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31st December 2018

Government Consults Again on Reforms to Developer Contributions

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The Government is consulting on draft regulations reforming the Community Infrastructure Levy and section 106 planning obligations, aimed at making the system of developer contributions more simple, transparent and accountable.

This follows the Government’s response to the consultation on “Supporting Housing Delivery Through Developer Contributions” which we reported on in November

Perhaps the most significant proposal is the removal of the restriction which prevents local authorities “pooling” more than five section 106 obligations to fund a single infrastructure project. It is recognised that this can have distortionary effects and lead to otherwise acceptable sites being refused planning permission. It is also felt that the change will address the uncertainty, complexity and delay created by the restriction. The draft regulations will also allow local authorities to use both the Levy and section 106 planning obligations to fund the same item of infrastructure, giving them greater flexibility.

There is also a proposal to adopt a more proportionate approach to administering exceptions to the Community Infrastructure Levy. Certain development, such as residential extensions and self-building housing are exempt, or gain relief, from the Levy. In most cases, a developer must submit a Commencement Notice to the charging authority prior to the start of works, or the benefit of the exemption of relief is lost entirely. However, the Government recognises that this can result in developers, particularly smaller developers and self-builders who are less familiar with the requirements, being unfairly penalised. They therefore propose to introduce a smaller penalty than at present for not serving a Commencement Notice prior to starting works, amounting to a surcharge equal to 20 per cent of the notional chargeable amount or £2,500, whichever is the lower amount.

The Government also wants to link Community Infrastructure Levy rates more closely with the value of development, rather than the cost of building infrastructure. Accordingly, they propose to index the Levy for residential development to a three-year smoothed average of the annual local House Price Index. For non-residential indexation the Government proposes indexing to the Consumer Price Index.

To improve transparency and accountability around the spending of the Community Infrastructure Levy and section 106 planning obligations, the Government proposes introducing a requirement for all local authorities to publish an annual Infrastructure Funding Statement by 31 December each year which will be available on the local authority website. This will report “what has happened” on revenues from developer contributions and the way in which those revenues have been applied. It would also look forward to anticipated revenues from developer contributions and how they propose to apply them in the following years. The Government also proposes to specifically permit authorities to seek a sum for monitoring planning obligations as part of a section 106 agreement, which is something that there is currently uncertainty about.

The draft regulations also deal with a number of other changes, and minor technical clarifications, to the Community Infrastructure Levy Regulations 2010. The consultation closes on 31 January 2019.

For more information contact Gemma Dudley on 01223 532747 or click here to email Gemma.