The viability question

The government's proposed community infrastructure levy, which is set to come into force next year, couldn’t be homing into view at a worse time.

The viability of schemes is already being threatened by tumbling land and property prices, and CIL could deal the killer blow.

Savills Research director Yolande Barnes says: “Theoretically CIL is good but the timing is unfortunate. It might end up being blamed for what is already there.”

Research by Savills shows land values fell towards the end of 2007, as the credit crunch started to hit the headlines. Urban land suffered particularly, with the biggest drop, of almost 5%, recorded in the South-east. That was just the beginning, warns Barnes: “I’d expect urban land values to be down 12-15% by the end of this year, while greenfield values could be down up to 5% in some areas.”

The consequence of that could be stagnation, Barnes says. “Deals will be way down. Quite a few sites will be mothballed. There is a risk that as costs mount even sites with planning permission will become unviable.”

That fear is shared by developers. Martin Leyland, managing director with Barratt’s strategic land division, says:

“If land prices go down moderately, then nothing may happen. The cost of the levy or tariff plus the cost of meeting the Code for Sustainable Homes could add up to as much as £50,000 per unit – and that does not include Section 106 which is still in force.”