CIL To Be Replaced By…CIL

When I saw a limelon for the first time yesterday (some recently marketed lime/melon hybrid since you ask, and tangy and refreshing it is indeed), I naturally thought of the proposed combined infrastructure levy: what on earth is it?

Planning For The Future is of course work in progress and it may be churlish for us to expect it to have all the answers. After all, it is up to us to provide cogent responses to the current consultation process.

But the sections in the document on infrastructure contributions are very light indeed, given the central role that section 106 and the community infrastructure levy play in the current system and the obvious complexity of arriving at a system for a combined infrastructure levy that on the one hand does not choke off various forms of development in some areas by making it unviable and that on the other hand both (1) raises sufficient monies to secure the delivery of necessary social (e.g. affordable housing) and physical infrastructure and also (2) ensures for the benefit of both communities and developers that the infrastructure will actually be provided in the right place, at the right time.

The lightness is in contrast to the detailed analysis of the existing position in relation to contributions by way of CIL and section 106 planning obligations that is the subject of a detailed study (143 pages) by respected academics (all those listed on the front page of the document), The Incidence, Value and Delivery of Planning Obligations and Community Infrastructure Levy in England in 2018-19, published alongside the white paper.

The objectives of the study were to

•Update the evidence on the current value and incidence of planning obligations

• Investigate the relationship between CIL and S106

• Understand negotiation processes and delays to the planning process

• Explore the monitoring and transparency of developer contributions

• Understand the early effects and expectations for the changes to developer contributions brought in by the revisions to the NPPF

Chapter 3 (The value of Planning Obligations and the Community Infrastructure Levy) sets out some interesting findings:

“• The estimated value of planning obligations agreed and CIL levied in 2018/19 was £7.0 billion. This 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 contributions in real terms is £500 million higher than in 2016/17, £300 million higher than in 2007/08.

• 67% of the value of agreed developer contributions was for the provision of affordable housing, at £4.7 billion; this is the same proportion as in 2016/17 and is the joint-highest to date.

• 44,000 affordable housing dwellings were agreed in planning obligations in 2018/19. This is a reduction since 2016/17, but the value of this housing has increased over the same period due to an increase in house prices in many areas with higher developer contributions.

• The value of CIL levied by LPAs was £830 million in 2018/19, with a further £200 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, South West and London regions account for 61% of the total value. However, the value of developer contributions exacted in London has fallen since 2016/17 – down from 38% to 28% of the total aggregate value.”

There is nothing in the white paper that explicitly draws from the findings of that report in order to arrive at the wholly new mechanism that is proposed.

Some people seem to have picked up the message that the white paper means the end of the community infrastructure levy – a cause for celebration in some parts. But the white paper’s proposal for a combined infrastructure levy to my mind is CIL writ large, potentially just as complex, with a whole new set of rate setting, liability, payment and spending mechanisms and with the express objective of raising more monies than the current system. It warrants its own focus at this point, away from the noise of the other proposals in the white paper.

How to begin to unpick what is proposed in relation to CIL and section 106 planning obligations (and what the proposals in relation to section 106 mean for the delivery of affordable housing in particular)? I wrote down for myself five basic questions:

1. How will planning obligations work under the new system?

2. What will happen to CIL?

3. How will the new Combined Infrastructure Levy be set?

4. What requirements will there be on local authorities as to how they apply combined infrastructure levy receipts?

5. Under the new system, how can local planning authorities set requirements for affordable housing and seek to ensure that they are delivered?

In order to try to answer them (in a way which would have to work in relation to all of the proposed consenting routes: DCO, outline planning permission in plan, PiP (if different from outline permission in plan, not sure!), traditional planning permission, PD), then I cut and pasted the relevant passages from the white paper in their entirety (only leaving out the detail of some of the “alternative options” floated and leaving out the questions raised in the consultation). It is easy to read summaries and think “well there must be more detail in the document itself”. It is worth reading these passages to see the totality of the proposals.

After these passages I then see how far we can get in answering my questions.

“The process for negotiating developer contributions to affordable housing and infrastructure is complex, protracted and unclear: as a result, the outcomes can be uncertain, which further diminishes trust in the system and reduces the ability of local planning authorities to plan for and deliver necessary infrastructure. Over 80 per cent of planning authorities agree that planning obligations cause delay. It also further increases planning risk for developers and landowners, thus discouraging development and new entrants.”

“1.19. Fourth, we will improve infrastructure delivery in all parts of the country and ensure developers play their part, through reform of developer contributions. We propose:

• The Community Infrastructure Levy and the current system of planning obligations will be reformed as a nationally-set value-based flat rate charge (‘the Infrastructure Levy’). A single rate or varied rates could be set. We will aim for the new Levy to raise more revenue than under the current system of developer contributions, and deliver at least as much – if not more – on-site affordable housing as at present. This reform will enable us to sweep away months of negotiation of Section 106 agreements and the need to consider site viability. We will deliver more of the infrastructure existing and new communities require by capturing a greater share of the ulpift [sic] in land value that comes with development.

• We will be more ambitious for affordable housing provided through planning gain, and we will ensure that the new Infrastructure Levy allows local planning authorities to secure more on-site housing provision.

• We will give local authorities greater powers to determine how developer contributions are used, including by expanding the scope of the Levy to cover affordable housing provision to allow local planning authorities to drive up the provision of affordable homes. We will ensure that affordable housing provision supported through developer contributions is kept at least at current levels, and that it is still delivered on-site to ensure that new development continues to support mixed communities. Local authorities will have the flexibility to use this funding to support both existing communities as well as new communities.

• We will also look to extend the scope of the consolidated Infrastructure Levy and remove exemptions from it to capture changes of use through permitted development rights, so that additional homes delivered through this route bring with them support for new infrastructure.

“4.5. Securing necessary infrastructure and affordable housing alongside new development is central to our vision for the planning system. We want to bring forward reforms to make sure that developer contributions are:

• responsive to local needs, to ensure a fairer contribution from developers for local communities so that the right infrastructure and affordable housing is delivered;

• transparent, so it is clear to existing and new residents what new infrastructure will accompany development;

• consistent and simplified, to remove unnecessary delay and support competition in the housebuilding industry;

• buoyant, so that when prices go up the benefits are shared fairly between developers and the local community, and when prices go down there is no need to re-negotiate agreements.

4.6. The Government could also seek to use developer contributions to capture a greater proportion of the land value uplift that occurs through the grant of planning permission, and use this to enhance infrastructure delivery. There are a range of estimates for the amount of land value uplift currently captured, from 25 to 50 per cent. The value captured will depend on a range of factors including the development value, the existing use value of the land, and the relevant tax structure – for instance, whether capital gains tax applies to the land sale. Increasing value capture could be an important source of infrastructure funding but would need to be balanced against risks to development viability.”

“4.7. We propose that the existing parallel regimes for securing developer contributions are replaced with a new, consolidated ‘Infrastructure Levy’.

Proposal 19: The Community Infrastructure Levy should be reformed to be charged as a fixed proportion of the development value above a threshold, with a mandatory nationally-set rate or rates and the current system of planning obligations abolished.”

“4.8. We believe that the current system of planning obligations under Section 106 should be consolidated under a reformed, extended ‘Infrastructure Levy’.

4.9. This would be based upon a flat-rate, valued-based charge, set nationally, at either a single rate, or at area-specific rates. This would address issues in the current system as it would:

be charged on the final value of a development (or to an assessment of the sales value where the development is not sold, e.g. for homes built for the rental market), based on the applicable rate at the point planning permission is granted;

• be levied at point of occupation, with prevention of occupation being a potential sanction for non-payment;

• include a value-based minimum threshold below which the levy is not charged, to prevent low viability development becoming unviable, reflecting average build costs per square metre, with a small, fixed allowance for land costs. Where the value of development is below the threshold, no Levy would be charged. Where the value of development is above the threshold, the Levy would only be charged on the proportion of the value that exceeded the threshold ; and

• provide greater certainty for communities and developers about what the level of developer contributions are expected alongside new development.

4.10. The single rate, or area-specific rates, would be set nationally. It would aim to increase revenue levels nationally when compared to the current system. Revenues would continue to be collected and spent locally.

4.11. As a value-based charge across all use classes, we believe it would be both more effective at capturing increases in value and would be more sensitive to economic downturns. It would reduce risk for developers, and would reduce cashflow difficulties, particularly for SME developers.

4.12. In areas where land value uplift is insufficient to support significant levels of land value capture, some or all of the value generated by the development would be below the threshold, and so not subject to the levy. In higher value areas, a much greater proportion of the development value would be above the exempt amount, and subject to the levy.

4.13. To better support the timely delivery of infrastructure, we would also allow local authorities to borrow against Infrastructure Levy revenues so that they could forward fund infrastructure. Enabling borrowing combined with a shift to levying developer contributions on completion, would incentivise local authorities to deliver enabling infrastructure, in turn helping to ensure development can be completed faster. As with all volatile borrowing streams, local authorities should assure themselves that this borrowing is affordable and suitable.

4.14. Under this approach the London Mayoral Community Infrastructure Levy, and similar strategic Community Infrastructure Levies in combined authorities, could be retained as part of the Infrastructure Levy to support the funding of strategic infrastructure.

4.15. In bringing forward the reformed Infrastructure Levy, we will need to consider its scope. We will also consider the impact of this change on areas with lower land values.”

Alternative options proposed: “The Infrastructure Levy could remain optional and would be set by individual local authorities”. “Alternatively, the national rate approach could be taken, but with the aim of capturing more land value than currently, to better support the delivery of infrastructure”

“Proposal 21: The reformed Infrastructure Levy should deliver affordable housing provision

4.20. Developer contributions currently deliver around half of all affordable housing, most of which is delivered on-site. It is important that the reformed approach will continue to deliver on-site affordable housing at least at present levels.

4.21. Affordable housing provision is currently secured by local authorities via Section 106, but the Community Infrastructure Levy cannot be spent on it. With Section 106 planning obligations removed, we propose that under the Infrastructure Levy, authorities would be able to use funds raised through the levy to secure affordable housing.

4.22. This could be secured through in-kind delivery on-site, which could be made mandatory where an authority has a requirement, capability and wishes to do so. Local authorities would have a means to specify the forms and tenures of the onsite provision, working with a nominated affordable housing provider. Under this approach, a provider of affordable housing could purchase the dwelling at a discount from market rate, as now. However, rather than the discount being secured through Section 106 planning obligations, it would instead be considered as in-kind delivery of the Infrastructure Levy. In effect, the difference between the price at which the unit was sold to the provider and the market price would be offset from the final cash liability to the Levy. This would create an incentive for the developer to build on-site affordable housing where appropriate. [Footnote: As above, a Section 106 planning obligation could still be used to secure a covenant on the land, where necessary. However, the value would be captured through the Infrastructure Levy, rather than Section 106. ] First Homes, which are sold by the developer direct to the customer at a discount to market price, would offset the discount against the cash liability.

4.23. Under this approach we recognise that some risk is transferring to the local planning authority, and that we would need to mitigate that risk in order to maintain existing levels of on-site affordable housing delivery. We believe that this risk can be fully addressed through policy design. In particular, in the event of a market fall, we could allow local planning authorities to ‘flip’ a proportion of units back to market units which the developer can sell, if Levy liabilities are insufficient to cover the value secured through in-kind contributions. Alternatively, we could require that if the value secured through in-kind units is greater than the final levy liability, then the developer has no right to reclaim overpayments. Government could provide standardised agreements, to codify how risk sharing would work in this way.

4.24. We would also need to ensure the developer was incentivised to deliver high build and design quality for their in-kind affordable homes. Currently, if Section 106 homes are not of sufficient quality, developers may be unable to sell it to a provider, or have to reduce the price. To ensure developers are not rewarded for low standard homes under the Levy, local authorities could have an option to revert back to cash contributions if no provider was willing to buy the homes due to their poor quality. It is important that any approach taken maintains the quality of affordable housing provision as well as overarching volumes, and incentivises early engagement between providers of affordable housing and developers. Local authorities could also accept Infrastructure Levy payments in the form of land within or adjacent to a site. Through borrowing against further Infrastructure Levy receipts, other sources of funding, or in partnership with affordable housing providers, they could then build affordable homes, enabling delivery at pace.

4.25. Alternative option: We could seek to introduce further requirements around the delivery of affordable housing. To do this we would create a ‘first refusal’ right for local authorities or any affordable housing provider acting on their behalf to buy up to a set proportion of on-site units (on a square metre basis) at a discounted price, broadly equivalent to build costs. The proportion would be set nationally, and the developer would have discretion over which units were sold in this way. A threshold would be set for smaller sites, below which on-site delivery was not required, and cash payment could be made in lieu. Where on-site units were purchased, these could be used for affordable housing, or sold on (or back to the developer) to raise money to purchase affordable housing elsewhere. The local authority could use Infrastructure Levy funds, or other funds, in order to purchase units.”

“Proposal 22: More freedom could be given to local authorities over how they spend the Infrastructure Levy

4.26. It is important that there is a strong link between where development occurs and where funding is spent. Currently, the Neighbourhood Share of the Community Infrastructure Levy ensures that up to 25 per cent of the levy is spent on priorities in the area that development occurred, with funding transferred to parish councils in parished areas. There are fewer restrictions on how this funding is spent, and we believe it provides an important incentive to local communities to allow development in their area. We therefore propose that under this approach the Neighbourhood Share would be kept, and we would be interested in ways to enhance community engagement around how these funds are used, with scope for digital innovation to promote engagement.

4.27. There is scope for even more flexibility around spending. We could also increase local authority flexibility, allowing them to spend receipts on their policy priorities, once core infrastructure obligations have been met. In addition to the provision of local infrastructure, including parks, open spaces, street trees and delivery or enhancement of community facilities, this could include improving services or reducing council tax. The balance of affordable housing and infrastructure may vary depending on a local authority’s circumstances, but under this approach it may be necessary to consider ring-fencing a certain amount of Levy funding for affordable housing to ensure that affordable housing continues to be delivered on-site at current levels (or higher). There would also be opportunities to enhance digital engagement with communities as part of decision making around spending priorities. Alternatively, the permitted uses of the Levy could remain focused on infrastructure and affordable housing, as they are broadly are at present. Local authorities would continue to identify the right balance between these to meet local needs, as they do at present.”

“ 5.19. If a new approach to development contributions is implemented, a small proportion of the income should be earmarked to local planning authorities to cover their overall planning costs, including the preparation and review of Local Plans and design codes and enforcement activities.”

Back to my questions:

1. How will planning obligations work under the new system?

It is said in the paper that the “current system of planning obligations under Section 106 should be consolidated under a reformed, extended ‘Infrastructure Levy’.” There will no longer be “months of negotiation of Section 106 agreements”. “Section 106 planning obligations [will be] removed”.

The proposals seem to assume that section 106 is simply a mechanism for securing provision of affordable housing and other “developer contributions”. Whilst that is its main role at present, it is a mechanism for a wide range of commitments – see this table from the accompanying study:

The joy of section 106 is its flexibility to circumstances and policy, enabling the applicant commit to commit, in a way that binds successors in title, to all necessary mitigation measures that cannot be secured by way of planning condition and which are necessary to overcome what would otherwise be reasons not to allow the proposed development to proceed. On more complex developments it is the only tried and tested way in which appropriate mechanisms can be arrived at to make sure that, for instance, necessary infrastructure comes forward at the right time and by way of a sensible process, bespoke to the circumstances of the development, agreed between the parties. There is no proposal in the paper (although it has previously been floated by some) that the role of planning conditions could be expanded.

Where financial contributions are paid to a local planning authority under a section 106 agreement they can only be used for the specified purposes, whereas the proposals in relation to the consolidated infrastructure levy appear to be more loose: “We could also increase local authority flexibility, allowing them to spend receipts on their policy priorities, once core infrastructure obligations have been met.”What is meant by “core infrastructure obligations”? The core infrastructure obligations necessary to make a particular development acceptable? If so, then a document will need to be drawn up which surely will be as complex as a section 106 agreement – when will the school come forward, using the developer’s infrastructure levy contribution, how, where and when? Local employment and training measures, provision and maintenance of open space and play areas, carbon reduction commitments, commitments to specified transport improvements and the formulation and implementation of transport plans – are all these to be swept away? If so, the document needs to explain either why this is acceptable and desirable or how these matters will otherwise be addressed.

Additional confusion arises when these bold statements as to the removal of section 106 obligations are then contrasted with the footnote to paragraph 4.22: “As above, a Section 106 planning obligation could still be used to secure a covenant on the land, where necessary. However, the value would be captured through the Infrastructure Levy, rather than Section 106”. What does that mean? What would the “covenant on the land” and if the only point is to make sure that the infrastructure levy binds successors in title, why not leave that for the legislation itself?

Is anyone out there clearer at this stage ?

2. What will happen to CIL?

The community infrastructure levy will be replaced by the consolidated infrastructure levy, which will work in various significantly different ways to the current system. For instance:

• It will be a “nationally-set value-based flat rate charge”. I try to unpick this in my answer to question 3 below.

• It will be “levied at point of occupation”.

“Revenues would continue to be collected and spent locally.”

• “we would also allow local authorities to borrow against Infrastructure Levy revenues so that they could forward fund infrastructure. Enabling borrowing combined with a shift to levying developer contributions on completion, would incentivise local authorities to deliver enabling infrastructure, in turn helping to ensure development can be completed faster.” [If a developer needs specific infrastructure to be delivered in order to enable development to proceed, how will this be documented? What if, as is usually the case, the developer would prefer to deliver the infrastructure, e.g. build the school?]

• The “London Mayoral Community Infrastructure Levy, and similar strategic Community Infrastructure Levies in combined authorities, could be retained as part of the Infrastructure Levy to support the funding of strategic infrastructure” [Is this retained as in retained under the current CIL system so that in London CIL would continue to operate alongside the new levy, or is this retained as in “rolled into”?]

• “We will also look to extend the scope of the consolidated Infrastructure Levy and remove exemptions from it to capture changes of use through permitted development rights” [This is odd – development pursuant to PD rights is not exempt from CIL at the moment. Is this flagging more widely that exemptions will be removed? That would have been a sensible, simplifying, approach were CIL levels to be reduced, but here we are faced with an increased Infrastructure Levy…]

3. How will the new Combined Infrastructure Levy be set?

• It will be a “nationally-set value-based flat rate charge, set nationally, at either a single rate, or at area-specific rates”. [Clearly this can’t in any circumstances mean a nationally-set flat rate charge of x per square metres but must mean a nationally-set proportion of (I assume) gross development value.]

• There will be “a value-based minimum threshold below which the levy is not charged, to prevent low viability development becoming unviable, reflecting average build costs per square metre, with a small, fixed allowance for land costs. Where the value of development is below the threshold, no Levy would be charged. Where the value of development is above the threshold, the Levy would only be charged on the proportion of the value that exceeded the threshold”. [When would the developer have certainty that the threshold was not exceeded, or indeed as to what the value (and therefore charge) is considered to be, through what procedure and with what rights to appeal against the valuation? Is the valuation a notional one, applying a formula, or an actual valuation?]

• “buoyant, so that when prices go up the benefits are shared fairly between developers and the local community, and when prices go down there is no need to re-negotiate agreements.” [the timing of the valuation date will be critical, as will how to deal with phased and revised schemes and so on].

• “It would aim to increase revenue levels nationally when compared to the current system” [so more than £7bn, on the basis of the findings in that study – in a way which will need not to disincentivise owners and developers from carrying out development].

That’s all I can glean from the document. It seems to me that local planning authorities will lose much flexibility, for instance in the setting of differential rates for different types of floorspace (the document does focus to a significant extent on residential development – what rate would be set for, say, offices, logistics or retail, particularly given the weaker relationship between non-residential uses and the delivery of affordable housing, and what about not for profit development – will we need to reintroduce a number of the current CIL exemptions?

4. What requirements will there be on local authorities as to how they apply combined infrastructure levy receipts?

• “With Section 106 planning obligations removed, we propose that under the Infrastructure Levy, authorities would be able to use funds raised through the levy to secure affordable housing”. I try to unpick this in my answer to question 5 below.

• “We could also increase local authority flexibility, allowing them to spend receipts on their policy priorities, once core infrastructure obligations have been met. In addition to the provision of local infrastructure, including parks, open spaces, street trees and delivery or enhancement of community facilities, this could include improving services or reducing council tax.” [So, infrastructure levy surplus receipts (after delivery of “core infrastructure”) become unhypothecated tax receipts – the less the authority spends on infrastructure, the lower it can keep its council tax, hmm…]?

• “If a new approach to development contributions is implemented, a small proportion of the income should be earmarked to local planning authorities to cover their overall planning costs, including the preparation and review of Local Plans and design codes and enforcement activities.”

5. Under the new system, how can local planning authorities set requirements for affordable housing and seek to ensure that they are delivered?

• “We will be more ambitious for affordable housing provided through planning gain, and we will ensure that the new Infrastructure Levy allows local planning authorities to secure more on-site housing provision”.

• “This could be secured through in-kind delivery on-site, which could be made mandatory where an authority has a requirement, capability and wishes to do so. Local authorities would have a means to specify the forms and tenures of the onsite provision, working with a nominated affordable housing provider. Under this approach, a provider of affordable housing could purchase the dwelling at a discount from market rate, as now. However, rather than the discount being secured through Section 106 planning obligations, it would instead be considered as in-kind delivery of the Infrastructure Levy. In effect, the difference between the price at which the unit was sold to the provider and the market price would be offset from the final cash liability to the Levy. This would create an incentive for the developer to build on-site affordable housing where appropriate. First Homes, which are sold by the developer direct to the customer at a discount to market price, would offset the discount against the cash liability.” [So presumably the developer could net-off the costs of on-site delivery from its infrastructure levy liability. How is this to be documented? Who adjudicates on the obvious valuation issues arising?]

• “Under this approach we recognise that some risk is transferring to the local planning authority, and that we would need to mitigate that risk in order to maintain existing levels of on-site affordable housing delivery. We believe that this risk can be fully addressed through policy design. In particular, in the event of a market fall, we could allow local planning authorities to ‘flip’ a proportion of units back to market units which the developer can sell, if Levy liabilities are insufficient to cover the value secured through in-kind contributions. Alternatively, we could require that if the value secured through in-kind units is greater than the final levy liability, then the developer has no right to reclaim overpayments. Government could provide standardised agreements, to codify how risk sharing would work in this way” [How to safeguard against misuse?]

“To ensure developers are not rewarded for low standard homes under the Levy, local authorities could have an option to revert back to cash contributions if no provider was willing to buy the homes due to their poor quality.”

• “Local authorities could also accept Infrastructure Levy payments in the form of land within or adjacent to a site.” [Back to ensuring a robust valuation process].

Again, maybe it’s just me but I’m left scratching my head. This is a wholly different approach to extracting contributions for affordable housing and for ensuring that they are delivered. Basic questions:

• How will the requirements (quantum, tenure mix, size] be set at policy stage and determined at application stage (in advance of valuations) such that there can be confidence that development will not be stalled through lack of viability?

• Are we moving to a system where all affordable housing is delivered by a local authority nominated housing provider, with less ability for the developer to seek to improve viability?

• How can there be any confidence that this mechanism will result in more on-site affordable housing than at present?

I also recommend George Venning’s LinkedIn piece on the issues arising: Planning Reforms Contain a Poison Pill.

Again, thoughts welcome – it’s not that the proposals can’t be made to work, it’s just that much more input is required and, in my view, a cautious approach needs to be taken so as to guard against the inevitable unintended consequences.

The deadline for consultation responses is 29 October. We are likely to be collating a Town response, if only on specific issues such as this. If you would be interested in feeding in your thoughts, then please let me know, although, health warning, we are not in the business of designing fruit by committee!

Simon Ricketts, 22 August 2020

Personal views, et cetera

For The Future

are probably the three words I most associate with the planning system in England, since you asked.

The main part of this post is a commentary by special guest and fellow Town partner Duncan Field on the Government’s Planning for the future white paper, published on 6 August 2020.

But before we get to that, some initial comments from me on timescales.

The consultation period on the white paper ends on 29 October 2020.

The aspiration in the document is that (subject to time extensions for recent plans) new local plans should be in place by the end of this Parliament, so by Spring 2024. Given that those local plans will take up to 30 months to be put in place under the new system proposed, the necessary primary legislation will need to have been passed and in force, with any necessary accompanying Regulations and guidance, by Autumn 2021.

By way of proxy for legislative timescales, the less ambitious Housing and Planning Act 2016 and Neighbourhood Planning Act 2017 each took around seven months to pass through the necessary Parliamentary stages, which would mean introducing a Bill by the beginning of 2021. One perhaps has to look back to the Localism Act 2011 for planning legislation of equivalent complexity. That took eleven months from soup to nuts.

Something is going to have to give – either there is going to be rushed consideration of these proposals, which still need significant refinement, or that “end of this Parliament” aspiration is going to have to be reconsidered before long.

But in any event, things can be expected to move quickly.

On the subject of timescales, of course there are shorter term measures proposed in MHCLG’s accompanying document “Changes to the current planning system: Consultation on changes to planning policy and regulations”, which is the subject of a shorter consultation period, until 1 October.

The timescales in that document for the four sets of proposals within it are as follows:

· changes to the standard method for assessing local housing need: “Following the outcome of this consultation, the Government will update the planning practice guidance with the revised standard method for assessing local housing need.”

· securing of First Homes through developer contributions in the short term until the transition to a new system: “We intend to begin by making planning policy changes, to ensure that clear expectations are set. However, to ensure that First Homes are delivered, nationwide, on a consistent basis, we are keeping under consideration the option to strengthen the policy through primary legislation at a future date. We also intend to introduce an exemption from the Community Infrastructure Levy for First Homes, to enable delivery prior to wider developer contribution reform. This would require changes to regulations. Lastly, we are also considering significant reforms to the system of developer contributions. We will ensure that First Homes will continue to be delivered under a reformed approach”

· supporting small and medium-sized builders by temporarily lifting the small sites threshold below which developers do not need to contribute to affordable housing: “Following the consultation, a decision will be taken on whether to proceed with this approach. If it is taken forward, this could be through the introduction of a Written Ministerial Statement in the Autumn.”

· extending the current Permission in Principle to major development: “Following this consultation, if we introduce Permission in Principle by application for major development, we aim to introduce amending regulations this Autumn, with the regulations expected to come into force by the end of the calendar year. Changes to the fee structure would require separate changes to the Planning Fees Regulations.”

The white paper is in my view a considered document and less radical than might have been expected, although certainly ambitious in its breadth. Proposals spin out of it, one after the other, often just in a sentence or two. There are of course areas where there needs to be further thought or explanation. For me, there are two big ones in particular:

⁃ the way in which housing numbers are to be set by the Government for individual authorities and how to resolve the inevitable tension between a swifter examination process and a process that allows proposals in a plan (and the basis for proposals not being in the plan) to be properly tested (particularly where the plan is going to be the equivalent of a series of outline planning permissions for its growth areas);

⁃ how this new infrastructure levy is really going to work and how obligations are going to be addressed that presently are dealt with by way of section 106 agreement, in particular the delivery of affordable housing.

There will also have to be a clear working through of the respective powers and responsibilities across the system, as between government, strategic authorities, local planning authorities and neighbourhoods.

I must say that I found Chris Katkowski QC’s explanations in the latest Have We Got Planning News For You episode really helpful in bringing the proposals, and the thinking behind them, to life. And, boring to say, there is no substitute for reading the actual document.

We are going to drill down into the likely practical implications of the proposals in our next webinar, arranged for 5 pm on 13 August. Do register here: https://us02web.zoom.us/webinar/register/WN_ddkW3FG1SeS4j1XuV5KK6A . The panel will be:

• Chris Young QC (barrister, No 5 Chambers)

• Steve Quartermain CBE (consultant, Town Legal LLP)

• Catriona Riddell (Catriona Riddell & Associates)

• Duncan Field (partner, Town Legal LLP)

• Thea Osmund-Smith (barrister, No 5 Chambers)

• Gordon Adams (Battersea Power Station)

• myself

Now, Duncan’s thoughts, as follows:

Planning for the Future begins with some fairly combative language, referring to “our outdated and ineffective planning system” and drawing comparisons with a patched up building which needs to be torn down.

In truth the Government’s proposals do not go quite as far as that and in practice, to continue with the same analogy, we might end up with a better and more sustainable outcome if we were to save the parts of the “patched up building” which have architectural merit. The biggest problem with the current system is not that it is all inherently bad but that it is not sufficiently resourced; it is a pity that planning reforms by successive Governments have never really grappled with that central issue. The good news on this occasion is that the new system will be accompanied by a comprehensive skills and resources strategy for local authorities and key participants in the system; let’s hope the Government delivers on that.

Further on in the document there are some powerful words from the Secretary of State which bring home just how important a time this is for the planning system and what it can deliver.  It is hard to disagree with any of this:

The outbreak of COVID-19 has affected the economic and social lives of the entire nation. With so many people spending more time at home than ever before, we have come to know our homes, gardens and local parks more intimately. For some this has been a welcome opportunity to spend more time in the place they call home with the people they love. For others – those in small, substandard homes, those unable to walk to distant shops or parks, those struggling to pay their rent, or indeed for those who do not have a home of their own at all – this has been a moment where longstanding issues in our development and planning system have come to the fore.

Onto the objectives for reform, which can be summarised as follows:

• Reduce complexity and with it, uncertainty and delay.

• In doing so, deliver a more competitive market with a greater diversity of developers.

• Remove the discretionary nature of individual development management decisions and replace it with a rule-based system of development control.

• In doing so, reduce planning risk and the cost of capital for development.

• Reduce the time it takes to produce a local plan.

• Simplify assessments of housing need, viability and environmental impacts.

• Restore public trust and encourage more widespread public participation.

• Get better at unlocking growth and opportunity, encouraging beautiful new places, supporting town and city centres and revitalising existing buildings as well as new development.

• Harness digital technology.

Linked to this is a long list of desired outcomes including the user experience, home ownership, access to infrastructure, economic growth and innovation.

We then come to the main proposals which the Government intends to bring forward:

1. Local plans

a. These will be simplified so that they only identify land for development, the sites that should be protected and the development that can take place.  There would be three categories of land:

i. Growth – sites suitable for comprehensive development which, once allocated, will have outline approval for development.

ii. Renewal – sites where smaller scale development is appropriate, which would benefit from a statutory presumption in favour of development once allocated.

iii. Protected – sites with environmental or cultural characteristics where development should be subject to more stringent controls.

An alternative approach might be a more binary system (growth and renewal with permission in principle versus protected areas) or more scope for the existing development management approach in areas other than those allocated for “growth”.

b. Plans should become digital, visual and map-based, interactive and data rich, using a standardised approach to support open access.

c. Local plans (and neighbourhood plans) will be more focused on giving clear area-specific requirements for land that is allocated for growth and renewal including design codes; generic development management policies and duplication of national policy and guidance needs to be avoided.

d. Plans should be subject to a single test of achieving sustainable development instead of the current tests for soundness and the duty to co-operate.  There would be no Sustainability Appraisal and instead this would be replaced by a simplified process for assessing the environmental impact of plans.

e. Local plans would meet housing need by reference to a standard method for establishing housing requirements developed and set at a national level; this would mean distributing the national housebuilding target of 300,000 new homes annually, and one million homes by the end of the Parliament, taking into account local factors including constraints, opportunities and affordability.  The Housing Delivery Test would stay.

f. Local plans would have to be brought forward by reference to a fixed 30 month statutory timescale with six stages and individual timings for each stage.

g. Local planning authorities would be under a duty to review their plans every 5 years; powers of intervention would remain such as the issuing of directions and preparation of a plan in consultation with local people.

h. Neighbourhood Plans to be retained but with more focus on form of development to reflect the proposals for Local Plans.

This is a refreshingly clear vision of what local plans might become and a digitalised system would be transformative for the user experience and public engagement. However, there are some big questions around how to encourage strategic planning across local authority boundaries for the bigger than local issues (the Government is open to suggestions), how in practice the “sustainable development” test would work and, linked to that, how robust the new environmental assessment process will be.

Equally as important, what will the effect of these promised changes be on current local plans? Without further incentives or assurances around their continuing effect in any transitional arrangements as we switch over to the new system, there must be a real concern they will be halted in their tracks.

2. Development Management

a. As indicated above, growth areas allocated in a local plan would have outline permission for the principle of development; details would be agreed and full planning permission achieved through a new reserved matters process, a local development order or possibly, on bigger sites, via a development consent order.

b. Renewal areas would benefit from a new statutory presumption in favour of development and would benefit from either a new automatic consenting route where specified forms of development meet design and other prior approval requirements, a faster planning application process or a local or neighbourhood development order.

c. Proposals which do not conform to the local plan in renewal and growth areas could still come forward, exceptionally, through a planning application process.

d. In protected areas, proposals will have to be brought forward via a planning application (subject to any permitted development rights or local development orders) and will be judged against the NPPF.

e. Generally, the development management process will be based on a more streamlined end-to-end process with firm deadlines for determination through a mix of:

i. Digitalisation;

ii. Data access;

iii. Shorter and standardised applications with reduced or limited supporting material;

iv. A standardised approach to technical information, conditions and developer contributions; and

v. Delegation of detailed planning decisions to planning officers where the principle of development has been established.

f. The Government will build in incentives for prompt determination of applications by local planning authorities such as deemed approval of some applications or refunds of application fees.

g. The process will still be subject to call-in powers and appeals but the Government expects the volume of call-ins and appeals to reduce over time.

h. There will be encouragement for faster build out by making provision in local plans/design codes for a variety of development types by different builders (picking up on the conclusions of the Letwin Review).

This vision for the new development management system feels less clear: permission in principle and outline planning permission are used interchangeably in places as a consequence of land being allocated for growth; however, over and above this, there appears to be provision for a “full” planning permission through a new reserved matters system or local development orders or even development consent orders. Would this not remove a lot of the benefit of allocating land for growth?  There is also a myriad of possible ways in which land allocated for renewal might gain consent and, in the meantime, we retain the current planning application process as well.  If the Government is not careful it might add to the complexity of development management.

Certainly, we can all get on board with the much-needed streamlining of the development management process from end to end, with more standardisation, reducing the quantity of application documents and increased use of digital technology.  However, resourcing this change will be key to its success.

3. Building better, building beautiful and sustainable places

Design and place-making is still high up on the Government’s political agenda.  Proposals in this space include the following:

a. A National Model Design Code to be published in the Autumn which will work alongside the National Design Guide and the Manual for Streets; together these are expected to have a bearing on design of new communities and to guide decisions on development. (This will be an early entrant into the current planning system.)

b. Local guides and codes are to be prepared wherever possible to reflect local character but need to have input from the local community before they are given any weight in the planning process.

c. A new expert body will be set up to help local authorities make use of design guidance and codes, as well as performing a wider monitoring and challenge role for the sector.

d. The much-heralded “fast-track” for beauty will be achieved through:

i. The NPPF – which will have provision for schemes that comply with local design guides and codes to be approved quickly;

ii. Legislation to require that sites in growth areas should have a masterplan and site-specific code as a condition of the permission in principle which is granted through allocation in the local plan; and

iii. Widening permitted development rights through the use of “pattern books” for different building types.

e. The NPPF will require targeted consideration of measures to support climate change mitigation and adaptation. (In our view, policy has been playing catch-up on climate change for some time – this is long overdue and should be welcomed.)

f. There will be a quicker and simpler framework for assessing environmental impacts, stepping away from the current frameworks such as Strategic Environmental Assessment, Sustainability Appraisal and Environmental Impact Assessment.  The key requirements for the new framework will be:

i. early consideration;

ii. clear and easy to understand; and

iii. avoidance of duplication.

A further consultation on this is expected in the Autumn.

g. The Government intends to review and update the planning framework for listed buildings and conservation areas, to ensure their significance is conserved while allowing, where appropriate, sympathetic changes to support their continued use and address climate change.

h. Improvements to the energy efficiency standards for buildings will be brought forward to help meet the 2050 net zero commitment.

The intention here is clear and consistent with the recent focus of the Government on design and beauty in the planning system.  The area with the most loaded questions is the promised framework for assessing environmental impact; in our view, there is clear scope to reduce the voluminous and highly technical nature of the current framework but now is not the time to water it down in terms of its ambit and its protective function.  We will have to wait until the Autumn to find out more.

4. Infrastructure

There are radical proposals for the funding of infrastructure:

a. Replace S106 obligations and the current version of Community Infrastructure Levy with a new Infrastructure Levy calculated as a fixed proportion of the development value above a threshold, with a mandatory, nationally-set rate or rates (potentially variable by area).

b. This new levy will be charged on the final value of a development (or an assessed sales value where the development is not sold, e.g. build to rent) by reference to the rate in force when planning permission is granted.  This would have to be paid before occupation.

c. Local authorities would be able to borrow against Infrastructure Levy revenues so that they could forward fund infrastructure.

d. The London Mayoral Community Infrastructure Levy and similar strategic Community Infrastructure Levies in combined authorities could be retained.

e. The Infrastructure Levy Could be extended to capture changes of use without additional floor area and through permitted development.

f. The new levy would be extended to fund affordable housing.  Allowance would be made for in-kind delivery on-site, which could be made mandatory where an authority has a requirement, a capability to deliver on site and wishes to do so. In those circumstances local authorities would be able to specify the form and tenure of the on-site provision.  The Government anticipates that there would need to be a considered policy approach to the risk of imbalance between the value of the agreed in-kind delivery and the fluctuating nature of the levy liability, contingent as it will be on the development value.

g. Local authorities could be given more freedom on how they spend the levy.

There is a lot of detail to be worked through here.  Setting the new levy at a level which does not deter development (and indeed land supply through the price paid by developers) will be key and a difficult issue to judge.  

The Government will also need to be scrupulous in ensuring that affordable housing continues to come forward using levy funds and still comes forward as part of mixed and balanced communities.

The removal of the blunt and inflexible tool that we have come to love or hate in the form of CIL is welcome in our view and with it the removal of a considerable amount of confusing and time-consuming red tape.  For practical reasons – not least delivering site-specific solutions for development – we are not sure we are witnessing the end of S106 obligations or an equivalent just yet but they will undoubtedly be slimmed down.

5. Delivery

The consultation document ends with a few final proposals and thoughts from Government on the delivery of a new planning system:

a. As a first step there is a parallel consultation on changes to the current system including extension of Permission in Principle (by application to major development), the standard method for assessing local housing need, First Homes and supporting SME builders by temporarily lifting the small sites threshold below which developers do not need to contribute to affordable housing. More here: https://www.gov.uk/government/consultations/changes-to-the-current-planning-system

b. The Government sees a potential delivery role for development corporations.

c. The reforms are considered likely to reduce judicial review risk.

d. The need for resources and skills is recognised and will be addressed through a comprehensive strategy.  In principle, the Government’s view is that the cost of operating the new planning system should be principally funded by the beneficiaries of planning gain – landowners and developers – rather than the national or local taxpayer.  Funding may also be achieved through application fees and potentially the new infrastructure levy or- to a limited extent – general taxation.

e. The Government intends to strengthen the powers for local planning authorities to enforce against breach of planning control and provide incentives for enforcement action to be taken.  

To end where this overview began, resources are key and a comprehensive strategy to ensure the sufficiency of funding and skills will be very welcome, as long as it does what it says on the tin. This will be vital to the success of the new system.

We know now what the Government wants to achieve. It is up to all of us in the sector to help them make it work and if parts of the system are worthy of retention for their “architectural” merit, to explain why that is, with reference to the Government’s objectives.

Thanks Duncan.

Simon Ricketts, 7 August 2020

Personal views, et cetera

Court Challenges Undo Previous Blog Posts: Westferry, Dill

No-one embarks lightly on litigation but there have been two striking examples this week of what it can achieve. Sometimes it doesn’t even need a hearing (first example) and sometimes it’s on the final roll of the dice (second example).

Westferry Printworks

The Secretary of State’s decision to grant planning permission, against his inspector’s recommendations, for a large development on Docklands – with the decision issued a day before the developer’s CIL liability would have increased by up to £50m – was an eye opener. I covered it, and Tower Hamlets’ reaction, in my 18 January 2020 blog post Westferry Printworks Decision: LPA Reaction Unprintable.

The Council followed through with its threat of a legal challenge to the decision, as did the Mayor of London.

It was frankly surprising to hear this week that the Secretary of State has consented to judgment. I do not think that the consent order itself, which would set out the reasoning agreed by the parties and sealed by the court, is yet in the public domain but there are these two press statements from those involved:

Westferry Printworks: Secretary of State Accepts “Apparent Bias” in His Decision and Consents to Judgment (Francis Taylor Building press statement, 21 May 2020) (FTB’s Melissa Murphy acted for the Mayor).

Council forces government to concede illegality in making decision on controversial Westferry Printworks scheme (London Borough of Tower Hamlets press statement, 22 May 2020) (Sasha White QC and Gwion Lewis have been acting for Tower Hamlets).

To quote from the FTB statement:

“The consent order reflects the fact that in pre-action correspondence, the Secretary of State explained that the decision letter was issued on 14 January 2020, rather than the following day, so that it would be issued before Tower Hamlets adopted its new local plan and CIL charging schedule. He accepted that the timing of the decision letter, thereby avoiding a substantial financial liability which would otherwise fall on the developer, would lead the fair minded and informed observer to conclude that there was a real possibility that he was biased in favour of the developer. He accepted that the decision letter was unlawful by reason of apparent bias and should be quashed. The Mayor/GLA’s challenge was therefore academic, but he agreed to pay their costs. “

Those of us not close to what happened can only speculate but why would the Secretary of State cave in rather than face a hearing? Was he worried as to what might be made public in a trawling over of internal correspondence and notes? Echoes of the Mayor’s recent consenting to judgment in the Kensington Forum case (see my 14 March 2020 blog post, London, Friday the 13th).

The appeal will now need to be redetermined and, which is an expensive consequence for the developer of these events, even if the appeal is allowed second time around, the higher CIL figure will be payable.

Dill

I recounted this saga, about a lost pair of urns which were the subject of a listed building enforcement notice, at the time of the Court of Appeal ruling (see my 1 December 2018 blog post Is It A Listed Building? No Statuary Right Of Appeal). I still like the title to the post but the rest of it is now out of date – the effect of the Supreme Court’s ruling in Dill v Secretary of State (Supreme Court, 20 May 2020) was basically to remove the word “no” from my blog post: in defending a listed building enforcement appeal it is now possible to raise the argument that the listed building is not in fact a building (and the court gives some guidance as to what constitutes a “building” for these purposes). See also this excellent summary: Supreme Court rules on the meaning of listed building (39 Essex Chambers, 20 May 2020 – Richard Harwood QC appeared for Mr Dill, instructed by Simon Stanion at Shakespeare Martineau).

Aside from the substantive legal points, which are important, the interesting thing about the case for me is that persistence paid off. The inspector found against him, Singh J at first instance found against him, the Court of Appeal found against him but Mr Dill and his legal team did not give up. The costs of losing would no doubt have been as significant for Mr Dill as the CIL consequences for Tower Hamlets in Westferry.

And whilst the outcome of the case did not remove the spectre for Mr Dill of continued battles – the listed building enforcement notice appeal would now need to redetermined – Lord Carnwath concluded his final judgment before retiring from the Supreme Court with these words:

I understand that this will be deeply frustrating for Mr Dill. There is as I understand it no suggestion that he acted other than in good faith in disposing of items which he believed to be his own disposable property, and had been so treated by his family for several decades. Since this problem was first drawn to his attention by the local authority in April 2015 he has been attempting to obtain a clear ruling on that issue. On the view I have taken, that opportunity has been wrongly denied to him for five years. Even if his appeal were ultimately to fail, the practicability of restoring the vases to their previous location in the grounds of Idlicote House is uncertain. Accordingly, this court’s formal order for remittal should not prevent the respondents from giving serious consideration to whether in all the circumstances it is fair to Mr Dill or expedient in the public interest to pursue this particular enforcement process any further.”

Concluding thoughts

Well done to the successful claimants and legal teams in both cases. But “snakes and ladders” and “final roll of the dice” analogies are not far off the mark, are they? How to arrive at a system that is more simple and not dependent on expensive, uncertain litigation? Perhaps by reducing the politics (removing the ability for the Secretary of State to recover appeals?), certainly by trying to make sure that legal principles are simpler (if you do the maths, in Dill one inspector and four judges were overruled by five judges, over those narrow “legal exam” questions, following submissions prepared by five barristers and their associated legal teams – the whole process ultimately to be paid for by us, the tax payer, save for those costs which Mr Dill cannot recover).

Simon Ricketts, 23 May 2020

Personal views, et cetera

Stay Alert! A Quick Guide To All Those MHCLG Announcements

On 13 May 2020, MHCLG published:

Guidance: coronavirus planning update

Guidance: Coronavirus compulsory purchase

Guidance: Coronavirus community infrastructure levy

Guidance: construction site working hours Q&A

Guidance: consultation and pre-decision matters

Guidance: plan-making

Guidance: neighbourhood planning

On the same day, the Planning Inspectorate updated its guidance on site visits, hearings, inquiries and events.

On 14 May 2020, the Town and Country Planning (Development Management Procedure, Listed Buildings and Environmental Impact Assessment) (England) (Coronavirus) (Amendment) Regulations 2020 were made and came into force that day. The Regulations were accompanied by an Explanatory Memorandum.

The highlights

Validation and determination of applications for planning permission

No changes have been made to the timescales for determining planning applications. Developers are however encouraged to agree extensions of the period for determination. Local authorities have been urged to give priority to validating urgent COVID-19 related applications for planning permission and associated consents.

Publicising applications for planning permission

Temporary regulations (expiring on 31 December 2020) were made and came into force on 14 May to supplement existing publicity arrangements for planning applications, listed building consent applications and environmental statements for EIA development. There is now flexibility to take other reasonable steps to publicise applications and environmental statements if the usual specific requirements cannot be discharged relating to site notices, neighbour notifications, newspaper publicity or availability of hard copy documents. Steps can include the use of social media and electronic communications and they must be “proportionate to the scale and nature of the development”. Guidance has also been issued on this topic.

Planning Conditions

MHCLG has made it clear that planning conditions should not be a barrier to allowing developers and site operators flexibility around construction site working hours to facilitate safe working. Where only short term or modest increases in working hours are required, LPAs are encouraged to use their discretion to not enforce against a breach of working hours conditions. Where longer term measures or other significant changes are required, applications to amend conditions should be made, which LPAs should prioritise and turn around in 10 days. Requests to work up to 9 pm Monday to Saturday should not be refused without very compelling reasons.

Community infrastructure levy

The existing CIL regulations of course allow charging authorities limited flexibility to defer CIL liability. Amendments will be made to the regulations “in due course” to increase flexibility, but that will still depend upon charging authorities deciding to exercise the new discretion available to them. Authorities will be able to defer payments, temporarily disapply late payment interest and provide a discretion to return interest already charged. However, these changes will only apply to small and medium-sized developers with an annual turnover of less than £45 million. It remains to be seen how this limitation will be addressed in the regulations, for example where a special purpose vehicle, potentially offshore, has assumed liability. The new instalment policies for deferred payments will only apply to chargeable development starting after the changes come into effect, but they are anticipated to apply to “phases“ of the development starting after that date. The announcement on 13 May added that “existing flexibilities and the government’s clear intention to legislate should give authorities confidence to use their enforcement powers with discretion and provide some comfort to developers that, where appropriate, they will not be charged extra for matters that were outside of their control.”

Section 106 planning obligations

Local planning authorities are encouraged to consider the deferral of section 106 obligations, e.g. financial payments. This will require variations to existing section agreements and undertakings. Local planning authorities are encouraged generally to take a “pragmatic and proportionate” approach to the enforcement of section 106 planning obligations

Virtual Committees

These are already enabled, by way of Regulation 5 of the Local Authorities and Police and Crime Panels (Coronavirus) (Flexibility of Local Authority and Police and Crime Panel Meetings) (England and Wales) Regulations 2020. MHCLG is working with the Planning Advisory Service (PAS) to provide further practical advice on the way these meetings are managed.

Planning Appeals

PINS issued a further update on 13 May. Site visits are being commenced and PINS is considering whether there are types of cases that can proceed without a site visit. The first digital appeal hearing took place on 11 May as a pilot and PINS is aiming for 20 further examinations, hearings and inquiries in May and June. It is also exploring hybrid options – a mix of in person and by video public/telephone hearings and is considering “social distance” events.

Local Plans

MHCLG is working on ways to address the local plans process in order to meet aspirations to have all local plans in place by 2023. In particular, the use of virtual hearings and written submissions is being considered.

Neighbourhood Plans

Regulation 12 of the Local Government and Police and Crime Commissioner (Coronavirus) (Postponement of Elections and Referendums) (England and Wales) Regulations 2020 prevents any neighbourhood planning referendum from taking place until 6 May 2021. Updated guidance was issued in April allowing neighbourhood plans awaiting referendums to be given significant weight in decision making.

Nationally Significant Infrastructure Projects

The government is working with consenting departments to support the continuation of decision-making to minimise the impact of current restrictions on the consideration of DCO applications and the Planning Inspectorate has updated its guidance.

Compulsory purchase orders

There is now pragmatic advice as to the service of documents. Acquiring authorities are encouraged to allow more time for responses to requests for information about interests in land or submitting objections to CPO. There is also encouragement to authorities to act responsibly regarding business and residential claimants, particularly regarding the timing of vesting orders and payment of compensation, which is particularly relevant when considering evictions. Authorities are reminded of their obligation to make advance payments of compensation in accordance with statutory time limits given cash flow difficulties which claimants may currently face.

Concluding remarks

To my mind, this is all welcome and congratulations are due in particular to the relevant civil servants. Of course, there is more to be resolved, for instance the vexed question of extending time limited planning permissions (see my 4 April 2020 blog post Pause Not Delete: Extending Planning Permissions) as well as the Regulations in relation to CIL, but it is good to see this progress. No wonder MHCLG’s Simon Gallagher was prepared to come on this week’s Have We Got Planning News For You!

Whether by serendipity or, now I think about it, of course, good planning, the RTPI published on 15 May 2020 its research paper Pragmatic and prepared for the Recovery: The planning profession’s rapid response to Covid-19. This last week has been a good start.

Simon Ricketts, 16 May 2020

Personal views, et cetera

(Thank you to Town’s Michael Gallimore and Lida Nguyen for allowing me to draw from a client note prepared earlier this week).

We Need Some Flex On CIL

Miles Gibson rightly spotted, in his good CBRE piece Community Infrastructure Levy – ten years old, but COVID-19 is its biggest test (7 April 2020), that the Community Infrastructure Levy Regulations came into force just over ten years ago, on 6 April 2010. (And who better to point it out, given that until 2011 Miles led on CIL at the Department of Communities and Local Government?).

Of course, after the regulations were brought into force, there was then a pause caused by the 6 May 2010 general election. Would the incoming coalition government scrap, or at least amend and rebadge, the system? In the end the system survived and, according to wikipedia at least, the London Borough of Redbridge was the first to adopt a CIL charging schedule, on 1 January 2012.

So CIL didn’t live through the global financial crisis, or previous recessions, as we have done. I have written before about the inherent inflexibility of the mechanism but, as Miles acknowledges in his piece, the current economic conditions are going to prove the big test for the levy.

He says “CIL’s inflexibility could prove its downfall if the forthcoming downturn is anything other than a short sharp shock. COVID-19 has created the biggest test which CIL has yet faced. If the downturn is lengthy, local authorities may need to hurriedly cut CIL rates to help return development to viability. Or, press the pause button on introducing CIL altogether.”

This may all be so, but there are also other, more nuanced steps which charging authorities could also be taking, with the encouragement of MHCLG, one would hope. For instance:

⁃ The switching on, within charging authorities, of the ability to apply for exceptional circumstances relief – and if there isn’t sufficient movement on this I would argue for its automatic national application by way of a change to the regulations. Whilst ECR is a cumbersome process, and there are state aid considerations to be borne in mind, if these aren’t “exceptional circumstances” what are? And I suspect that the application of ECR will be more palatable than the reintroduction of section 106BA, which enabled developers to reduce or remove section 106 affordable housing obligations on the grounds of viability.

⁃ The introduction of instalment schemes for payment (currently discretionary) and the review of existing instalment schemes to push back timescales.

I was interested to see, via an update by Ashfords (Covid-19: Mitigating the impact of Community Infrastructure Levy (“CIL”) on stalled developments, 7 April 2020) East Suffolk Council’s pragmatic response to current developer cashflow problems, basically stepping outside the procedural tramlines of the Regulations. In its statement, Coronavirus: Actions for CIL, it sets out a series of commitments, including these:

Where development has already commenced, CIL demand notices will shortly be re-issued to allow for a 3 month extension to the next instalment due date and to subsequent outstanding instalments. This position will be reviewed towards the end of June and any further extension to instalment payment periods will be communicated. It will take time for notices to be prepared and issued, but this work will be prioritised.

An individual, case by case review of late payment interest and surcharges will be made and a pragmatic approach adopted to support customers in these circumstances.

CIL debt recovery will largely be paused for 3 months and will be reviewed towards the end of June 2020 with a view to extending this position if required.

Are there any examples of other charging authorities taking an equivalent stance? Clearly there are risks in such an approach and I would be cautious as to the extent that, for example, a funder with millions of pounds at stake, could rely on such a commitment. It is unfortunate that the Regulations are so inflexible as to lead to such sticking-plaster solutions.

Stepping back, unless authorities are now going to move very quickly to propose reduced charging rates and take positive steps in relation to instalment policies and ECR, wouldn’t a solution in current circumstances be for the Government to legislate so as to allow authorities, both in relation to existing permissions and permissions which have not yet been issued, either to (1) defer payment of CIL for a defined period or (2) allow an emergency discount of say 50% to be applied, conditional upon development being commenced within a defined period of time and then completed within a defined period (the period to be agreed with the authority having regard to its projected build programme and if the deadline is missed there would be clawback)? To reduce the extent that the authority is as a consequence unable to deliver essential infrastructure, the Government would need to make additional funding available, because after all the economic and social benefits of ensuring that development gets started again will be immense.

I don’t have the answers – I would welcome your much better ones (except “abolish CIL” – let’s be practical). However, I do know that (1) CIL is a massive, inflexible, cash drain for any development early in its implementation and (2) some additional flexibility would surely reduce the risk that many development projects will remain on hold even once normal life starts to return around us all.

Simon Ricketts, 10 April 2020

Personal views, et cetera

What To Do?

When, as it will, this current terrible phase of the Covid-19 pandemic passes, what needs to be done to ensure that we catch up on efforts to provide housing and resume economic activity?

The main purpose of this blog post, into which a number of my partners at Town have contributed their thoughts (although all errors and omissions are mine), is to try to answer that question.

But first, what is presently being done to make sure that our system continues to operate, efficiently but fairly?

It is encouraging to see the great efforts being made by many local planning authorities to keep going with decision making, by way of innovative approaches to decision making and greater use of officers’ delegated powers, and the commitment of so many officers and members, continuing to work from home against a background of other domestic pressures and technological constraints. It will be excellent to see proactive moves by authorities to amend their constitutions, with necessary safeguards such as chief executive oversight, where there are specific rules against certain categories of application being dealt with other than by committee. Some of the options are set out in a piece by barrister Jonathan Easton, Local authority decision making in a time of crises, 19 March 2020. The Government has also confirmed that it “will consider bringing forward legislation to allow council committee meetings to be held virtually for a temporary period” (Robert Jenrick reaffirms support for councils in their coronavirus response, MHCLG press release, 16 March 2020); the Association of Democratic Services Officers and Lawyers in Local Government wrote jointly to the Secretary of State on 17 March 2020 setting out the full extent of changes that would be needed for local government decision making to function properly during this period of social distancing. The quicker the better please!

It is frustrating after the resounding success of the Rosewell reforms to see planning appeal inquiries, as well as informal hearings and local plan examinations, postponed as a result of the virus (see Coronavirus (COVID-19) – Planning Inspectorate guidance – updated 18 March 2020) – but of course the reason is plain. So far the postponements only relate to those scheduled up to 23 April but surely this will roll forward in due course. The Bar has made much of discussions with the Planning Inspectorate for greater use of video conferencing – which is the stock in trade for all of us at the moment – microsoft teams, zoom, you name it, we’re all on it! But keeping the professionals communicating with the inspector in a structured way is one thing – what about the “public” element of a public inquiry? [subsequent addition to blog post: see this subsequent excellent Landmark Chambers paper Fairness and public participation in video or telephone hearings for planning appeals during the COVID-19 crisis]. For all but the most controversial or complex appeals (so perhaps not those which have been recovered by the Secretary of State), should appellants be given the option of having their appeals determined by written representations, even if until now the appeal has been identified as appropriate for a hearing or inquiry?

The courts have also been quick to consider how to respond. An update from the Lord Chief Justice on 17 March 2020 spoke of the “urgent need to increase the use of telephone and video technology immediately to hold remote hearings where possible”, the “considerable flexibility” provided for in the Civil Procedure Rules and the courts’ “immediate aim is to maintain a service to the public, ensure as many hearings in all jurisdictions can proceed and continue to deal with all urgent matters”. Indeed, colleagues had an early taste of this on 19 March, with Deputy High Court Judge Alice Robinson handing down judgment from open court in a section 288 challenge (following a hearing earlier in the week), with the advocates and parties at the other end of the telephone. Clause 53 and Schedule 24 of the Coronavirus Bill (introduced into the House of Commons on 19 March 2020) proposes greater flexibility in relation to the use of live video and audio links, with appropriate protections, for a temporary period of two years (whoch period may be shortened or extended). I also recommend this excellent piece, Tim Buley QC shares his thoughts on the Public law courts during the coronavirus crisis, which pulls together much of what is currently being done, or contemplated.

Some ideas, looking ahead

Just a week or so ago seems like an age away. The Secretary of State set out a range of proposals for further reform of the planning system in his Planning for the future document (12 March 2020). He announced:

In the Spring, we will publish a bold and ambitious Planning White Paper. It will propose measures to accelerate planning. It will maximise the potential of new technologies to modernise the system. It will make it easier for communities to understand the planning system and play a role in decisions that affect them. Together, the measures it puts forward will set out a pathway to a new English planning system which is fit for the future”.

That talk of a “new English planning system” seemed to herald some of the thinking from the Policy Exchange’s paper Rethinking the Planning System for the 21st Century (27 January 2020) and, after all, its co-author Jack Airey is now a 10 Downing Street advisor. I wrote a critique of the paper in the Estates Gazette (Let’s rethink the rethink, 5 March 2020) but perhaps I was being a little premature. Because maybe, once all this subsides, it is time to look at for instance:

⁃ the potential for more of a zoning-style approach, which could begin to be introduced fairly simply by placing a proper duty on authorities to prepare brownfield land registers (as well as making it mandatory for local authorities to import into their registers all sites identified by the Government in its promised national brownfield sites map) and then increasing the scope for use of the ‘permission in principle’ procedure e.g. by allowing it to be used for more than just housing-led development and allowing permission in principle to be established through site allocations in a local plan.

⁃ greater use, this time with better safeguards against abuse, of permitted development rights. After all, setting aside the problems caused by that lack of appropriate safeguards, since the permitted development right to convert offices to residential was initially introduced for a temporary three year period from May 2013 (following an initial announcement in the March 2011 budget), many thousands of new homes have been created at much greater speed than traditional planning application routes would have achieved. Desperate times call for desperate measures. Planning For The Future announces that the Government will introduce “new permitted development rights for building upwards on existing buildings by summer 2020, including to extend residential blocks by up to two storeys and to deliver new and bigger homes. We will also consult on the detail of a new permitted development right to allow vacant commercial buildings, industrial buildings and residential blocks to be demolished and replaced with well-designed new residential units which meet natural light standards.” Devil’s question: if we are to have permitted development rights to demolish and rebuild, why not go further and have permitted rights, with equivalent safeguards, to carry out residential development on already cleared brownfield land (as an alternative to the enhanced brownfield land register/permission in principle proposal above)?

Surely, all these ideas will need to be considered, against the backdrop of months of lost housing delivery and a severe knock to economic confidence.

But I would suggest that, ahead of that promised White Paper, which will surely now slip considerably, there are a number of shorter-term measures to make adjustments in order to make up for the time that has been lost as a result of this crisis. In considering these, I recognise the inevitable tension between on the one hand measures that seek to “put on hold” aspects of our system, particularly time limits, and on the other hand measures to keep the system moving.

We need to learn from recent history. In the wake of the global financial crisis, on 1 October 2009 the Government introduced a temporary measure “to make it easier for developers and local planning authorities to keep planning permissions alive for longer during the economic downturn so that they can more quickly be implemented when economic conditions improve.” Guidance as to the operation of the provisions was set out in Greater flexibility for planning permissions (23 November 2009, amended 1 October 2010 and eventually withdrawn 7 March 2014). (The same document gave guidance as to the operation of the helpful section 96A non-material amendments procedure, introduced at the same time.)

We urgently need an equivalent measure reintroduced or, perhaps more simply, an automatic six months’ extension to all planning permission time limit conditions. After all there is already a year’s automatic extension under section 91 (3A) of the Town and Country Planning Act 1990 where a planning permission is subject to judicial review proceedings. The thinking should extend to other fixed deadlines, for instance in relation to the implementation of compulsory purchase orders and NSIPs.

There are various section 106 obligations which provide for ongoing financial contributions or measures with significant ongoing costs, not linked to progress with stages of development. The Government should surely provide firm guidance to authorities that they must readily agree to the renegotiation of such provisions to take into account the current standstill period if the evidence is, for any specific development, that this is necessary and justified.

In London, there is a particular issue with the early stage viability review mechanism required by the Mayor. The review is triggered if “substantial implementation” (usually development above ground floor level) has not happened within two years of planning permission being issued. Surely we should be avoiding the unnecessary bureaucracy inherent in that process where we can and for most major schemes the 24 months’ deadline is challenging even with a fully deployed design and construction team. Again, boroughs and the Mayor should surely be urged to agree to vary such arrangements so as to allow for an appropriate extension, whether it turns out to be three months, six months, or longer. Flexibility is also urgently needed with agreements that are currently being negotiated and we have been considering various potential drafting options so as to secure that outcome.

Publicity and consultation arrangements for planning applications need to be adapted to fit this world of social distancing and self-isolation: much of this can occur anyway through innovative use social media and other online consultation tools but there should be a temporary lifting of legislative requirements which will currently serve little purpose and may prove difficult to fulfil, such as the deposit of physical copies of Environmental Statements in the community (under Regulation 23 of the Town and Country Planning (Environmental Impact Assessment) Regulations 2017) and the erection of site notices under Article 15 of the Development Management Procedure Order.

Any such proposal would need underwriting from the Government but, as part of any planned economic bounce-back, should there be a year’s window within which schemes can commence free from CIL or with a significant deferment of payments (subject to clawback unless the chargeable development is completed within a specified number of years)? Should the three years period for the “in use” exemption be extended (surely the answer is yes)?

Given the disruption and in some cases the reduction in the capability of local authorities to determine planning applications and in light of the current postponement of hearings and inquiries by PINS there must also be a case for easing the burden on the current system and deferring costs for applicants and would-be appellants by introducing a temporary extension of the statutory period for determination of planning applications and the time limit for appealing against refusal or deemed refusal of planning permission under Articles 34 and 37 of the Development Management Procedure Order.

There will surely need to be adjustments to the operation of the housing delivery test so as not to unfairly penalise authorities facing, for no fault of their own, a slow down in housing starts.

Some have called for the Government to suspend litigation deadlines and limitation periods for the duration of the crisis. It is difficult to see how an across the board standstill would not cause substantial injustices, but should the usual judicial review and statutory challenge periods be extended in relation to decisions taken after a specified date, or perhaps for a temporary period to extend the deadline to three months?

Finally, taking into account the consequences of its social distancing measures, the Government has already announced on 17 March 2020 that permitted development rights will be extended for a period of 12 months to allow the temporary change of use of pubs, bars and restaurants to hot-food take aways; one can readily see that further temporary extensions of permitted development rights might be necessary – e.g. change of use of offices, industrial buildings or warehouses to use for the sale of food and other convenience goods and change of use of hotels and hostels to hospitals or healthcare centres. Planning law will need to be nimble.

It’s times like these we learn to live again.

Simon Ricketts, 21 March 2020

Personal views, et cetera

With thanks to my partners and colleagues at Town. If any of these ideas chime with other organisations’ thoughts, please speak to any of us.

Westferry Printworks Decision: LPA Reaction Unprintable

Tower Hamlets Council’s revised CIL charging schedule came into effect on 17 January 2020, imposing borough CIL for the first time on its large allocated sites, so you will appreciate its double disappointment at the Secretary of State allowing the Westferry Printworks site appeal, against the inquiry inspector’s recommendations, in a decision letter dated 14 January 2020. The CIL figure could have been up to £50m, according to evidence given at the inquiry on behalf of the appellant.

The scheme is for a “comprehensive mixed-use redevelopment comprising 1,524 residential units (Class C3), shops, offices, flexible workspaces, financial and professional services, restaurants and cafes, drinking establishments (Classes B1/A1/A2/A3/A4), community uses (Class D1), car and cycle basement parking, associated landscaping, new public realm and all other necessary enabling works” at Westferry Road on the Isle of Dogs.

There has been a furious response from the council. At a full council meeting the following day, 15 January 2020, a resolution was passed to examine “all available options, including a judicial review“. The East London Advertiser reports Mayor John Biggs as saying:

It is a massively tall and dense development. Something of 40 floors on the island is an outrage. By making the decision on Tuesday we also lose a massive sum of money. This development will place a huge impact on the island. It is a scandal and outrageous. We will be doing everything in our power [including] seeking a judicial review.”

The potential impact of borough CIL on the viability of the proposals obviously had been raised by the appellant as a potentially relevant matter, given that it would go to viability. Unsurprisingly, the appellant had sought to include a mechanism within its section 106 agreement for a potential reduction in affordable housing should the Secretary of State’s decision letter be issued after the revised CIL charging schedule had been adopted, a proposal which both the inspector and Secretary of State rejected.

The timing of the decision letter meant that this issue went away – it would have been an interesting one to test, given that the situation often arises where an applicant or appellant is in the hands of the decision maker as to whether permission will be issued before a revised CIL charging schedule comes into effect and why shouldn’t a section 106 agreement mechanism to neutralise the effect be appropriate where the viability appraisal has not taken the potential additional CIL liability into account?

The decision letter was plainly ready to be issued, why should it have been held back?

The appeal had been lodged in relation to an application submitted by Westferry Developments Limited (the owner of the site is Northern & Shell, the development manager is Mace) on 24 July 2018. The appeal was recovered for the Secretary of State’s own determination on 10 April 2019. Tower Hamlets asked for more time to formulate their position in relation to the proposals but this was refused by the Secretary of State, as recorded in a report to a meeting of Tower Hamlets’ strategic development committee on 14 May 2019:

This report is seeking the authority of the committee for officers to defend an appeal which has been submitted to the Secretary of State by the developer. The Secretary of State has imposed a timetable which requires that this report is considered by the Committee on 14th May 2019 in time for the council to submit a Statement of Case by 22nd May 2019 in order to avoid breaching the imposed timetable and making the authority liable for costs for unreasonable behaviour. As the report had not been written when the timetable was imposed, the Council asked Secretary of State to review the timetable and he has declined. These are the special circumstances justifying the urgency.”

The previous Mayor of London (whatever happened to him?) had intervened and granted planning permission for an earlier scheme for the site in 2016 for “comprehensive mixed use redevelopment of 118,738 m2 including buildings ranging from 2-30 storeys (tallest 110 m AOD) comprising: a secondary school, 722 residential units, retail use, restaurant and cafe and drinking establishment uses, office and financial and professional services uses, community uses, car and cycle basement parking, associated landscaping and new public realm“. That planning permission has been implemented by the demolition of the printworks and works to construct a new basement.

The latest application had been on the basis of an offer of 35% affordable housing, although not policy compliant due to the proposed tenure mix, justified by reference to viability appraisal. When the appeal was submitted, unsurprisingly, given that on appeal the decision maker would expect an updated viability appraisal, that offer was withdrawn and at the time of the 14 May 2019 committee meeting there was just an indication that a revised viability assessment would be submitted and that the revised offer would be less than 35%.

The committee resolved that the proposals would have been refused on the following grounds:

⁃ Townscape and visual impact

⁃ Wind Impact on the Docklands Sailing Centre

⁃ Affordable housing – amount

⁃ Housing mix and choice

The inquiry started on 7 August 2019. This was an important appeal for the council, as can be seen from this July 2019 Facebook post from a councillor, encouraging opposition to the proposals:

In the evidence for the inquiry, the affordable housing offer had been reduced to 21% on the basis of an updated viability assessment.

In this summary that follows I am plagiarising some of an internal note prepared by my Town partner Louise Samuel (into which I may now introduce errors, all mine):

• The inspector accepted that the existing permission should be treated as a fallback, which formed an appropriate basis for assessing an alternative use value for the purposes of arriving at a benchmark land value.

• However, the inspector did not agree with how the appellant had calculated the benchmark land value (see IR 507 on for BLV discussion) and considered that the 21% offer was unlikely to be the maximum reasonable provision for the site. He did not, however, set what the maximum reasonable provision would be.

• Whilst Tower Hamlets criticised the appellant for resiling from its previous 35% offer, the Inspector notes that it was clear that the appellant was responding to the Mayor’s fast-track approach (which requires at least 35%) and so took a commercial view despite the fact that it was not supported by the viability assessment at the time. He concluded that this was not, in itself, a reason to reduce the weight to be attached to the Assessment before him (see para 530 of the IR).

• The Inspector’s view was that the consented scheme provided many of the same benefits but without causing the same harm to heritage assets. Because of the consented fallback, the only benefits that carried weight were those in addition to the consented position.

• The Secretary of State agreed that it is likely that the scheme could provide more affordable housing (“21% does not…represent the maximum reasonable amount of affordable housing”) but still considered that the additional benefits (compared to the consented fallback scheme) of: (a) housing (802 more units of which 142 would be affordable, with a policy compliant tenure split of 70% affordable rent 30% intermediate); and (b) employment during construction, were enough to grant permission. The Secretary of State gave these benefits significant weight whereas the Inspector had attached moderate weight to these benefits. The Secretary of State took into account that “there is no evidence before him of any other scheme which might come forward or what level of affordable housing might be delivered by any such scheme”.

• The Secretary of State considered these benefits to be enough to outweigh harm to important heritage assets (Grade I Old Royal Naval College; Grade I Tower Bridge; and the Greenwich World Heritage Site).

• The section 106 agreement included both an early and late stage viability review, which means that the percentage of affordable housing may increase, albeit the Inspector criticised the limited effectiveness of these.

An interesting decision in that we would need to go back almost two years to find another recovered appeal for housing development which the Secretary of State has allowed in London. Contrast for instance with the 19 July 2019 Chiswick Curve decision letter, appeal dismissed by the Secretary of State against his inspector’s recommendations, where he gave only moderate weight to the provision of 327 dwellings, whereas the Inspector had given significant weight to the housing offer (the decision has been challenged by the appellant – Louise and colleagues acting), and contrast with for instance the 1 Cambridge Heath Road 10 June 2019 decision letter, again an appeal dismissed against his inspector’s recommendations.

Much to chew over for those promoting, or otherwise engaged with, major projects in London.

Simon Ricketts, 18 January 2020

Personal views, et cetera

 

Image courtesy of Westferry Printworks website

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

The Bottom Line: Updates On CIL And Viability

“Out of the blue and into the black

You pay for this, but they give you that

And once you’re gone, you can’t come back

When you’re out of the blue and into the black.”

(Neil Young)

Two double act dates for the diary:

12 July (Bob Dylan and Neil Young, Hyde Park)

1 September (CIL amendment regulations due to come into force, RICS professional statement on financial viability in planning takes effect).

I was going to force myself to write a dull, worthy and academic blog post on one of these, but I know what you want so 1 September it is.

CIL

The Community Infrastructure Levy (Amendment) (England) (No. 2) Regulations 2019 were finally laid before Parliament on 4 June 2019. They will be debated in the House of Commons and, assuming they receive an affirmative resolution, will come into force on 1 September 2019.

There was an accompanying press release, Communities to benefit from new housing infrastructure rules, and, more informatively, a more detailed document, Government response to reforming developer contributions.

Further regulations will follow:

The Government intends to lay the secondary legislation which will enable the delivery of starter homes later this year. Therefore, the Government also intends to introduce the regulations for the exemption of starter homes from the Levy later in the year.”

There has been some attempt at consolidation (although a single set of consolidating regulations really is overdue for those, particularly non-lawyers, without access to expensive online legal information subscription services):

The Government recognises that unconsolidated regulations can be challenging to understand, and that this challenge can be particularly acute when calculating Levy liabilities. To increase usability the Government has consolidated all regulations relating to the calculation of Levy liabilities into a single schedule. The Government will consider fully consolidating the regulations when any further regulatory amendments are made.

There will be some simplification in terms of access to information on indexation:

The Regulations have instead been amended to improve the transparency around indexation, while retaining the existing approach by indexing the Levy to the Building Cost Information Service’s (BCIS) All-in Tender Prices Index. The Government has asked the Royal Institution of Chartered Surveyors to produce a bespoke index for the Levy, based on BCIS. This will be produced annually and be made publicly available. The index will not change through the year, as BCIS forecasts can at present. The Government will review guidance to improve clarity, including making clear that from 1 January each year, the latest index figure produced by the Institution should apply. The Government also proposes to retain the proposal for charging authorities to produce annual rate summaries, which will further improve transparency, in particular for smaller developers. The changes to regulations will address several issues raised during consultation regarding how the existing approach to indexation is implemented.”

There are also some other detailed fixes of previous glitches, but largely the Regulations are as foreshadowed in its Reforming developer contributions Technical consultation on draft regulations (December 2018) and before that in its document Government response to supporting housing delivery through developer contributions: A summary of consultation responses and the Government’s view on the way forward (October 2018) which was the subject of my 9 November 2018 blog post An Update On CIL: Reform Promised, Meanwhile Continuing & Increasingly Expensive Uncertainties.

It really is the Never Ending Tour.

Viability

The RICS published its professional statement on Financial viability in planning: conduct and reporting on 28 May 2019, which comprises fourteen mandatory requirements which chartered surveyors must observe when carrying out financial viability assessments in a planning context. It is all strong stuff, not just vague exhortations of good practice. Breaches will be a disciplinary matter for the RICS member and his or her firm: “Sections within professional statements that use the word ‘must’ set mandatory professional, behavioural, competence and/or technical requirements, from which members must not depart.

The RICS covering statement says this:

Dissatisfaction has been expressed among some stakeholders in the sector about the standards to which viability assessments are being produced. The concerns extend from public representatives, the development sector, community groups and decision makers all of whom rely on viability assessments in a key public interest area. Questions about objectivity, conflicts of interest, transparency and contingency fees among others have been raised about those working for both the private and public sectors. While not all viability assessments are undertaken by chartered surveyors, in response RICS has strengthened our advice on these areas, the professional conduct of chartered surveyors and regulated firms undertaking viability assessments and the essential information which should be reported so that informed decisions may be taken transparently.

We have also produced this professional statement in recognition of the Mr Justice Holgate’s comments in the Parkhurst Road case requesting professionals to contribute to a more efficient public administration of planning. His further comments on the technical aspects of viability will be addressed in the review of our guidance note which will go to consultation over summer 2019.”

I covered those comments from Holgate J in my 27 April 2018 blog post Pointers From Parkhurst.

These are the key requirements:

“The RICS member carrying out the FVA must be a suitably qualified practitioner.”

“The report must include a statement that, when carrying out FVAs and reviews, RICS members have acted:

• with objectivity

• impartially

• without interference and

• with reference to all appropriate available sources of information.
This applies both to those acting on behalf of applicants as well as those acting on behalf of the decision-makers.”

Terms of engagement must be set out clearly and should be included in all reports. The RICS professional statement Conflicts of interest (1st edition, 2017) applies, but with the additional requirement that RICS members acting on behalf of all those involved must confirm that no conflict or risk of conflict of interest exists (see Conflicts of interest paragraph 1.1). The professional statement allows ‘informed consent’ management, which, subject to the circumstances, can be both pragmatic and appropriate. This should take the form of a declaration statement.”

A statement must be provided confirming that, in preparing a report, no performance- related or contingent fees have been agreed.”

Transparency and fairness are key to the effective operation of the planning process. The PPG (paragraph 021, reference ID 10-021-20190509) states that:

‘Any viability assessment should be prepared on the basis that it will be made publicly available other than in exceptional circumstances.’

Although certain information may need to remain confidential, FVAs should in general be based around market- rather than client-specific information.

Where information may compromise delivery of the proposed application scheme
or infringe other statutory and regulatory requirements, these exceptions must be discussed and agreed with the LPA and documented early in the process. Commercially sensitive information can be presented in aggregate form following these discussions. Any sensitive personal information should not be made public.”

“Before accepting instructions, if RICS members are advising either the applicant or the LPA on a planning application and have previously provided advice, or where they are providing ongoing advice in area-wide FVAs to help formulate policy, this must be declared.”

“All inputs into an appraisal must be reasonably justified. Where a reviewer disagrees with a submitted report and/or with elements in it, differences must be clearly set out with supporting and reasonable justi cation. Where inputs are agreed, this must also be clearly stated. Where possible, practitioners should always try to resolve differences of opinion.”

“In the interest of transparency, when providing benchmark land value in accordance with the PPG for an FVA, RICS members must report the:

current use value – CUV, referred to as EUV or first component in the PPG (see paragraph 015 reference ID: 10-015-20190509). This equivalent use of terms – i.e. that CUV and EUV are often interchangeable – is dealt with in paragraph 150.1 of IVS 104 Bases of Value (2017)

premium – second component as set out in the PPG (see paragraph 016 reference ID: 10-016-20190509)

market evidence as adjusted in accordance with the PPG (see PPG paragraph 016 reference ID: 10-016-20190509)

all supporting considerations, assumptions and justi cations adopted including valuation reports, where available (see PPG paragraphs 014 reference ID: 10-014-20190509; 015 reference ID: 10-015-20190509; and 016 reference ID: 10- 016-20190509)

alternative use value as appropriate (market value on the special assumption of a specified alternative use; see PPG paragraph 017 reference ID: 10-017-20190509). It will not be appropriate to report an alternative use value where it does not exist.
A statement must be included in the FVA or review of the applicant’s FVA or area-wide FVA that explains how market evidence and other supporting information has been analysed and, as appropriate, adjusted to reflect existing or emerging planning policy and other relevant considerations.

“During the viability process there must be a clear distinction between preparing and reviewing a viability report and subsequent negotiations.”

“All FVAs and subsequent reviews must provide a sensitivity analysis of the results and an accompanying explanation and interpretation of respective calculations on viability, having regard to risks and an appropriate return(s).”

“At all stages of the viability process, RICS members must advocate reasonable, transparent and appropriate engagement between the parties, having regard to the circumstances of each case. This must be agreed and documented between the parties.”

“For applicants, subsequent reviews and plan-making, FVAs must be accompanied by non-technical summaries of the report so that non-specialists can better understand them. The summary must include key gures and issues that support the conclusions drawn from the assessment and also be consistent with the PPG”

“Reports on behalf of both applicants and the authority must be formally signed off and dated by the individuals who have carried out the exercises. Their respective qualifications should also be included.”

“All contributions to reports relating to assessments of viability, on behalf of both the applicants and authorities, must comply with these mandatory requirements. Determining the competency of subcontractors is the responsibility of the RICS member or RICS-regulated firm.”

“RICS members must ensure that they have allowed adequate time to produce (and review) FVAs proportionate to the scale of the project, area-wide assessment and specific instruction. They must set out clear timeframes for completing work. If the timeframes need to be extended, the reasons must be clearly stated, both at the time and in the subsequent report.”

Well done technical author, Gerald Eve’s Robert Fourt, and his working group:

Jeremy Edge FRICS (Edge Planning)

Nigel Jones FRICS (Chesters Commercial)

Jacob Kut MRICS (Avison Young)

Simon Radford FRICS, Chair (Lothbury Investment Management)

Charles Solomon MRICS (GLA)
Peter Wyatt MRICS (Reading University)

(Albeit a very male group).

It may be that the stable door has already bolted but I do hope that the professional red lines in the statement give some reassurance that viability figures are not cooked up behind closed doors without appropriate professional discipline being applied, and strengthen surveyors’ position in discussions with their clients, whether from the private or public sectors.

The professional statement is separate from RICS guidance as to how to carry out financial viability appraisals in accordance with government policy, which is now very out of date. The professional statement says this:

“Since the publication of the NPPF 2018 and PPG 2018 (as updated in 2019) RICS has also been reviewing its 2012 guidance note to align it with the changed emphasis in current government policy; a second edition is forthcoming.”

The Government’s PPG guidance on viability was tweaked again on 9 May 2019. Having been through it and flagged changes from the previous 24 July 2018 version, I can’t really improve upon this summary, from the day it was published, by Matthew Spilsbury (Turley).

Hey hey, my my.

Simon Ricketts, 8 June 2019

Personal views, et cetera

Calculating Education Contributions

We class schools, you see, into four grades: Leading School, First-rate School, Good School, and School. Frankly,” said Mr Levy, “School is pretty bad…”

(Evelyn Waugh, Decline and Fall)

The government has been fine-tuning its guidance as to the extent to which developers in England should be required to fund education provision.

Serendipitously for this blog post, the High Court last month handed down judgment in Thompson v Conwy County Borough Council (Dove J, 26 March 2019). Not only does the case provide an introduction to some of the existing uncertainties, but, as is clear from Dove J’s introduction, there is a link to one of the greatest comic literary depictions of a private school:

The site in question in relation to these proceedings is the Fair View Inn in Llanddulas. It appears that Evelyn Waugh was at one time a patron of the Fair View Inn when he taught at a nearby preparatory school. The Fair View Inn features as “Mrs Robert’s Pub” both in his diaries and also in his first novel, Decline and Fall.”

Remember that section in Decline and Fall, where Paul Pennyfeather gets sent to Llanabba Castle School in north Wales to teach subjects he knows nothing about, and his trips to Mrs Roberts’ pub with Captain Grimes? (If not, do put this blog post down and pick up D&F – much more entertaining).

One of the grounds of challenge to the grant of planning permission for residential development on the site of the Inn was that the planning committee, in approving the proposal on the basis of a commuted sum towards education provision, “were misled by inaccurate information being provided in relation to education school capacity.” It was submitted by the claimant (a representative of the campaign group Passionate about Llanddulas) that “although members were advised that the commuted sum would be used to improve existing school facilities in the near future, including the construction of a new school, the position […] is significantly different. [The claimant] contends that the position in truth is that the school in Llanddulas will remain over capacity on the basis that there is no guarantee at present that any new school would be secured through the provision of a commuted sum for education“.

The local school is indeed already oversubscribed. The education officer sought a financial contribution of £17,009, towards the costs of a new school in due course, based on approximately two additional nursery and primary pupils being added to the local school population. An internal email from the education officer was disclosed: “… we will be building a new school there in less than 5 years and the money will come in handy!

The claimant sought to rely on correspondence from the same officer that post-dated the permission and which set out the steps that would need to be taken to secure Welsh Government funding for a new school, the outcome of which was uncertain notwithstanding confidence expressed by the officer.

Dove J unsurprisingly took the position that “the question of whether or not officers misled members should be considered on the basis of the material as known to the officers at the time of the Committee report, rather than taking account of matters that arose or came to light after the decision was reached.”

But in any event he held that what was later set out by the officer in correspondence was “not in substance different from the succinct email he sent to Ms Roberts earlier in the year, namely that the Education Section of the Defendant has it in mind to use the commuted sum towards the redevelopment of the school in Llanddulas within five years. In my view it would subject the advice that the members were given to an illegitimate and overly forensic scrutiny to suggest that it was necessary also to spell out the further statutory and administrative processes which would be required before the new school would be open for use. The issue about which members were being advised was the question of whether or not there was a legitimate objective for the commuted sum in respect of education. The advice which the members were provided with accurately reflected the view of the Education Section given by Mr Jones and did not in my judgment mislead them. I am therefore satisfied on the basis of the information which has become available since the grant of permission that the members were not misled. Thus, even were account taken of material provided after the decision the position remains the same.”

No point appears to have been expressly taken as to whether the contribution failed the regulation 122(2) test within the CIL Regulations:

A planning obligation may only constitute a reason for granting planning permission for the development if the obligation is—

(a) necessary to make the development acceptable in planning terms;

(b) directly related to the development; and

(c) irly and reasonably related in scale and kind to the development.

Nor whether it offended the (soon to be abolished) pooling restriction in regulation 123.

Whilst the permission thereby survived the campaign group’s legal challenge, when you step back for a moment, the basis for requirements for contributions towards education provision, and the expensive uncertainty which developers and residents in new developments are expected to put up with, is faintly bizarre. New homes may contain children. Those children would need schooling somewhere regardless of the particular development. And yet, an application for planning permission for residential development is an opportunity that the Government pretty much requires local authorities to take in order to reduce the financial burden on the state and on direct taxation to secure financial contributions towards new and expanded schools. That cost reduces the financial viability of schemes, thereby reducing the amount affordable housing that the developer can subsidise (I’ve commented before on that logical disconnect conveniently ignored by successive Governments looking to minimise headline tax rates – so building market housing increases the amount of subsidised affordable housing that needs to be provided does it?). And, as in that Llanddulas example, where development proceeds on the basis of a financial contribution to something somewhere in the future, the developer and those who end up living in the development are at the whim of demographics and the education department’s forward planning and funds-securing nous as to whether, and where, necessary school places will become available. Rarely is the lack of available school places a reason to refuse planning permission.

But this is the policy environment.

Relevant passages in the Government’s Planning Practice Guidance were amended on 15 March 2019:

What funding is available for education?

Government provides funding to local authorities for the provision of new school places, based on forecast shortfalls in school capacity. There is also a central programme for the delivery of new free schools.

Funding is reduced however to take account of developer contributions, to avoid double funding of new school places. Government funding and delivery programmes do not replace the requirement for developer contributions in principle.

Plan makers and local authorities for education should therefore agree the most appropriate developer funding mechanisms for education, assessing the extent to which developments should be required to mitigate their direct impacts.

Paragraph: 007 Reference ID: 23b-007-20190315

Revision date: 15 03 2019

What contributions are required towards education?

Plans should support the efficient and timely creation, expansion and alteration of high-quality schools. Plans should set out the contributions expected from development. This should include contributions needed for education, based on known pupil yields from all homes where children live, along with other types of infrastructure including affordable housing.

Plan makers and decision makers should consider existing or planned/committed school capacity and whether it is sufficient to accommodate proposed development within the relevant school place planning areas. Developer contributions towards additional capacity may be required and if so this requirement should be set out in the plan. Requirements should include all school phases age 0-19 years, special educational needs (which could involve greater travel distances), and both temporary and permanent needs where relevant (such as school transport costs and temporary school provision before a permanent new school opens).

Plan makers should also consider whether pupils from planned development are likely to attend schools outside of the plan area and whether developer contributions may be required to expand schools outside of the area.


When local authorities forward-fund school places in advance of developer contributions being received, those contributions remain necessary as mitigation for the development.

Paragraph: 008 Reference ID: 23b-008-20190315

Revision date: 15 03 2019

The Department for Education published some detailed guidance for local authorities on 11 April 2019 to help them in securing developer contributions for education and on the approach to education provision in garden communities.

The guidance purports not to “advise the construction/development industry on its duties or responsibilities in paying for infrastructure” or to replace or override “policy/guidance produced by other government departments“. However, if you are negotiating section 106 agreement obligations, it is essential reading.

Securing developer contributions for education sets out the following principles:

• Housing development should mitigate its impact on community infrastructure, including schools;

• Pupil yield factors should be based on up-to-date evidence from recent housing developments;

• Developer contributions towards new school places should provide both funding for construction and land where applicable, subject to viability assessment when strategic plans are prepared and using up-to-date cost information;

• The early delivery of new schools within strategic developments should be supported where it would not undermine the viability of the school, or of existing schools in the area.”

Planning obligations should “allow enough time for developer contributions to be spent (often this is 10 years, or no time limit is specified“. But personally, I would push against such long timescales save where specifically justified!

In terms of the inter-relationship between government and developer funding:

5. Central government basic need grant, the DfE free schools programme and other capital funding do not negate housing developers’ responsibility to mitigate the impact of their development on education. When the DfE free schools programme is delivering a new school for a development, we expect the developer to make an appropriate contribution to the cost of the project, allowing DfE to secure the school site on a peppercorn basis and make use of developer contributions towards construction. National Planning Practice Guidance explains how local planning authorities should account for development viability when planning for the provision of infrastructure.2 There should be an initial assumption that both land and funding for construction will be provided for new schools planned within housing developments

6. While basic need funding can be used for new school places that are required due to housing development, we would expect this to be the minimum amount necessary to maintain development viability, having taken into account all infrastructure requirements Where you have a reasonable expectation of developer funding being received for certain school places,3 and you have declared this in your SCAP return (or plan to do so), then basic need funding should not be considered available for those school places other than as forward funding to be reimbursed by developer contributions later.

7. There are other options besides basic need grant for forward-funding school places, including the use of local authority borrowing powers where necessary. Where developer contributions have been secured through a planning obligation, you can recoup the borrowing costs from developer contributions later, provided these costs have been incurred as a result of housing growth. Local authorities can bid for funding under government grant programmes such as the Housing Infrastructure Fund (HIF) as they become available, while developers delivering schools directly as an ‘in kind’ contribution may be eligible for loan funding from DfE or Homes England, allowing a new school to be delivered at an earlier stage in the development than would have been possible otherwise.”

Pupil yield factors should be based on up-to-date evidence from recent local housing developments“. DfE is working on a detailed methodology.

All new primary schools are now expected to include a nursery. There must be sufficient primary and secondary education up to the age of 19 as well as special educational needs and disabilities (SEN) provision.

The assumed cost of mainstream school places should be based on national average costs published by the DfE, adjusted to reflect regional costs differences. The cost of early years provision should be assumed as the same as primary provision. Contributions to special school provision should be set at four times the cost of a mainstream school place.

All temporary and permanent education needs should be properly addressed, including school transport costs and temporary school provision. Where appropriate, both a preferred and “contingency” school expansion project should be identified in a section 106 planning obligation.

23. You may wish to safeguard additional land when new schools within development sites are being planned, to allow for anticipated future expansion or the reconfiguration of schools to create a single site. ‘Future-proofing’ can sometimes be achieved informally through a site layout that places open space adjacent to a school site. Where justified by forecast need for school places, additional land can be designated specifically for education use and made available for purchase by the local authority within an agreed timescale, after which the land may be developed for other uses.

24. While developers can only be expected to provide free land to meet the education need from their development, the allocation of additional land should also preclude alternative uses, enabling you to acquire the site at an appropriate cost. Land equalisation approaches can be used in multi-phase developments to ensure the development ‘hosting’ a new school (and any additional safeguarded land) is not disadvantaged. Nevertheless, the market price for the land will depend on its permissible uses. Land allocated for educational use in a local plan would usually have no prospect of achieving planning permission for any other uses. Independent land valuation may be required to establish an acquisition cost. National Planning Practice Guidance provides advice on land valuation for the purposes of viability assessment.

(There are elements of paragraphs 23 and 24 with which I would take issue or which may be too generally expressed. For example, if the reservation of additional land for a school (or for further forms of entry to an existing school) and the need for those additional school places is not generated by the development within which the land is situated, why should that land not be acquired at the development value it would otherwise have enjoyed?).

The guidance annexes advice on compliance with state aid and public procurement legislation.

There is specific guidance on strategic developments and new settlements (with more detailed separate guidance on garden communities), including on multiple phase school provision, the timing of provision and use of viability review mechanisms where the initial education contribution has been reduced on viability grounds.

Whether your education contribution is in the low tens of thousands of pounds as per the Llanddulas case or in the low tens of millions of pounds, as may be the case with a new settlement, arriving at efficient, practical solutions is key. Travelling optimistically, let us hope that the new guidance will assist in arriving at those solutions, rather than encouraging authorities to add to the current list of requests.

Simon Ricketts, 13 April 2019

Personal views, et cetera