Developer contributions – significant changes to regulations

Developers may be asked to provide contributions for infrastructure in different ways. Planning obligations, known as section 106 (s106) agreements are legal obligations entered into to mitigate the impacts of a development proposal. Developers may also contribute towards infrastructure by way of the Community Infrastructure Levy (CIL) which is a fixed charge levied on new development to fund infrastructure and intended to address the cumulative impact of development in an area.

The Community Infrastructure Levy (Amendment) (England) (No. 2) Regulations 2019 came into force on 1 September 2019. The amended regulations make changes to how CIL is charged, collected and reported and seeks to clarify the relationship between CIL and s106 contributions. The Government have updated the national Planning Practice Guidance on Community Infrastructure Levy and Planning Obligations to reflect the amended regulations.

The amended regulations follow an independent review of CIL which concluded that the present system of developer contributions was too complex and uncertain and recommended to Government that CIL be replaced with a low-level Local Infrastructure Tariff combined with s106 agreements for larger developments. The Government has not pursued this and instead has amended the current system. Nevertheless, these amendments will result in significant change to the way developer contributions can be used to fund infrastructure.

The key changes

  1. Planning authorities were previously not allowed to pool more than five s106 obligations to fund a single infrastructure project. This pooling restriction has been removed.
  2. The CIL ‘Regulation 123’ List has been removed. Planning authorities can now use CIL and section 106 obligations to contribute towards the same piece of infrastructure, subject to three planning tests (Regulation 122) to ensure that s106 contributions are necessary, reasonable and directly related to the development.
  3. Guidance clearly distinguishes between the purpose of s106 obligations to mitigate site-specific impacts and CIL which can be used to address the cumulative impact of infrastructure in an area. Typically, s106 health contributions have not been sought from individual developments where ‘health’ was identified on an authority’s Regulation 123 List. The removal of the Regulation 123 List will remove this obstacle. 
  4. CIL Regulation 123 Lists will be replaced by an infrastructure funding statement (under Regulation 121A) which identifies the infrastructure required to support development in an area and how it will be funded, using CIL, or s106 obligations, or a combination of both. The first statement should be published by 31 December 2020.
  5. The infrastructure funding statement should also include details of how much money has been raised through CIL and s106 obligations and how it has been spent.
  6. The scale of s106 obligations is influenced by development viability. Previously viability was assessed as part of the planning application. Now, viability is assessed at the local plan stage and viability assessments submitted with a planning application should be based on the plan evidence.

    A briefing note on the impact of the changes can be viewed here.

Reforming developer contributions – proposed Government measures

It is widely recognised that the current system of developer contributions (section 106 obligations and Community Infrastructure Levy) is too complex and uncertain. In May 2018, HUDU responded on behalf of London NHS Clinical Commissioning Groups to the Government’s public consultation on reforms to developer contributions. The Government has responded to the consultation and has proposed measures which reflect some, but not all, of the recommendations of an earlier independent CIL Review (A New Approach to Developer Contributions) which was published in February 2017.

A number of measures will require new guidance and amendments to the Community Infrastructure Levy Regulations 2010, and the Government will consult on draft amended regulations in ‘due course’.

HUDU has prepared a briefing note which summarises the key measures and comments on the Government’s response to the public consultation and the need for further reforms as advocated by the CIL Review. The briefing note can be viewed here.

There is a tension between removing planning restrictions to increase the supply of homes and ensuring that the impact of development on infrastructure is adequately addressed. Permitted development rights, such as allowing offices to be converted into residential use without the need for planning permission can also lead to poor quality homes, built in the wrong places. The Town and Country Planning Association has recently launched a campaign ‘Room to Breathe’ urging the government to reconsider permitted development rights.

Draft new London Plan examined

From January to May 2019, the draft London Plan was examined in public by independent inspectors. The new plan will provide the policy framework to shape how London evolves and develops over the next 20-25 years. In response to projected population growth, the draft plan aims to increase the supply of new housing from 42,000 to 65,000 new homes in London each year with a strategic target of 50% of all new homes being affordable. In many London boroughs higher housing targets will place additional pressure on existing infrastructure, including healthcare. Underpinning the draft plan are six ‘Good Growth’ policies, including a policy framework to create a healthy city which aims to help improve Londoners’ health and reduce health inequalities.

In 2017, HUDU contributed to the drafting of the new policies during an informal consultation stage. In early 2018, HUDU, on behalf of London NHS Clinical Commissioning Groups (CCGs), responded to a public consultation along with other NHS organisations. The examination provided a further opportunity to refine the policies ensuring that sufficient priority is given to health infrastructure needed to support housing growth and to ensure that the plan policies consistently and collectively help create a healthy city. Further information on the examination and the next steps can be found here.

The draft Plan was examined against the old (2012) National Planning Policy Framework. A new Framework was published in July 2018 following consultation. HUDU has produced a briefing note on the new Framework which can be viewed here.

Consultation on a revised National Planning Policy Framework and developer contributions

The Government are consulting on a revised national planning policy framework and reforms to developer contributions.

The National Planning Policy Framework is six years old and the revised framework focuses on proposals to speed up the delivery of new homes. Overall, the revised policy framework is more prescriptive requiring local authorities to plan positively and quickly to meet housing needs, review policies every five years, agree plans with neighbouring authorities and make more effective use of brownfield land. A housing delivery test to scrutinise local authority performance and a proposal to shorten the time limit to implement planning permissions to less than three years aims to ensure that more planned homes are built.

The revised policy framework proposes:

  • minimum densities for housing development in town and city centres and around transport hubs
  • to require local authorities to allocate at least 20% of their housing supply from small sites of 0.5ha or less
  • broaden the definition of affordable housing to include 10% of homes on major sites as affordable home ownership. Housing for essential local workers, including NHS staff, is also added to the definition.
  • to make best use of land by permitting housing on retail and employment land and, in future, upwards extensions on existing sites to create new homes, but bypassing a requirement for developer contributions for infrastructure
  • to include both non-statutory and statutory consultees in pre-application consultation to resolve issues, such as affordable housing and infrastructure requirements and to secure good design
  • to deliver a range of housing, but no extra emphasis on the need for housing for older people.
  • to continue to promote healthy and safe communities proposing that policies and decisions should consider the social and economic benefits of estate regeneration and additional recognition of the role that planning can play in promoting social interaction and healthy lifestyles.
  • to promote sustainable transport and require authorities to identify additional development opportunities arising from strategic transport infrastructure investment.
  • that plans should set out a clear design vision and expectations, supported by tools and checklists, including Building For Life.

The Government is also consulting on changes to developer contributions in response to an independent review of the Community Infrastructure Levy which was published in February 2017.

In the short term, it proposes to:

  • simplify consultation requirements for setting and revising a CIL charging schedule and to align it with the local plan process when assessing infrastructure needs and development viability.
  • remove the section 106 pooling restriction in areas that have adopted CIL or where significant development is planned on several large strategic sites
  • allow CIL charging schedules to be set based on the existing use of land to capture increases in land value
  • remove regulatory requirements for Regulation 123 lists and require the publication of Infrastructure Funding Statements
  • allow strategic local authorities to introduce a Strategic Infrastructure Tariff to help fund or mitigate strategic infrastructure, citing the success of the Mayoral CIL in London to help fund Crossrail.

In the longer term, the Government will explore the option of a national, non-negotiable developer contribution tariff for affordable housing and infrastructure. The independent CIL Review recommended that the Government should replace CIL with a low level Local Infrastructure Tariff (LIT) with section 106 agreements for larger developments.

The consultation ends on 10 May 2018 and the Government intends to produce a final version of the policy framework this summer. Further details on the consultation can be found here.

New London Plan: draft for public consultation

The Mayor of London has launched a consultation on his new London Plan which sets the planning policy framework to shape how London evolves and develops over the next 20-25 years.

The population of London is projected to increase by 70,000 each year, reaching 10.8 million in 2041. In response to this population growth, the draft plan aims to increase the supply of new housing from 42,000 to 65,000 new homes each year and sets a strategic target of 50 per cent of all new homes being affordable. It introduces new borough housing targets. Most boroughs will see their targets increase, but the largest increases are in outer London which, if delivered, will place additional pressure of existing infrastructure.

Underpinning the draft plan are six ‘Good Growth’ policies which seek to ensure that growth is sustainable, is supported by sufficient infrastructure and benefits all Londoners. One of the Good Growth policies aims to create a healthy city which will improve Londoners’ health and reduce health inequalities. It advocates the use the Healthy Streets Approach to prioritise health in all planning decisions and requires that the potential impact of development on the health and wellbeing of communities is assessed, for example through the use of Health Impact Assessments.

Other key policy requirements include:

  • Support for NHS service and estate transformation and the delivery of new or enhanced infrastructure, advocating the use of the HUDU Model to help calculate costs and developer contributions.
  • Introducing polices for new growth corridors (Crossrail 2, Elizabeth Line, HS2, Trams Triangle in South London) which extend beyond London’s boundaries
  • Making better use of land by maximising housing density, with new minimum housing space standards
  • Annual borough benchmarks for specialist older persons housing
  • Guidelines for increasing green infrastructure, delivering 50 per cent green cover across London
  • Promoting active travel, including doubling the current amount of cycling provision in many new developments
  • Commitment to make London a zero-carbon city by 2050
  • Restricting new takeaways within 400 metres walking distance of an existing or proposed school

HUDU has contributed to the drafting of the new policies during the informal consultation stage and will be responding to the draft Plan on behalf of London CCGs. Further details on the consultation can be found here.

HUDU Model Update

The HUDU Planning Contributions Model (the HUDU Model) provides a standardised and transparent approach to help calculate potential developer contributions and plan for future health infrastructure requirements. Its use is advocated in the draft London Plan.

We have refreshed the model by updating the default data on population projections, housing completions, health activity and build costs. The model can be used to assess the impact of single developments and the cumulative impact of housing and population growth in an area. In addition to GLA and ONS population projections, users are now able to manually add a population projection profile.

More information on the model can be found here