10 August 2020

Government White Paper: Planning for the Future – Infrastructure

The Government has published its White Paper setting out far reaching proposals to reform the planning system with the aim to simplify, speed up and create more certainty in the planning process.

The three pillars of change; Planning for Development, Planning for Beautiful and Sustainable Places and Planning for Infrastructure set out a number of proposals to achieve these aims. This article focuses on some of the key proposals within Planning for Infrastructure.

Planning for Infrastructure

In what is arguably one of the most radical proposals the White Paper puts forward, there is proposed a new 'Infrastructure Levy,' to replace both the existing planning obligations under s106 and Community Infrastructure Levy.

The Infrastructure Levy would be charged on a fixed proportion of the development value above a minimum threshold, with a mandatory nationally set rate and the current system of planning obligations abolished.

Key characteristics of this Levy are as follows:

  • Charged on the final value of a development (or to an assessment of the sales value where the development is not sold, for example homes built for rental);
  • Payable at the point of occupation, with a potential sanction being prevention of occupation for non-payment; and
  • Include a value based minimum threshold below which the levy is not charged, to prevent low viability development become unviable.

These characteristics raise some interesting points. In particular viability is not solely an issue for low-value developments. There is no associated proposal of a cap on the amount payable and therefore the need to set the levy at the appropriate rate is fundamental to the operation of this system, to prevent the removal of any financial incentive to work on developments of a larger scale.

The proposal is that local authorities will not be able to use s106 agreements to secure infrastructure or affordable housing.

Affordable Housing

Affordable housing provision is currently secured by local authorities via section 106, however with this option removed the proposal is that authorities would be able to use funds raised through the Infrastructure Levy to secure affordable housing.

Delivery of on-site affordable housing can be off-set against the amount of levy payable. A provider of affordable housing could purchase the dwellings at a discounted market rate, however the discount would be considered an in-kind delivery of the Levy. This is designed to incentivise developers to build affordable housing on-site where appropriate.

It is recognised, in a footnote, that a s106 obligation could still be used to secure a covenant on the land where necessary, however the value would be captured through the Infrastructure Levy rather than the s106. Local Authorities could also accept Infrastructure Levy payments in the form of land within or adjacent to a site.

Guidance will be needed as to whether the full cost of delivering affordable housing on-site can be off-set against the Levy, or what happens if the amount of affordable housing delivery equates to more Levy than is due on the development. If the nationally set rate is not calculated correctly, this could result in disproportionately less funding being available for infrastructure.

Permitted Development Rights

It is proposed that the levy is extended to capture some permitted development rights including office to residential conversions and new demolition and rebuild permitted development rights (for a discussion of this new right see our previous article here).

This approach would increase the outreach of the levy base, however the exemption of self and custom-build development would be retained. This is a positive step given the Government’s continued push to deliver more housing through permitted development rights.

Uplift in Land Value

The suggestion has been put forward that the government could seek to use developer contributions to capture a greater proportion of the land value uplift that occurs through the grant of planning permission and use this to enhance infrastructure delivery.

Despite the recognition that this would need to be balanced against risks to development viability, this proposal will not be welcomed by developers.

As the Grosvenor Britain & Ireland director of development highlighted, the Levy is based on an assessment of the end value of the development rather than profitability. There does not appear to any recognition of the reality that viability is an issue to be overcome not just in areas where the sites are of lower value, and at this stage it is unclear whether this will be addressed.

It is unlikely that any measures proposed by this consultation will be brought into effect until next year at the earliest and we will await to see whether any of the measures will be adapted as result of the consultation process.

The consultation closes on 29 October 2020 and the White Paper can be found here setting out the full range of proposals.

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