This new Levy is supposedly going to make contributions “fairer and easier” - DHA’s Danielle Lawrence looks at what this means in practice.
The infrastructure levy (IL) is intended to fund a broader range of infrastructure than CIL, by enabling local authorities to impose a “tax” on development, to fund infrastructure such as transport facilities, open space, childcare provision, and affordable housing.
The Government intends to delineate between:
- ‘Levy funded’ infrastructure – infrastructure required to support the local area that would need to be delivered by local planning authorities; and
- ‘Integral’ infrastructure – infrastructure integral to the successful functioning of a site, such as on-site play areas, access, and internal highway networks.
Levy funded infrastructure will be funded by the IL, whilst integral infrastructure will be provided via planning conditions.
The IL rates will be based on the final gross development value (GDV) of a development, as a percentage of the final GDV, above a minimum threshold (i.e., if a local authority set a minimum threshold of £1,500 psm, and the GDV of a completed development was £2,500 psm, then the Levy will only be charged on the £1,000 psm above the threshold).
The following approaches will be applied to collecting the Levy:
- Indicative calculation to be submitted alongside a planning application.
- Initial estimated payment after commencement- but pre-occupation.
- A final balancing payment once the scheme is completed or sold.
Whilst the Government considers that this will have the advantage of reflecting the latest market position and capturing land value uplift, this presents several disadvantages in that developers and landowners will not know how much a scheme owes until it has been completed and sold.
This could also delay the funding of infrastructure, in that local authorities do not know when developments will be completed and could mean that infrastructure would not be in place when it is needed. The inclusion of affordable housing within the Levy would also mean that the rates charged would need to be considerably higher than CIL, to ensure the appropriate funding is obtained for affordable housing and other infrastructure.
Following the technical consultation which took place earlier this year, the Government made several amendments to the intended framework back in July which are summarised as follows:
- The IL Regulations will allow local authorities to require developers to pay a proportion of their levy liability in-kind through the delivery of on-site affordable housing.
- Local authorities will be required to ensure that affordable housing can be delivered at a level maintain or exceeding what is currently delivered in that area, unless it is deemed unviable.
- The Secretary of State will be under a duty to publish a report on the amount of affordable housing be funded by the IL, the impact of the new Levy on delivery of affordable housing and other infrastructure.
- The Secretary of State will have additional powers through the regulations to disapply the IL in a particular area, if the Levy is not delivery on its policy aims. The local authority could then use S106 agreements to secure affordable housing and planning obligations.
It’s fair to say there is considerable concern from the industry on the proposals with several of us making strong representations to the Government on the viability and practicality of the proposals. It is intended that the IL will be introduced on a ‘test and learn’ basis, with the Levy introduced in selected local authorities before national rollout over the course of a decade. Until that time, the current system will remain in place in areas which have not adopted the Levy and of course if we do have a new administration, whether these changes will be implemented at all.
To read more on the Levelling-Up and Regeneration Act please click here.
