Money Money Money: Accounting For CIL

This tweet from MHCLG has been nagging away at me for a few days:

The announcement of course was in relation to the 1 September 2019 commencement date in the Community Infrastructure Levy (Amendment) (England) (No. 2) Regulations 2019 and the Government’s updated planning practice guidance in relation to CIL , planning obligations and viability.

I covered the background to the changes in my 8 June 2019 blog post The Bottom Line: Updates On CIL And Viability.

There was quite a splash on 1 September, with a MHCLG press statement Communities to see how housing developers cash benefits them thanks to new planning rules (1 September 2019) and media briefings by planning minister Esther McVey, duly reported in the professional press eg Councils forced to spell out details of CIL deals (Housing Today, 2 September 2019):

“McVey said builders “spent a whopping £6bn towards local infrastructure in 2016/17” but councils had not been required to report on the total amount of funding they had received or how it was spent, “leaving residents in the dark”.

She went on: “The new rules … will allow residents to know how developers are contributing to the local community when they build new homes, whether that’s contributing to building a brand new school, roads, or a doctor’s surgery that the area needs.”

What has been nagging away at me in the tweet was the gif image: “Developers paid £6bn in contributions in 2016/2017…Community Infrastructure Levy”.

Huge if true.

But it’s not.

I have tracked the £6bn figure back to a research report The Incidence, Value and Delivery of Planning Obligations and Community Infrastructure Levy in England in 2016-17 by Dr Alex Lord, Dr Richard Dunning and Dr Bertie Dockerill (University of Liverpool), Dr Gemma Burgess (University of Cambridge), Dr Adrian Carro (University of Oxford) Professor Tony Crook and Professor Craig Watkins (University of Sheffield) and Professor Christine Whitehead (London School of Economics) published by MHCLG in March 2018.

From the executive summary:

“There has been an increase in the aggregate value of planning obligations agreed and CIL levied since 2011/12, up 61% from £3.7bn to £6.0bn in 2016/17 (50% after adjusting for inflation).”

So the £6bn is the total of the value of section 106 planning obligations agreed (not paid) and “CIL levied”. This is the table in the research document:

⁃ “The estimated value of planning obligations agreed and CIL levied in 2016/17 was £6.0 billion. This central valuation is premised upon the assumptions identified in the appendix, corresponding to survey validity, respondent representation and the distribution of values.

⁃ When adjusted to reflect inflation the total value of developer obligations in real terms is almost identical to the peak recorded in 2007/08 (£6.0 billion), but significantly higher than in 2011/12 (£3.9 billion). These changes coincide with changes in the number of dwellings granted planning permission over time.

⁃ 68% of the value of agreed developer obligations was for the provision of affordable housing, at £4.0 billion. 50,000 affordable housing dwellings were agreed in planning obligations in 2016/17.

⁃ The value of CIL levied by LPAs was £771 million in 2016/17, with a further £174 million levied by the Mayor of London.

⁃ The geographic distribution of planning obligations and CIL is weighted heavily towards the south of England. The South East and London regions account for 58% of the total value.

⁃ Direct payment contributions continue to provide a large proportion of the total contribution value for non-affordable housing obligations”

But I am pretty sure there is a confusion over “CIL levied” too. The table shows that of the £6bn, £771m was LPA CIL and £174m was Mayoral CIL. As with the money attributed to planning obligations, I suspect that these CIL figures represent the amount of CIL that is calculated to be payable if development eventually proceeds pursuant to permissions issued in 2016/2017. After all we can cross-check the £174m against the MCIL monies actually collected by the Mayor from the boroughs in 2016/2017 which this GLA table shows to be only £137m.

There is something else important. Over two thirds of the “whopping £6bn towards local infrastructure” that developers allegedly spent in 2016/2017 was not even towards “local infrastructure” as defined by the Government – it was towards affordable housing!

So it’s not that developers are not committing huge sums towards local infrastructure, and even greater sums towards affordable housing.

And it’s not that CIL will not over time secure increasing contributions towards the provision of local infrastructure.

It’s the inaccuracies and exaggeration. £6bn was not received by local authorities in 2016/2017 to be spent on local infrastructure. Local authorities did not even accrue the right to that amount in the future. The reality is that planning permissions were issued which, could, in due course , deliver (subject to the application of CIL exemptions and reliefs in the case of the £945m CIL component) up to around £2bn.

The minister accuses authorities of “leaving residents in the dark” as to funding received and spent. Greater transparency from MHCLG on the numbers it uses would be equally helpful.

Simon Ricketts, 7 September 2019

Personal views, et cetera