • All evidence is ‘appropriate available evidence’

25. Strike the Appropriate balance Between • the desirability of funding the infrastructure gap to support the development of the area from CIL and • the potential effects (taken as a whole) of the imposition of CIL upon the economic viability of development across the area.

26. Viability - rate setting: • Strategic approach • Look at the effect on the whole area • The rate may put some development at risk • No requirement to use any particular models • Can set differential rates – but rate changes can only be differentiated on viability grounds. Note: If there is a CIL, a rate must be set for every use.

27. Differential rates • Different between uses (not just use classes) • Different across the geographic area • Both or neither • All differential rates must be based on viability evidence ( not policy objectives)

28. Different rates for different authorities • £70 per sq Metre – flat rate – based on residential growth. • residential charges rural - £80m2 and urban -£40m2 . All office/industrial uses £0m2 charge. • Incl. 4 residential rates, 3 employment rates,– high level of differentiation by area and use.

29. Members role • Make sure you know what is necessary to aid delivery of growth in your area. Make sure your priorities are clear. • Get involved in deciding how ‘risky’ your rates are going to be - strike the appropriate balance for your area.

30. Exemptions etc • Social housing relief • Buildings used for charitable purposes- exempt • Discretionary relief for charitable investments • Instalments policy • Exceptional circumstances (where scheme can’t afford to pay it) but conditions apply

31. Exceptional Circumstances • It is very difficult to get • It is not a negotiated amount • Should not be considered when setting rates

32. How is the levy paid? • Usually cash contribution • Falls due on commencement of the development but you can agree to payment by instalments

33. What has PAS learnt from the early CIL authorities? Those that succeed have: • Councillor and management team support • Effective project management • Project team • Project plan

34. What has PAS learnt from the early CiL authorities? • There is no one way to DO a CIL • Remember the basics • Infrastructure – Local Authorities should use what they have • Viability and balancing risk are key to the rate • Keep it simple

35. Who has a CIL? • There are (as of April 2013) 19 July charging authorities with a schedule in place (incl. Redbridge, Wandsworth, Newark & Sherwood, Shropshire, Huntingdonshire, Wycombe, Portsmouth, Poole, Bristol, GLA) • Many more on their way (at least 90 are actively working on their CIL)

36. Questions?

37. Spending CIL – For Charging Authorities • It must be on infrastructure needed to support the development of the area • It can be spent on infrastructure outside the CA’s area, and spent by another body • Doesn’t have to spent on the infrastructure referred to in your charge setting evidence but.. the links should be clear • It is advisable to publish a list of the infrastructure you intend to use CIL for (Reg 123 list)

38. Purpose of the Reg 123 list • “double dipping” is a concern for Developers • Reg123 is the requirement for a published list of infrastructure projects or types of infrastructure that the Charging Authority intends will be, or may be, wholly or partly funded by CIL, those infrastructure projects or types of infrastructure. • …put another way you cannot collect s106 to spend on items within your Reg 123 list • Golden thread

39. GOLDEN THREAD From plan to delivery Devising CIL spending list: A draft Reg 123 is now part of the examination

40. 123 LIST- Post Examination : • Reg 123 list - should be based on the draft list examined with the charging schedule • Need to explain the reason for any change • Appropriate local consultation • Where a change to the regulation 123 list would have a significant impact on viability evidence requires a review of the charging schedule

41. Implications on Council Resources The more comprehensive the Reg 123 List Education Transport Community Facilities Green space Health Education Transport Education The greater demand on and for Council resources to deliver

42. Neighbourhoods Localism Act: • localism principles – the money should benefit those who take the development. (incentivisation)

43. CIL and Neighbourhood Planning

44. Member involvement in delivery • Get involved early in Infrastructure prioritisation • Decide how best you can use all income from development to aid growth • Understand the implications of s106 vs CIL • Work with neighbourhoods and local communities

45. Is CIL right for you?

46. Decisions • What will you seek from CIL ? • What will you seek from s106 ? • How will you spend your new homes bonus and business rate retention on? • Who do you need to be working with? • County • Health authority • Neighbouring authority • Parish

47. Tough decisions • CIL might give you enough money for that long awaited – politically popular- skating rink BUT Is that the best way to make your new development sustainable and acceptable to the community? OR should you give the CIL money to your neighbouring authority for a new transport link in their area that improves access for the new growth in your area?

48. Governance • Review your infrastructure priorities • Set up your council procedures and delegation agreements for CIL • Create the necessary CIL management structure. • How will you work with other organisations. • Enter into memoranda of co- operation with other bodies e.g. neighbouring authority

49. What should be happening • Working on your Local plan/ Core strategy • Infrastructure planning • Viability • Are you and your officers talking to your: • county and parish • developers • communities • neighbours • infrastructure providers

50. What will success look like?