The consultation on a national Infrastructure Levy (“the Levy”) proposed by the Department for Levelling Up Housing and Communities (“DLUHC”) is due to close this Friday, 9 June 2023.
The Levy will be mandatory and set by local authorities. There will be a process of examination in public of the charging schedules and the DLUHC will be able to intervene in the preparation of charging schedules in certain circumstances. Charging authorities will be obliged to publish an Infrastructure Delivery Strategy. Under the consultation, the DLUHC is seeking input from key stakeholders on the technical aspects of the design of the Levy.
Scope of the Levy
The Levy is a proposed reform to the existing system of developer contributions captured through section 106 planning obligations and the Community Infrastructure Levy (“CIL”)
The consultation envisages that levy rates will be a percentage of the final ‘gross development value’ (GDV) of a scheme above a minimum levy threshold. CIL is payable on most developments which create net additional floor space (above 100 sq metres) and/or create a new dwelling with liability being payable at commencement. Under the Levy however it is likely that a valuation will be required on or before units are sold because the GDV is unknown. This means that when the scheme is commenced, unlike CIL, the final amount payable would not be known.
The DLUHC has said that it is intended that a substantial portion of the value captured through the Levy will be delivered via on site affordable housing and that it will introduce a ‘right-to-require’ scheme to remove the role of negotiation in determining levels of onsite affordable housing.
The DLUHC wants feedback on the extent to which the right-to-require scheme and Infrastructure Delivery Strategy could reduce the risk of affordable housing contributions being negotiated down. Input on the option of charging a discounted/zero-rated levy on high percentage affordable housing schemes is also welcome.
There has already been significant criticism of the right to require scheme from within the housing sector. One consistent criticism is the lack of certainty about the amount of affordable housing the Levy will deliver above current levels which are captured through developer contributions. Furthermore, as units will only be earmarked as affordable once development has commenced, it will be difficult for registered providers to have any input on the style, location and specification of the units.
The extent to which the Levy will overhaul the delivery of development schemes is not yet apparent. As such, more clarity is still required from the consultation before it can be said with any certainty that the Levy will increase the stated aims of efficiency and do away with lengthy section 106 agreement negotiations.