What is the Community Infrastructure Levy (CIL)?
What forms of development are caught by CIL?
In general, it is payable for the creation of all new buildings or works to an existing building where the net additional floorspace created is 100 sq m or greater (unless the development constitutes a dwelling).
The levy also applies to changes of use where the building has been vacant for over six months in the 12 month period before permission is granted.
The circumstances in which relief from CIL may be sought are very limited and non-negotiable. There are some exemptions which broadly relate to charities, some social housing relief, and Crown land. These are all subject to a series of limitations and controls making it difficult to claim relief.
Relationship of CIL to Section 106 Obligations
CIL is intended to differ fundamentally from S106 Agreements. CIL funds collected are not tied to a specific development or the provision of specific infrastructure. CIL funds can be used flexibly by the LPA to fund pretty much any infrastructure as defined within the Regulations. Whereas infrastructure provision necessary to mitigate the impact of a particular development through S106 Agreements should be used solely for that specific purpose.
In essence, the CIL Regulations are designed to scale back and restrict the operation and use of planning obligations secured through Section 106 Agreements. Fine in theory but only time will tell if this is the case, or indeed we end up with ‘double-costing’.
Why all the controversy?
Amidst the worst economic conditions in living memory, CIL is generally viewed by property developers as a threat to viability. Bluntly, developers can expect a significant increase in the cost of development which limits their returns. In the good economic times CIL may be more palatable. Here and now, it is most certainly not.
The effects on the ground are limited so far, principally because most local authorities have been slow off the blocks to adopt CIL ‘charging schedules’ to impose on developers. However, there are growing signs that more and more cash-strapped local authorities see CIL as a future device for funding infrastructure schemes which were previously thought unviable.
Whilst local authorities can choose whether or not to charge the levy, it is anticipated that by 2014 around half of all councils in England and Wales will be imposing it.
Friend or Foe?
Of course, we should all consider the potential income stream generated by CIL and the flexibility to fund infrastructure programmes across the community rather than merely site/development related. We can all see the wider benefits of this provided it is done in a fair, transparent and consistent way. The problem is that aligning the community infrastructure ambitions of local authorities with the needs of landowners/property developers to make a reasonable return will be extremely difficult to reconcile in practice, and particularly so in the current economic climate.
The ‘timing’ of CIL is simply all wrong. We remain in the grip of an unprecedented economic nightmare. We already have the perfect storm of double/triple dip recession, considerable planning red-tape, s.106 Agreements and lack of bank funding to contend with. Surely common sense should prevail.
The roll-out of CIL on a more widespread basis should be held back at least until we have sustained economic recovery. On current forecasts this could be at least 2014/2015. It could take longer, but so be it. The fact is that without development viability, nobody wins and CIL will be counter-productive for all concerned. We are already seeing this with the existing use of S106 Agreements which are either stalling development indefinitely, or requiring complex and time-consuming renegotiations to make development schemes viable again. Why compound the problem through CIL? Put simply, if CIL is introduced too soon in many areas across England and Wales, it risks further choking off economic recovery.