The November 2017 Budget announcement on developer contributions, promised in the Housing White Paper, decided not to ditch the Community Infrastructure Levy but to tweak it instead.
Last January we suggested 6 reforms to make CIL more transparent and ensure it complements, rather than confuses, the development process. Here are the top 5 for 2018.
Reform #1 – deal with the small stuff, quickly
The recent amendment Regulations are welcome. The Government should look to implement another set of amendment regulations by the summer, to deal with identified problems on indexation and give effect to the simplification on pooling restrictions promised in the Budget. It should reconsider the current proposal to use house price indices to inflate CIL. Although transparent, there is no relationship between the change in values and the cost of delivering infrastructure.
There are better alternatives and consideration should be given to capping indexation rises where they exceed modelling assumptions at the CIL setting stage, giving a discount to the rate equivalent to any excess. That would encourage regular charging schedule reviews and ensure the charge remains within bounds of the original viability work.
Reform #2 – Free up strategic sites
The Budget committed to allowing a partial review of charging schedules. Among other things, that will allow charging authorities to look again at genuinely strategic sites and fix some of the problems that CIL-setting has created where errors were made or assumptions were not held to account in the examination process. The reform will allow zones to be set for these sites, with rates that reflect an agreed viability position including factoring in affordable housing delivery.
This can and should be implemented by the summer.
Reform #3– Free up strategic sites, again
For all the benefits of CIL recognised by both the CIL Review and the Budget, it is horribly complex for large, phased development. The Review will need to grapple with how much flexibility can be created for genuinely 'Strategic Sites'. CIL agreements should be allowed for these sites, which preserve the overall value of the infrastructure contribution (so that CIL is still a tool of value capture rather than mitigation management) but escape the complexity of the Regulations in terms of triggers, offsets and reliefs. That will require careful thought on procurement issues, in terms of the point at which liability arises, and a more sensible approach to works in kind than the Regulations currently allow.
This can and should be implemented this year.
Reform #4 – Exemptions, distractions and diversions
There should be a proper debate about the sense in the reliefs, exemptions and offsets that plague CIL. If we want the system to be simpler, simplify it by removing these. As long as the charging regime ensures the charges adjust to reflect that, it will be neutral in many cases but far less complex.
Reform #5 – Spend It
One of the main gripes on CIL is the lack of certainty about its use (and the delay this is said to cause). In truth, many S106 contributions are subject to long clawback periods. In truth, too, CIL is only a drop in the ocean for infrastructure funding – it is unreal to expect it to be spent before match funding has been assembled or for it to deliver big bang projects on its own.
That said, two things need to be fixed:
- CIL is meant to support the Local Plan. That is not always clear and the Government needs to consider tilting the balance from discretionary use of CIL, where it can be drained away from investment in new infrastructure to support Local Plans, to a slightly more prescriptive framework for some of the really big ticket items used to justify CIL setting in the first place.
- Allowing CIL to be spent on maintenance of existing infrastructure is a mistake and undermines the benefit and legitimacy of the value capture it was designed to achieve. The changes made by the Localism Act 2011 to allow this were regressive and going back to the 2010 position – that CIL should fund new or upgraded infrastructure – would help concentrate spending and minds.
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