Plans for a new local infrastructure levy to be paid by developers have been unveiled by the Government.
Proposals announced as part of a 12-week consultation are set to overhaul the current system for funding and delivering affordable housing and infrastructure, whilst presenting developers with a collection of unknowns.
Instead of infrastructure and affordable housing funded by the current system of community infrastructure levy (“CIL”) and section 106 agreements, a new sales value levy will be introduced on most new developments, paid upon the occupation of developments. The new levy will remove opportunities for negotiations between developers and local planning authorities.
Unlike CIL, the new levy would be a requirement on all local planning authorities, albeit with local autonomy over the rates to charge. Large and complex sites will still require s106 agreements for in-kind infrastructure which will then be netted off to reduce the balance of the remaining levy to be paid.
A “right to require” will be given to local planning authorities to the proportion of the levy that is delivered as affordable housing versus cash.
Under the new proposals, councils will also benefit from increases in land value that can occur over the course of development, with calculations made upon completion instead of when planning permission is granted.
Councils will, however, be required to create infrastructure delivery strategies and engage with local communities in order for communities to have more control over how money is spent.
Ros Trotman, Head of Development of Land, said: “This proposed new levy places a great deal of power into the hands of local councils to set rates at the right level for new developments and removing the scope for negotiations.
“With the lack of clarity around the amount of levy required for each development until work is done, developers are unsurprisingly going to be uncomfortable with these new proposals, especially at a time when the construction industry is facing ever increasing costs.
“As such, it is imperative for landowners, housebuilders and promoters to seek out sound advice on the implications the new levy could have on their upcoming projects as well as proactively engaging with communities at an early stage to better understand their anticipated needs.”
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