Viability work is important to me, so the proposed ‘Infrastructure Levy’ (IL), a component of the ‘Levelling Up and Regeneration Bill’ is of considerable interest.
Questions remain concerning delivery and the end outcomes of the proposed levy, and I post this to inform my connections and to hopefully create discussion.
In summary, IL is a tax on development schemes (but incudes change of use and works to existing buildings), based upon a percentage of a scheme’s ‘Gross Development Value’ (GDV).
The mandatory Levy will replace CIL and the majority of S106 agreements (although these may remain for larger schemes), with Local Authorities (LAs) preparing charging schedules. Additionally, LAs will be required to prepare an “Infrastructure Delivery Strategy’ for their respective areas detailing how levied monies will be directed.
The Levy will be utilised for the replacement, operation, and maintenance of infrastructure. Infrastructure encompasses highways, education facilities, medical facilities, recreational facilities and most significantly funds to deliver affordable housing.
The Governments rationale for implementing IL, is in their words to: -
“Ensure that developers pay their fair share to deliver the infrastructure that communities need”
Moreover, IL it is hoped will address the perception that S.106 agreements cause delay, are burdened by bureaucracy and that the associated viability testing is inconsistent.
Concerns
The first concern relates to ‘Charging Schedules’, and the setting of appropriate rates. Rates that that are too high have potential to render marginal developments undeliverable. This may be especially acute in less prosperous areas, where improved infrastructure and housing are much needed.
Viability currently acts as a ‘safety valve’, allowing problematic schemes to come forward; the proposed levy currently has no flexibility in this regard.
A further major concern is the capacity of the levy to deliver affordable housing. Fears have already been expressed by several housing bodies that the levy will result in less provision of affordable housing.
Are Local Authorities best placed to deliver affordable housing? This would require a big step up, with few LA housing companies or partnerships already in place.
Currently, the Bill is somewhat vague in terms of the delivery of affordable housing. Mention is made of the “right to require” on site affordable housing, with a proportion of the levy received in kind as ‘on site’ affordable homes, but little other detail is forthcoming. Where this is not the case, would LAs have to compete with housebuilders to acquire land to deliver affordable homes? This would be a very poor outcome.
Timing of the payment of the levy remains somewhat loose, as this is currently linked to a ‘completed development’, but it is undefined as to whether this could encompass phases of development. Furthermore, this would directly affect the delivery of affordable housing and infrastructure, although there is the emerging suggestion that LAs could borrow against future receipt.
Hopefully the current consultation, will provide greater definition and resolve some of the concerns
