Is this the end of the Community Infrastructure Levy and Section 106 Agreements?
The Levelling Up and Regeneration Bill has recently received its first reading by Parliament (May 2022). If fully implemented, this Bill will affect developers and property owners in a number of ways.
This note focuses on Part 4 of the proposed Bill, which, if implemented, will change the way developer contributions are currently charged and collected by local authorities.
Developers currently contribute towards the cost of the provision of infrastructure within the local area by way of the Community Infrastructure Levy (CIL) and in accordance with the terms of a Section 106 Agreement.
Part 4 of the Bill introduces a new Infrastructure Levy, which is intended to replace the CIL and, potentially, Section 106 Agreements. The purpose of this new charge is to simplify the way developer contributions are calculated and to enable a local authority to build and maintain a pot of money for future infrastructure, to include affordable housing.
Differences between CIL and the Infrastructure Levy
The Infrastructure Levy will be determined by the local authority and will be detailed within a published charging schedule, similar to the CIL. However, unlike the CIL, the Infrastructure Levy will be mandatory and not discretionary.
The Infrastructure Levy will be calculated based on the gross development value of the development, rather than the floor space of the development as with the CIL.
The local authority will need to have regard to a number of different matters when determining the rates of Infrastructure Levy and, specifically, will need to take into account the level of affordable housing provided by the developer and required in the local area. The local authority’s aim will be to ensure that the level of affordable housing provided will be equal to, or will exceed, the amount supplied (and funding provided) over the previous period.
The benefits of the new Infrastructure Levy for developers
- With a published charging schedule, the charge will be transparent and should reduce uncertainty.
- A developer should find it easier to budget and will be aware of the cost to them at the start of the matter.
- Section 106 Agreements can often be heavily negotiated and a published charging schedule will remove the need for much of this (although it is likely that some form of agreement will still be needed to deal with non-financial elements of the planning obligations required by the local authority).
- This should avoid delays associated with agreeing and entering into section 106 agreements.
- The proposed Bill contains no detail of any potential reliefs or exemptions to the charge (currently, a registered provider, local housing authority or a provider of social housing can obtain relief under the CIL).
- It is intended that local authorities will have a ‘right to require’ onsite affordable housing. It is unclear how this will work.
- It is not clear how other planning obligations usually contained within a section 106 agreement will be documented and, therefore, section 106 agreements may still be required.
Currently, whilst the Bill is being reviewed and considered, there are no immediate changes to the need for a section 106 agreement or payment in accordance with the CIL and it is clear that there are a number of matters that will need to be clarified prior to implementation of the Bill. The Real Estate team at Ellisons will continue to keep you updated as and when the proposed Bill is amended or implemented.