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RTPI response to MHCLG consultation on developer contributions reform

This is the RTPI's response to the 2019 Ministry of Housing, Communities & Local Government Consultation on Community Infrastructure Levy draft regulations. The consultation focuses on technical implementation of the reforms outlined in the government response to supporting housing delivery through developer contributions. The reforms seek to improve the operation of the Community Infrastructure Levy by reducing complexity and increasing market responsiveness and transparency.

The RTPI's response welcomes the additional clarity provided by some of the regulations, however, it also highlights areas of the proposed regulations which would frustrate the Government's policy intent. In particular we make the case that some of the changes to CIL will introduce significant additional complexity, which may slow things down and create uncertainty.

Download the full response in pdf here, or read below.

Reducing complexity and increasing certainty

Ensuring that consultation is proportionate

Question 1: Are there any elements in regulation which will prevent the Government achieving the policy intent?

1. No.

Removing the restriction which prevents local authorities using more than five section 106 obligations to fund a single infrastructure project ('the pooling restriction')

Question 2: Are there any elements in regulations 4 and 12 which will prevent the Government achieving the policy intent?

2. No for Regulation 12.

3. Yes for Regulation 4. New draft regulation 28A(1)(a)(iii) requires "a summary of the policies (in relation to planning obligations or otherwise) the charging authority has or intends to put in place in relation to funding of infrastructure needs…". The wording of "policies" should be changed to "policies and/or guidance". This is because, whilst it is Government policy for Local Plans rather than Supplementary Planning Documents (SPDs) to set out policies on planning obligations, in practice Local Plans can often only set high level principles and the detailed requirements and calculations are often more appropriate in SPDs. Whilst this may not be appropriate in all circumstances, the regulations should allow for this flexibility to help achieve the policy intent.

A more proportionate approach to administering exemptions

Question 3: Are there any elements in regulation 7 which will prevent the Government achieving the policy intent?

4. Yes - New draft paragraph 1A states the surcharge "must" be imposed whereas existing paragraph 1 states "may" be imposed. Should prefer the surcharge to be discretionary and so "may" should be used here to achieve the policy intent

Extending abatement provisions to phased planning permissions secured before the introduction of the Community Infrastructure Levy ('balancing')

Question 4: Are there any elements in regulation 13 which will prevent the Government achieving the policy intent?

Applying indexation where a planning permission is amended

Question 5: Are there any elements in regulation 6 which will prevent the Government achieving the policy intent?

Increasing market responsiveness

Indexation of Community Infrastructure Levy rates

Question 6: Are there any elements in regulation 5 which will prevent the Government achieving the policy intent?

5. Yes - The draft regulations introduce significant additional complexity. Indexation is already a complicated area. Figures need to be confirmed for the point of the charging schedule taking effect and for the point of planning permission. Doubling the amount of figures needing to be confirmed, with different rates for residential and different rates for non-residential, significantly increases the amount of time that would have to be taken in doing calculations, checking them, checking non/residential areas, and being scrutinised by applicants. It also increases the scope for error, appeal and challenge. This will further complicate the process, slow things down and lead to more uncertainty which is not in accordance with the policy intent. See response to Q7.

Question 7: Do you have any further comments in relation to the Government's proposed approach to Community Infrastructure Levy indexation including, for residential development, the approach of using a smoothed index using local house prices.

6. Whilst not perfect, the existing measure of inflation through the Royal Institution of Chartered Surveyors (RICS) Building Cost Information Service (BCIS) All-in Tender Price Index (TPI) should remain. However, the Government should support a mechanism for making this freely and publicly available (avoiding the current subscription required at the moment) and for providing a fixed figure on a quarterly basis (avoiding the current situation where the figure can fluctuate within a quarter).

7. Moving to a different measure of indexation would be likely to only have a relatively marginal impact on concluding CIL liabilities and not result in a huge benefit in terms of capturing uplift or harming viability. Moving to a different measure would also result in very complex transitional cases for, say, section 73s or large phased developments where calculations may need to straddle the two systems of indexation over time. If the Government can solve the problem of the existing BCIS measure being publicly-available and fixed for each quarter, the proposed changes are unnecessary and over-complicated

Improving transparency and increasing accountability

Removing regulation 123 restrictions and introducing Infrastructure Funding Statements

Question 8: Are there any elements in regulation 10 which will prevent the Government achieving the policy intent?

8. Yes. New draft regulation 121A(1)(d) and (e) should say "a three year forecast statement" rather than "a three forecast statement" for clarity.

9. It should be noted that the new requirement for S106 reporting in draft regulation 121A(5)(b)+(c) regarding (i) affordable housing should be considered alongside authorities' existing requirement to publish Authority Monitoring Reports (AMRs) to report on progress of Local Plans and policies – these often include reporting on affordable housing agreements signed and provided in a relevant year. LPAs have a requirement to produce an AMR at least annually and many LPAs include information in S106 / CIL in those documents. By requiring an IFS by 31/12, this then may cause problems with an LPAs existing AMR publication timetable and it would be helpful it this was considered. To avoid duplication and streamline the reporting, as the policy intends, the Government may wish to make a statement or publish guidance allowing AMRs and IFSs to be merged into one report to meet both regulatory requirements at the same time.

10. The new draft regulation 121A(5)(b)+(c) regarding S106 reporting for (ii) school places and category of school should be deleted because it is not always the case that a S106 specifically relates to a specific number of places or category, as needs and provision can change over time. Instead the requirement should just be concerned with the overall level of financial contribution for education. Otherwise, information published may end up being incorrect or misleading which would not achieve the policy intent.

11. The new draft regulation 121A(5) regarding S106 reporting should remove reference to reporting on provision of "infrastructure". This is because in the existing regulations, (relevant) "infrastructure" has often related to what CIL can be spent on, and therefore many S106s have been agreed for strictly non-"infrastructure" items in many cases. Whilst the current regulations are proposed to be amended by the new regulations, the use of the word "infrastructure" may cause confusion regarding existing S106s and should be removed for reporting requirements to keep the reporting simple to achieve the policy intent.

12. The new draft regulation 121A(7)+(8) requiring CIL and S106 3 year forecasting as part of IFSs should be deleted. It is very difficult to forecast CIL and S106 receipts as this is entirely dependent on planning applications being submitted, approved, development commenced and certain triggers being met, such as completion, with a wide range of factors outside of the control of the authorities influencing this. Particularly, the wider economy and development and construction industry factors play a big role. Contributions can vary from very small to very large across different development sites meaning that forecasts can be 'lumpy', volatile and be significantly impacted by one or two small changes. This means that any forecast is unlikely to be accurate and may in fact be misleading.

13. Large financial decisions have to be made at the appropriate level in authorities (linked to capital spending programmes) and so it may not always be possible for these decisions to be properly reflected in IFS – and they are subject to their own normal transparency, decision-making, timetable and accountability procedures anyway. Therefore reporting 3 year CIL and S106 forecasts would not achieve the policy intent of being transparent and clear. The new regulation reporting requirements for publishing CIL Liability Notice values (Reg 121A(3)(a)) and S106s signed (Reg 121(5)(b)+(d)) provide an indication of future pipeline and would be factually accurate and correct at the time – these requirements are better at meeting the policy intent than the 3 year forecasts.

14. We welcome the certainty on what is required to be reported on in IFSs in new draft regulation 121A. This will generally achieve the policy intent of transparency. However, it should be noted that there are many different ways of presenting information on CIL and S106s and Councils often receive Freedom of Information (FOI) requests asking for data in a different format to that proposed for IFSs, which still requires resource to provide the information in the requested form.

15. Whilst the clarity on authorities being able to request S106 monitoring fees (regulation 11, Q9) is welcomed, the income this provides may not be enough to meet the IFS reporting requirement. Particularly, it may be difficult to recruit appropriate staff to work on the first IFSs expected to be required to be published by December 2019, and so it may be appropriate for the Government to require IFSs from December 2020 instead to achieve the policy intent

16. We welcome the consultation on the proposed data specification to achieve the policy intent of consistency and transparency but the detail of this should be subject to much more focused consultation (such as workshops), testing and piloting with a range of different authorities and also with software service providers.

17. This is because each authority will have its own software solution to CIL and S106s which may not adapt easily to a national one-size-fits all approach, particularly regarding 'legacy' S106s which have been in the pipeline for sometimes over a decade. In particular we have concerns about how the data standard for the IFS would work in 2 tier areas. Previous attempts to agree Single Monitoring Systems for s106 have faced significant issues in the past.

18. The data specification should initially only apply to new S106s signed after a particular date and not apply retrospectively, although that should be the ultimate aim

Monitoring Fees

Question 9: Are there any elements in regulation 11 which will prevent the Government achieving the policy intent?

19. Yes. New draft subsections (a) "fairly and reasonably" and (b) "does not exceed the authority's estimate of its cost of monitoring the development" seem to overlap and duplicate the requirement. It would be simpler just to have "fairly and reasonably" as the latter would be implicit in this. This would reduce uncertainty and help achieve the policy intent.

20. We strongly support this regulatory clarity about the need to seek financial contributions for monitoring s106 planning obligations. Monitoring takes up significant time and resource to be done properly

Delivering Starter Homes

Question 10: Are there any elements in regulation 8 which will prevent the Government achieving the policy intent?

21. The draft regulations refer to Starter Homes by definition as set out in the Housing and Planning Act 2016 which appears to be a sensible approach. However, new draft regulation 49(7B)(b) introduces total household income caps of £90,000 in Greater London and £80,000 outside. Instead it may be better to refer to other existing / proposed legislation where these income caps are / will be set out such as the definitions of "First-time buyer" or the emerging "regulations made by the Secretary of State" both referenced in the 2016 Act.

22. An additional concern here is related to the affordability of starter homes. In many authorities an income up to £80,000 would not be regarded as requiring an affordable home. Exempting Starter Homes from CIL may make this a more attractive product for developers than truly affordable homes.