Thinkin’ ’bout the IL and how to build some homes”.
Many of us have had an intense few weeks of meetings and calls on the subject of the proposed infrastructure levy since publication in March 2023 of DLUHC’s technical consultation document and ahead of the 9 June deadline for responses to the 45 questions asked.
There is some bewilderment. We’re used to proposals for planning reform that introduce additional complexity, that as yet have no proof of concept or that are likely to have unintended, unwelcome, consequences, but the consensus seems to be that IL really takes the biscuit.
Sam Stafford and BECG have now done wonders in editing a recent Clubhouse discussion I hosted on the subject (featuring some people who know what they are talking about – my Town Legal partner Clare Fielding, Quod’s Sasha Gordon, BNP Real Estate’s Anthony Lee, the BPF’s Sam Bensted, Irwin Mitchell’s Nicola Gooch and, last but not least, Gilian MacInnes) into a 50 Shades of Planning podcast episode. Whatever your current level of knowledge of the proposals I think you will find it worth a listen – if only for Sam’s comments at the head and tail of the piece. It’s available to listen to here.
“Cheer up, it might never happen”, you could say. But it might.
The Secretary of State’s 6 April 2023 decision to refuse planning permission for Berkeley Homes’ proposed development of 165 new dwellings in Cranbrook, Kent (a decision in fact taken by planning minister Rachel Mclean on behalf of the Secretary of State) = a head on collision for sure.
Tunbridge Wells Borough Council had resolved to approve the scheme but Natural England, concerned as to the prospect of harm to the High Weald Area of Outstanding Natural Beauty, secured its call in by the Secretary of State.
The council has slightly less than five years’ housing land supply. The scheme included 40% affordable housing: 50/50 rented and shared ownership.
To cut a long story short (read the decision letter and inspector’s report), the Secretary of State disagreed with the inspector’s recommendation that planning permission be granted.
On the main issues:
⁃ AONB: “Overall the Secretary of State agrees with the Inspector at IR823 that there would be some harm to the HWAONB, which would be limited, and that the harm to the landscape and scenic beauty of the HWAONB attracts great weight.”
Tucked within his conclusions on AONB this turns out to be a crucial passage in the decision:
“The Secretary of State recognises that both the HWAONB Management Plan and the High Weald Housing Design Guide emphasise that housing development in the HWAONB should be landscape-led. Whilst he agrees with the Inspector that the proposed development would deliver landscape enhancements (IR826), he does not find the proposal to be of a high standard which has evolved through thoughtful regard to its context (IR723). Overall, he does not find that the scheme is sensitively designed having regard to its setting. He finds that the design of the proposal does not reflect the expectations of the High Weald Housing Design Guide, being of a generic suburban nature which does not reproduce the constituent elements of local settlements. He also considers that the layout of the scheme does not respond to its AONB setting. Rather than being a benefit of the scheme, as suggested by the Inspector, the Secretary of State considers that the design of the scheme is a neutral factor in the context of paragraphs 176 and 177 of the Framework and the planning balance.”
Not “sensitively designed”? “… of a generic suburban nature”? It’s worth looking at the scheme drawings, design and access statement etc on the council’s planning portal. I would disagree. More fundamentally, there is something very odd about a minister (and civil servants) arriving at a conclusion like this, in the face of the elected local planning authority and hands on consideration, site visits and so on conducted at that stage and in the face of the conclusions reached by an inspector after many inquiry days and a site visit. And in the face of Government assertions that it still wants to see 300,000 homes built annually. Frankly why bother with all that if this is the outcome?
⁃ Air quality: “…there would be very limited harm to air quality, and he affords this very limited weight in the planning balance.”
⁃ Site allocation strategy: Whilst he agreed with the inspector that the local plan policies should be treated as out of date because of the lack of five years’ housing supply, because the shortfall was slight he disagreed with the Inspector’s assessment that both the policies and the conflict with them carry limited weight.
⁃ Historic environment: “For the reasons given at IR767-774 the Secretary of State agrees with the Inspector at IR773 that the proposed development would not harm any significant historic landscape resource and all of the individual features which could be of potential interest would be retained.”
⁃ Sustainable transport: “For the reasons given at IR790-793 the Secretary of State agrees with the Inspector that the development would promote sustainable transport in the terms of the Framework and accord with relevant development plan policy in that regard (IR794).”
Turning to the benefits of the scheme:
⁃ Housing delivery: “For the reasons given at IR763-764 the Secretary of State agrees with the Inspector that there is a clear need for both market and affordable housing in the Borough and that the proposed development would make a significant contribution to the delivery of both (IR764).”
⁃ Biodiversity: “…the proposed development would secure significant BNG such that it would accord with the Framework, including paras 174, 179 and 180 and development plan policy, as well as the eLP, in this regard (IR747).
⁃ Other benefits: “The Secretary of State agrees for the reasons given at IR774, IR720 and IR811 that the proposed reinstatement of hedgerows along historic boundaries and of the shaw in the southern fields would be beneficial to the time-depth character of the HWAONB (IR774). Furthermore, the proposed re-creation of Tanner’s Lane would also be beneficial in heritage terms as it would reinstate a historic feature in the local landscape (IR774). The Secretary of State agrees for the reasons given at IR720 and IR811 that the new woodland planting and management of existing woodland would be to the benefit of the environment and landscape. He further agrees for the reasons given at IR786 that the proposed highway works may result in improving highway safety. In addition, for the reasons given at IR811 the additional footpaths and substantial new publicly accessible amenity space would enhance recreational opportunities.”
Overall conclusion on benefits:
“The Secretary of State has had regard to the Inspector’s view at IR824 as to weight attaching to the benefits of the scheme, and notwithstanding his conclusion at paragraph 36 below that there is not a ‘very compelling case’ for the need for development of this type and in Cranbrook, overall he agrees that the combined weight of the benefits is substantial. However, he does not agree with the Inspector’s characterisation at IR826 that it constitutes ‘a package of exceptional benefits’.”
So “the combined weight of the benefits is substantial”….
Application of policies in the NPPF relating to development in the AONB:
⁃ Great weight should be given to conserving and enhancing landscape and scenic beauty in AONBs – conclusion that limited harm but that harm should be given great weight.
⁃ Planning permission for major development in the AONB should be refused unless there are exceptional circumstances justifying the development, and where it can be demonstrated that the development is in the public interest – no exceptional circumstances, not in the public interest.
Overall conclusions:
“Weighing in favour of the development are the need for and delivery of housing, the Biodiversity Net Gain, enhanced recreation opportunities, improvements in highway safety, heritage benefits to the historic landscape and landscape benefits by way of woodland planting and management, which collectively carry substantial weight.
Weighing against the proposal is the harm to the landscape and the scenic beauty of the HWAONB which attracts great weight. There is further harm by way of conflict with the spatial strategy which attracts moderate weight, harm to air quality which is afforded very limited weight and harm to the plan making process through prematurity which is afforded very limited weight.
The Secretary of State has concluded for the reasons given above that exceptional circumstances do not exist to justify the proposed development in the AONB and that the development would not be in the public interest. Therefore, paragraph 177 of the Framework provides a clear reason for refusing the development proposed and as such under paragraph 11(d)(i) of the Framework the presumption in favour of sustainable development is no longer engaged.
Overall, the Secretary of State’s conclusion on section 38(6) of the Planning and Compulsory Purchase Act 2004 is that the conflict with the development plan and the material considerations in this case indicate that permission should be refused.”
The decision appears to have been the final straw for housebuilders, already riled by the overtly anti-housebuilding theme of the proposed amendments to the NPPF (final version soon to emerge). See for example Builders lambast Michael Gove after he blocks plan for ‘generic’ homes in Kent (The Times, 15 April 2023 – behind paywall).
There were no costs applications in this decision but I do note that costs applications and awards appear to becoming more frequent. Often of course these are in favour of appellants where the case against grant of planning permission simply has not been made out by the relevant local planning authority (particularly where the decision to refuse was against officers’ recommendations) – e.g for one example amongst many this decision letter dated 20 April 2023, plus accompanying costs decision letter in relation to a student housing scheme in Bath.
But it’s not just appellants who achieve costs awards. Did people see this recent costs decision letter where Mid Suffolk District Council achieved a full award of costs against the appellant, arising from flooding and access issues which led the inspector to conclude that the appeal had no reasonable prospect of success? Proceed with caution.
By way of reminder (ok gratuitous plug), if you sign up to our free Town Library appeal decisions service you get a list each week of the most recent major planning appeal decisions (namely all those arising from inquiries as opposed to hearings or the written representations process) with links to the decision letters themselves.
Oh finally, another mind blowing decision: the Government continuing to press on with the proposed Infrastructure Levy. Truly a terrible proposal. You may have logged on to our recent clubhouse discussion (hopefully soon to emerge as a 50 Shades of Planning podcast), ahead of the 9 June deadline for responses to the Government’s current technical consultation. If there is anyone out there who can articulate why IL would be an improvement over the current system I would love to hear from you.
You may be returning from that escapist world that is MIPIM and grimacing at the prospect of a week’s worth of emails, or you may be finishing a week of grimacing at all the LinkedIn pics of your colleagues in Ray-Bans. In any event, we now have three developments in relation to the Levelling-up and Regeneration Bill, currently at Committee stage in the House of Lords, sent to test the old saying that a change is a good as a rest…
I’m very grateful for three of my partners, not part of the MIPIM contingent, who have particularly had their eyes on the following:
Government amendment relating to removal of “hope” value in relation to particular categories of CPO
The Government tabled amendments on 13 March 2023 to the Levelling-up and Regeneration Bill that would have significant impacts on landowners. Raj Gupta has written a Compulsory Reading blog post LURB in the Lords – no hope (16 March 2023) on the potentially far-reaching implications. We have arranged a Clubhouse Planning Law Unplanned session at 5 pm on Thursday 23 March to discuss the proposal, led by Raj, Jon Stott, Greg Dickson and other leading specialists. Please RSVP here if you would like to tune in and/or take part in the discussion.
Government consultation on environmental outcomes reports – a new approach to environmental assessment
The Government published its consultation today, 17 March 2023, on the design on its proposed new system of environmental assessment. See the press statement, and consultation document. Duncan Field has set out some initial comments in a LinkedIn post. Again, we are going to arrange a Clubhouse Planning Law Unplanned event, probably for Thursday 30 March but further details will appear shortly.
Government consultation on the proposed infrastructure levy
The Government published its consultation today, 17 March 2023, on the design of the proposed infrastructure levy. See the press statement, technical consultation and a February 2023 research paper published alongside it. Clare Fielding will shortly be publishing a Levy-Headed blog post as to the likely implications.
Now to unpack. And let my picture be a warning for you to keep your parents away from the Be Real app.
8.1 Part 4 of the Bill introduces a charge to be known as the “Infrastructure Levy” in England. In addition the Secretary of State is given the power to designate the HCA a charging authority for the purposes of the Infrastructure Levy.
8.2 The Community Infrastructure Levy (CIL) is abolished in England, other than Mayoral CIL which continues to exist in Greater London.
8.3 CIL continues to apply in Wales.
8.4 Schedule 11 of the Bill inserts new sections 204A to section 204Z1 into the Planning Act 2008 (“PA 2008”) giving the Secretary of State the power to make regulations (IL regulations) providing for the imposition in England of the Infrastructure levy. The regulation-making power creates the framework for an IL regime that looks is strikingly similar to CIL in some respects, but with some significant differences. Key features:
(a) Like CIL, LPA to be IL charging authority and IL regulations can so designate other councils and bodies as well;
(b) Like CIL, a person will be able to assume IL liability before development commences, and becomes liable when development commences;
(c) Like CIL, the IL regulations must make provision for liability when no-one has assumed liability;
(d) Like CIL, the IL regulations may make provision about matters such as partial liability, apportionment of liability, transfer of liability and exceptions from and reductions in liability;
(e) Like CIL, IL to be calculated when development “first permits development”, and IL becomes due on commencement [but Regulations may provide for it to be paid on account or in instalments];
(f) Like CIL, “development” is a defined term and IL regulations must define planning permission, define the time at which the planning permission is regarded as first permitting development;
(g) Like CIL, IR regulations must make a charitable exemption where the building is wholly or mainly used for charitable purposes, and may provide for charitable exemption in other circumstances;
(h) A charging authority must issue a charging schedule and in setting rates must have regard to the level of affordable housing funding from developers over a given period, the economic viability of development, the potential economic effects of including land value increase of certain matters, the amount of IL received from developments over a given period and the charging authority’s infrastructure delivery strategy;
(i) Unlike CIL, the IL regulations may allow for a much wider variety of approaches to rate-setting: differential rates for different uses or zones areas; nil or reduced rates; rates calculated not just by floorspace but by numbers of units, buildings, or by allocation of space within units or buildings, or in any other way;
(j) Unlike CIL, IL is to be charged as a proportion of property value (this has not yet been fully fleshed out);
(k) Like CIL, charging schedules must be subject to public examination procedures;
(l) IL to be applied in the same way as CIL, to fund the provision (etc) of infrastructure to support the development of the charging authority’s area. “Infrastructure” includes affordable housing (as the PA 2008 did before that reference was removed by the CIL Regulations), and the regulation-making power still includes power to amend the definition of infrastructure for IL purposes;
(m) Unlike CIL, there is an interesting “relationship with other powers” paragraph (para 204Z1), under which the IL regulations may include provision about how the following powers are to be used or are not to be used:
(i) Part 11 of the PA 2008 on CIL;
(ii) section 70 TCPA 1990 (planning permission);
(iii) section 106 TCPA 1990 (planning obligations); and
(iv) section 278 Highways Act 1980 (execution of works).
8.5 The Policy Paper explains further that it is the Government’s intention indeed to reduce the scale of s106 planning obligations so that s106 agreements will be used:
(1) on the largest sites in place of IL (provided that the value of the infrastructure being provided in that way is not less than that which would be achieved under IL); and
(2) on other sites where “narrowly focused” s106s will be used to provide onsite infrastructure.
8.6 The Policy paper also makes reference to removing the role of negotiations in delivering affordable housing, suggesting that the Government’s intention is that AH will be delivered through the IL.”
As set out in the policy paper, when providing for the detailed regime by way of Regulations, the Government will:
• Introduce a new ‘right to require’ to remove the role of negotiation in determining levels of onsite affordable housing. This rebalances the inequality between developers and local authorities by allowing local authorities to determine the portion of the levy they receive in-kind as onsite affordable homes.
• Consider how the Levy should be applied to registered provider-led schemes.
• Require developers to deliver infrastructure integral to the operation and physical design of a site – such as an internal play area or flood risk mitigation. Planning conditions and narrowly targeted section 106 agreements will be used to make sure this type of infrastructure is delivered.
• Detail the retained role for section 106 agreements to support delivery of the largest sites. In these instances, infrastructure will be able to be provided in-kind and negotiated, but with the guarantee that the value of what is agreed will be no less than will be paid through the Levy.
• Retain the neighbourhood share and administrative portion as currently occurs under the Community Infrastructure Levy.
• Introduce the Levy through a ‘test and learn’ approach. This means it will be rolled out nationally over several years, allowing for careful monitoring and evaluation, in order to design the most effective system possible.
By way of IL the Government is attempting to extend the Community Infrastructure Levy, massively, in three directions:
(a) to make local planning authorities responsible for the delivery of affordable housing, using funds raised by the levy – meaning that the monies raised from development will be at many multiples of current CIL rates.
(b) to charge the levy on the basis of gross development value rather than floorspace.
(c) to make introduction of the levy compulsory.
I have now read the relevant parts of the Bill (sections 113 to 115 and Schedule 11), explanatory notes and policy paper many times and I must confess that there is much that I still don’t understand or which is still a blur pending further detailed work.
“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.”
“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.” (paragraph 4.5)
Now that we see what is emerging, I do not believe that anyone is suggesting that IL will be simpler than CIL. Undeniably it will be more complex (and indeed in London we will need to grapple both with CIL and IL – the work is doubled).
But I am concerned that it will be less predictable as well. Why does predictability matter? The main inflexion points in a typical development are as follows:
1. the contract to acquire the property, pricing-in likely development costs, including CIL/IL
2. scheme formulation so as to arrive at a proposed quantum and mix of development which is likely to be financially viable whilst working within likely planning constraints
3. negotiation of section 106 agreement and conditions such that permission can be issued
4. securing development funding and potential pre-lets and land parcel sales
5. letting the construction contract
6. sale of completed development, whether individual plot/flat sales or investment disposal.
If a reliable estimate of IL liability is not available for stages 1 to 3 and a concluded figure, which can relied upon as a final outcome, is not available for stages 4 to 6, development becomes much more difficult. How do you price, allocate risk and enable each party to the development to decide whether they are prepared to press the button?
The current proposals seem very blurred so far as to how and when gross development value, and therefore the amount of IL payable having regard to any relevant local thresholds, will be determined.
In terms of “how”, will it be for each developer to submit its valuer’s estimate of GDV for the completed development (or relevant completed phase), presumably prior to commencement of development? Or will there be some independent assessment? Or will there be any standardised values (for instance for development below a defined scale or value)? It is difficult enough with CIL where the moving parts are floorspace levels for each use plus the application of reliefs and exemptions. To these moving parts will now be added the inherent subjectivity that comes with valuation (accentuated where you have a type of development without readily available comparables, or subject to unusual restrictions or constraints?) and then the application of so far undefined thresholds – building costs for the area have been mentioned, but what about, for instance, existing pre-development land values (and will these be sufficiently site-specific)? The number at stake will also be much larger than is currently the case with CIL. Each process is going to be strongly argued over as the outcome will directly impact the financial bottom line of the developer and, ultimately, project viability.
In terms of “when”, will we be able to go “nap” on a figure at commencement of development or is the figure to be revisited on development completion or sale? Will any procedures for review or appeal carry on after development has commenced or will commencement of development be the cut-off?
If the authority subsequently requires affordable housing to be provided in the scheme by way of the “right to require”, how does this get taken into account in the calculation of GDV?
At what stage will a developer have certainty that a scheme is regarded as sufficiently large or strategic for IL not to apply? Can he opt in or out? Will there be local thresholds (which would inevitably influence scheme size, depending whether IL was regarded as a more or less advantageous mechanism than simply relying on section 106)?
It seems that “in kind” section 106 or other types of agreements will be required but the actual quantum of IL attributable to the development will not be known for certain at the stage the section 106 agreement is completed.
Will an authority’s targeted quantum of affordable housing, both borough/district wide and for particular areas or sites, be set out in its local plan, or infrastructure delivery statement? And will developers in future be bringing forward development proposals without reference to any anticipated affordable housing element? The local messaging is going to be complicated.
How rigorously will IL charging schedules be examined? The underlying valuation work and the thresholds to be applied will be critical.
How can we make sure that IL proceeds are used in the right way and that more affordable housing is indeed delivered, as well as the infrastructure needed to enable particular development proposals to come forward without delay?
Will the system be robust and workable in appeal situations where the developer and authority may not necessarily see eye to eye?
It is going to be fascinating to work through these sorts of issues as the proposals take shape. At this stage, what protections do we want to see in the Bill itself to safeguard against the detailed regime subsequently not living up to the Government’s promises? The Government’s commitment to a “test and learn” approach to the introduction of IL is welcome but of course risks adding to complexity by creating a patchwork of different processes dependent on geography and/or when schemes come forward – and accepts that there are inevitably going to be mistakes and unanticipated outcomes along the way.
I wasn’t particularly planning to run a clubhouse session this Tuesday but if anyone would like to join a discussion on these sorts of issues, let’s re-think that. Let me know!
Finally, another plug for the Town Legal/Landmark Chambers webinar at 5 pm on Monday 6 June back on the theme of housing: “Will the Bill deliver more or less housing? Yes or no?” Simon Gallagher (Department of Levelling Up, Housing and Communities) will join Zack Simons (Landmark Chambers), Kathryn Ventham (Barton Willmore now Stantec) and myself in a session chaired by Town Legal’s Meeta Kaur. Join us here.
Simon Ricketts, 28 May 2022
Personal views, et cetera
Details from image by Megan Bucknall courtesy of Unsplash
SIMONICITY 