CIL: a tax on all your houses

Credit where credit’s due, the government’s planning reforms are bringing rewards. Housebuilders are building more homes (alongside – and because of – much improved profits).  The National Planning Policy Framework is, for now at least, leading to a greater ease of gaining planning permission – certainly on appeal, where the success rate for major housing schemes is markedly up compared to the first year of the coalition government. 

There are even signs of a more positive attitude amidst a range of councils who (a) have recognised the importance of delivery to economic growth, and/or (b) aspire to the New Homes Bonus, and/or (c) understand the threat at appeal. The uplift in confidence in the market is helping to bring forward Core Strategy allocations that have been stalled since 2010 or earlier. 

Even so, I fear a localist backlash in the run-in to the general rlection in May 2015, particularly with councils facing up to the scale of objectively assessed needs and the potential impact on Green Belts and other locally cherished areas in seeking to meet these in full. With luck, the backlash will have no more than a temporary effect in slowing planning progress until the election is out of the way.

The payment of CIL up-front, rather than spread throughout the development, poses a major challenge to development finance

What worries me more is the potential effect of the Community Infrastructure Levy. I hear it frequently from developers: “I need to get this scheme through planning before CIL comes in.” And there are good reasons for this. We’re seeing a ramping up of planned CIL charges. Councils are starting to compete, it seems, to see who can charge the most. Examples include Wokingham in Berkshire, contemplating £365 psm, and adjoining Hart in Hampshire, up to £800 psm. (The fact that this latter proposed charge is in the rural area suggests that it’s not so much a charge for infrastructure as a disincentive to bring forward development.)     

The higher CIL levels go hand-in-hand with councils proposing to take greater control of – and hence responsibility for - the delivery of infrastructure, which begs the question of how well geared up they may be to actually deliver the facilities that development needs. Meanwhile, the payment of CIL up-front, rather than spread throughout the development, poses a major challenge to development finance.

There is a dangerous experiment in prospect, testing how many planning applications and thereafter how many developments come forward if high-cost CIL is introduced widely. It may be no coincidence that the highest CIL rates are in those areas with the greatest prospect of achieving housing delivery.  What the positive planning reforms deliver with one hand may yet be undermined by the wider introduction of CIL and the Government may need to face up to this (rather than continue to tinker with the regulations) as its constituent parties look beyond May 2015.   

The biggest obstacle to delivery may not be the localist backlash, after all.

Ian Tant is senior partner at Barton Willmore