Will housing gain from new levy?

If you ask most people in commercial and housing development about new regulations they will focus on changes to regulations for building safety and for achieving carbon zero development. Its understandable as both have serious implications for both immediate development decisions and long term asset values and management.

However all developers and their advisers should read the planned changes to the #planninggain and a new Infrastructure Levy (IL) in a technical consultation which is about to close. They may be classified as?technical, but be clear this will affect all developments, commercial and residential.

In principle I welcome this attempt to update the current system of planning gain, which is too complex, slow and opaque. As both a Chartered Surveyor and a former Housing Minister I have seen how the duel system of CIL and s106 agreements is muddled, and can act as a brake on development.?

Developers don’t know exactly what they will have to pay long after they have committed to a site; many councils lack the in-house expertise to effectively manage the process, causing lengthy delays; whilst the whole system is incredibly difficult for elected councillors or the public to understand. Given that one of the main complaints from communities about developments is that the infrastructure provided doesn’t match the impact of a scheme, reform is needed. In my former constituency I recall a two year delay between permission being granted and the conclusion of the s106 agreement, largely because the district and county councils couldn’t agree what they wanted to spend the money on.

But here are some issues property professionals need to think about.

First the new levy will be mandatory and will apply to all types of development, including where changes to use occur through the application of Permitted Development Rights.?This has significant implications for some marginal projects, often much needed urban regeneration schemes.

Second the proposals will effectively do away with s106 negotiations and agreements, providing instead three pre-determined ‘routeways’. This is welcome, but are those routeways clearly defined??

Third, Gross Development Value at the point of completion or site sale will replace the current approach of chargeable areas for CIL. If they can get these changes right in the details, this change could provide developers with upfront clarity about how much the levy will cost. This will help developers and owners plan and start building with confidence.

However,?local authorities will set both the rates for the new IL and the thresholds below which it will not be chargeable. They will, for example, be free to set different rates in their area, based either on the type of development or the location. There is merit in this, to enable planning authorities to prioritise locations of types of development needed. However it should not be a free for all. Government should provide a simple tariff guide from which councils can choose. This would be fair, clearer and easier to manage.?

Finally there is a real chance here that #affordablehousing could benefit from more funding and there will remain flexibilities about how it can be delivered – in-kind on site, or cash levied. However the consultation seems to be providing complete freedom to councils as to how cash might be spent – and that will mean the money will be spent to cover council’s other activities. That’s not right – at the very least 65% of cash payments should be for more affordable and social homes.

Mark Prisk FRICS FRSA is a former Minister of State, for Construction and for Housing. He is an active Non Executive Director & Independent Chair and a Strategic Adviser to residential and commercial real estate organisations.