News

Feeling the squeeze as councils extract levies

7th December 2012

Planning in London remains paralysed despite the Government’s enthusiasm to deliver more housing than ever. They have demonstrated their commitment by introducing localism and the Community Infrastructure Levy to deliver regeneration and more affordable housing.  Sadly, they are having the opposite effect. These latest initiatives are causing complications, uncertainty and inconsistencies and, from personal experience, providing even fewer affordable homes.

Localism will have more impact outside London but it is yet another layer causing confusion over interpretation and implementation by each local authority, according to the depth, or otherwise, of understanding among officers and councillors.

The Community Infrastructure Levy was designed to collect funds from developers for local roads, leisure centres, schools and doctors surgeries. These are the same developers who are being asked to provide affordable housing as part of the planning requirement. On top of the local authority CIL is the Boris CIL to help raise £300m for Crossrail – with charges of between £20 and £50 per square metre.The reality is that a £1 in the pot for CIL is £1 less for affordable housing.

As more councils adopt CIL, and they have to by 2014, the situation is likely to get worse and shaping up to have a catastrophic effect on the provision of affordable housing.
The irony is that the local authorities with the biggest funding gaps and in desperate need of more social housing have ramped up CIL charges sky-high. And this includes boroughs with very affluent districts.  There is only so much juice in the orange – higher CIL charges means fewer affordable homes.

The logic behind CIL, initiated by the Labour government and then introduced by the Coalition, is that the cost of new physical and social infrastructure necessary to support development is calculated across a whole authority and then worked back to a per square metre figure for any new development.  It allows developers to calculate upfront exactly what costs they will incur rather than negotiating complicated section 106 agreements as the final chapter of a planning agreement.

My concern is that the level of charges being levied is non-negotiable and is much higher than the affordable housing element of section 106 payments that were rendering new developments unviable. It cannot be clawed back from land values or by raising the prices of private homes being planned. In today’s market, they just won’t sell. The effect is that the viability of a site is threatened and the get-out clause is to take affordable housing out of the development or reduce it substantially. And what is the logic behind CIL being used to fund infrastructure anywhere in a borough – well away from the new development where new infrastructure and community facilities will also be required?

If developers are dazed and confused by the CIL cosh, so are some local authorities. A number of councils have worked it out, with well-informed councillors and officers considering an application and understanding that a development has to be viable. A similar planning application made in Leafy Ward Council is being rejected because the members don’t understand the maths and demand affordable housing as well as CIL.  The result is that applications are going back and forth.

Once more, planning is mired by uncertainty. And the real victims are people who deserve an affordable home in the capital.

This comment piece appears in Property Week and online at: http://www.propertyweek.com/residential/housebuilders-feel-squeeze-as-councils-extract-levies/5047007.article