Community Infrastructure Levy And Whole Plan Viability 4 July 2013

1. Community Infrastructure Levy And Whole Plan Viability4 July 2013 Steve Woolley

2. CIL & WPV • Context • Infrastructure delivery implications • CIL • Making it add up – a deliverable plan • Consultation & Examination

3. Context

4. Framework • Local Plan Requirements • NPPF • CIL Legislation • CIL Guidance • ‘Harman’ Guidance

5. Local Plans - NPPF “…should be aspirational but realistic.” (NPPF Para. 154) “….should be deliverable.” (NPPF Paras. 173 & 182) • Key elements of deliverability: • Availability of sites (NPPF Para. 47) • Policy burdens and viability (NPPF Para. 173) • Infrastructure delivery (NPPF Para.177)

6. Local Plans – Harman on viability • Guidance on assessing plan viability • Highlights the balance members need to strike

7. Local Plans – Infrastructure delivery “It is ... important to ensure that there is a reasonable prospect that planned infrastructure is deliverable in a timely fashion.” (NPPF Para. 177)

8. Local Plans – Infrastructure delivery • Key factors of infrastructure deliverability: • Cost and affordability • Delivery body agreement • Availability of land • Timing – for all of the above • Increased focus on this • Plan for real-world delivery

9. Whole Plan Viability in a nutshell • Using evidence to inform…. • Striking the balance between Policy / AH / Infrastructure / Viability • Ensuring the plan is…. • Sustainable • Deliverable • ……In the real world.

10. Not a one-off task “The assessment process should be iterative. Draft policies can be tested based on the assumptions agreed with local partners, and in turn those assumptions may need to be revised if the assessment suggests too much development is unviable. This dynamic process is in contrast to the consideration of viability during development management, when policy is already set. “ (Harman Page 11)

11. Community Infrastructure Levy

12. Purpose of CIL - Pro-growth • Contributions from development • Respect viability In order to • Bring forward infrastructure (etc.) • Deliver the Local Plan (Planning Act 2008 S205(2))

13. Why CIL? – CIL Vs S106 CIL S106 No tarriffs after 2014(5?) Requires development link Many had no S106 Subject to negotiation ‘Known Quantity’ Case by case negotiation NB: S106 remains. R123 lets you ‘draw the CIL/S106 line’ locally. • Deals with cumulative impact • Flexible strategic fund • Most development pays • Fixed rate(s), Predictable • Major work to establish • Easy(ish) once established ‘Fairer, faster and more certain and transparent’ (DCLG)

14. The CIL framework The Planning Act 2008 (as amended by Localism Act 2011) Part 11 (sections 205-225) Purposes of CIL – broad framework of CIL – plus some detail on charging schedule examination, charities, charging authorities... The CIL Regulations 2010 (as amended: 2011, 2012, 2013) Scope of CIL – liable parties – collection – enforcement – definitions – monitoring – procedures – exemptions and exceptions – alterations to section 106… Guidance and information CIL Statutory Guidance and CIL overview, CIL Relief, and CIL Collection documents

15. Key Features of CIL • Optional for LPA to set • A Tax - Mandatory once set • Set with regard to evidence • Proceeds Pooled – no link to contributor • Spend on infrastructure to support development • S106 ‘scaled back’

16. Recent changes • December 2012 CIL guidance • Focus on strategic sites • “Show and explain” how CIL will deliver plan • Clarity at Examination on s123 list and CIL v s106 • More emphasis on engagement • CIL (Amendment) Regs 2013 • LPAs must pass 15-25% of CIL revenue to local areas • No infrastructure spending tie for that %

17. Spending CIL

18. Spending CIL • Authorities can only spend on infrastructure to support the development of their areas • Includes provision, improvement, replacement operation or maintenance • “Infrastructure”includes(list in Act not exhaustive): • flood defence • open space • recreation and sport • roads and transport facilities • education and health facilities • [not affordable housing – removed by CIL regulations] (Planning Act 2008 S216)

19. Spending CIL • Flexible strategic fund • No connection to contributor • Proportion to neighbourhoods • No infrastructure spending tie • S106 ‘scaled back’ – But not for AH • Site focus & no pooling • CIL/106 mix must be transparent • Consult on CIL spending list

20. Planning Obligations and CIL CIL Regs. change use of S106 (but not S278): • Site Focus. From April 2010 law says obligations re. buildings must be: • Necessary to make acceptable in planning terms • Directly related • Fair and reasonably related in scale and kind (Reg. 122) • No more s106 infrastructure tariffs, from April 2014 (15?). • Max 5 S106s can be pooled • Does not apply to affordable housing (Reg. 123(3) • No double charging via s106 for things to be funded from CIL, from the point CIL introduced • Via a list of CIL spending intentions - aka. “Reg. 123 list” (Reg. 123(2))

21. Regulation 123 List Possible approaches to Regulation 123(2): • No list – this would mean you intend to fund all infrastructure via CIL - you could not use s106 for any infrastructure • Broad list – eg.state you would use CIL to fund health infrastructure - you then could not use s106 for any health infrastructure. BUT - you could use S106 to fund other infrastructure types not on the list • Specific/Mixed list – you state you would use to CIL to fund primary schools, but not one specific school – you then could use S106 to fund that primary school. BUT could not use it to fund other primary schools. You could use S106 to fund other infrastructure not on the list.

22. Regulation 123 list – Key points • Transparency is vital – be clear • Mixed approaches must be justified • At examination, must set out: • What will be on the list • How S106 will be used • How any S106 policies will be varied • Good practice to include in consultation • Must consult on later changes to the list

23. Neighbourhood Funding In neighbourhoods where development occurs: • If parish/local council, CA Passes over: • If no N/hood plan - 15% to parish (£100/dwelling/yr cap) • If N/hood plan – 25% to parish (no cap) • Local council to engage with CA over infra. priorities • If no local council, CA consults neighbourhood and spends: • If no N/hood plan – 15% (£100/dwelling/yr cap) • If N/hood plan – 25% (no cap) • CA expected to set out its neighbourhoods and consultation methods

24. Neighbourhood Funding • Parishor CA may spend the 15/25% on: • Infrastructure, or • “anything else….concerned with addressing the demands that development places on an area” • Intention is to incentivise acceptance of development

25. Liability

26. What is liable? • Development of buildings • Where people normally go • Over 100m2 – but any size new dwelling • For which permission granted post CIL (includes PD rights) • Net new-build GIA – charged £/m2 • Refurbishment & change of use not liable (NB dwellings) • Demolished GIA netted off, but • Only if in use for 6 mths in 12 before permission • What doesn’t pay • Non Buildings – not liable • Permission pre-CIL (inc. outline) – not liable • Below 100m2 (except new dwelling) – not liable • Charities (exempt) & Social housing (100% relief)

27. Exemptions& Reliefs • Mandatory exemption for development for charitable purposes (+ discretionary charitable investment relief) • Mandatory 100% relief for social housing

28. Who pays? • Liability runs with the land (land charge) • Anyone can accept liability • Incentives to do so • Defaults to landowner(s)

29. Paying CIL • Liability notified with planning permission • Fixed & non-negotiable • Virtually no scope for individual exceptions • Due 60 days after commencement, but • LA can set instalment policy • Can agree to transfer land (but not construct infrastructure) • Penalties for non payment • Surcharges & interest • Stop notices • Distress / sale of goods • Charging order / prison

30. Exceptions and Instalments • Optional Policies the CA may choose to set • Can be done at any time • Are not part of the charging schedule • Exceptional Circumstances Policy • For rare exceptions only - severely limited by Regulations & State Aid Law • Instalments Policy • Must apply to all • Vary payment deadlines by (only) • Time from commencement • Total liability • Amount and number of instalments

31. Setting CIL

32. CIL - setting • Optional for LPA • A Tax – must be paid • Based on evidence: • Development in Local Plan Strategic Sites Affordable Housing • Need for infrastructure • Viability of development

33. Setting a rate • CIL is designed to have a positive economic effect – it must support the development of the authority’s area (not threaten Local Plan delivery) (CIL Guidance Para 8) • A CA must look at the potential effects of charges “taken as a whole” on the viability of development “across its area” (CIL Reg 14(1)(b) ) • The law effectively recognises that the rate set may put some development at risk – this is a judgement for the CA

34. Pro-Growth Balance • Must “aim to strikewhat appears to the LPA to be an appropriate balance between”: • Meeting all or part of the infrastructure funding gap; and • The potential impact of CIL on the economic viability of development across its area. • Must explain this judgement at examination

35. Differential rates 1 • Differential rates are a useful tool, but be careful… • Only lawful criteria are “intended use” and/or “zone” Plus • Differential rates must (only) be based on economic viability evidence (CIL Reg. 13) NB – “use” not tied to Use Classes Order

36. Differential rates 2 • Differential rates can be used to: • Avoid threat to viability of particular uses vital for Local Plan delivery • Ensure development envisaged by the Local Plan can remain viable across the area, where viability differs by zone • Maintain viability of strategic sites with particular costs eg. S106 infrastructure needs (eg primary school). But • Avoid complex rate structures. More differential rates mean more evidence is needed.

37. Setting CIL: Evidence

38. Charge setting evidence The Charging Authority “must use appropriate available evidence to inform…preparation of a charging schedule” (Planning Act 2008 S 211(7A) - with my underlining)

39. Charge setting evidence:1. Up to date Plan • CIL Guidance: “Gov’t expects ……‘appropriate evidence’ includes an up-to-date Plan for the area….” • NPPF: “where practical, CIL should be worked up alongside the Local Plan”

40. Charge setting evidence:2. Infrastructure • Base evidence on IDP supporting the Plan • Supplement if necessary • Demonstrate an infrastructure funding gap • Need to fund infrastructure vs. existing funding streams • Consider CIL / S106 balance • Clear S106 policies in support • CIL spending priorities (R123 list)

41. Charge setting evidence:3. Viability • Area-based approach • not threaten Plan as a whole • Not an exhaustive evidence base • Appropriate range of site types • Particular focus on strategic sites • Evidence “informs” the charge • No need to exactly mirror evidence - pragmatism • Take policy costs into account e.g. affordable housing • CIL must leave room to deliver them

42. Exceptions and instalments • Ignore these when testing viability: • Exceptional Circumstances Policy • Instalments Policy • Charging schedule must stand on its own • Proposed use of these policies is irrelevant to the examination’s consideration of viability

43. How does it look?

45. Consultation • Engage developers and other LAs (neighbours, upper & lower tier) early - and throughout the process: • On viability • On spending proposals and CIL / s106 balance • CIL Guidance emphasises the need for this • Preliminary Draft Charging Schedule – no legal minimum. Guidance suggests 6 weeks. Minimum statutory consultees listed. • Draft Charging Schedule – minimum 4 week consultation period. Guidance suggests 6 weeks (CIL Regs 15 & 16)

46. Examination • Secretary of State has no role • LA appoints “independent” person with “appropriate qualifications and experience” to consider representations and establish: • The law has been complied with • Charging schedule supported by appropriate available evidence • Rates consitent with and informed by evidence of viability across the area • Evidence shows rates would not threated delivery of plan as a whole

47. Points from CIL examinations • Much discussion of infrastructure, but examiners not challenging IDPs • Established that rates “informed” by evidence • Representations focus on viability assumptions • Examiners looking for a reasonable viability ‘buffer’ • Potential threat to AH policy delivery has become a key focus NB: new requirement to “show & explain” the balance

48. Direction of travel? 2013 consultation 15 areas for possible change - including: • Extension to pooled s106 deadline - 2015? • Require evidence on “appropriate balance”? • Differential rates by size? • Allow payment ‘in kind’? • AH relief for Discounted Market Sale homes? • Easier to net off existing space? • Exemptions policies easier to apply? • Exempting self-build?

49. making it add up:Viability & deliverability

50. NPPF on WPV “Plans should be deliverable” “….the sites and the scale of development identified in the plan should not be subject to such a scale of obligations and policy burdens that their ability to be developed viably is threatened.” “…important to ensure that there is a reasonable prospect that planned infrastructure is deliverable in a timely fashion” NPPF, Paras. 173 & 177.