Editorial

Citation

Plimmer, F. (2008), "Editorial", Property Management, Vol. 26 No. 5. https://doi.org/10.1108/pm.2008.11326eaa.001

Editorial

Article Type: Editorial From: Property Management, Volume 26, Issue 5

At the time of writing, the Planning Bill is making its way through the British Parliament with much attention being focused on the proposed Independent Planning Commission. Less attention is being paid to the ten clauses in the Bill which introduce a community infrastructure levy (CIL) designed to fund the infrastructure necessary to support the government’s ambitious housing development plans.

The CIL is the outcome of the property industry’s firm and vociferous opposition to the planning-gain supplement which was to have been a tax on the increase in the value of land which resulted from the award of planning permission – a betterment tax.

The CIL is innovative in that, if implemented as proposed (DCLG, 2008), it will be based specifically on the local development needs of a particular local authority area, as evidenced by the development plan. The amount of the levy will relate entirely to the cost of the infrastructure needed to fund those development needs (with some provision being made for regional infrastructure), and the cost will be spread between those proposed sites, potentially on a unit basis.

Thus, CIL will be cost-based and plan-led, but will not be reliant at all on any increase in the value of land which results from the award of planning permission, although that is, of course, its intention. The person bearing the burden of the tax (i.e. the person who will be out of pocket) is to be the landowner (or developer owner), although it is not clear how this will be achieved.

CIL is expected to fund “infrastructure”, defined to include roads, parks, flood defences, schools and health centres and to facilitate the better use of existing infrastructure, for example, by increasing capacity. But affordable housing, which will be included in the definition of “infrastructure”, will continue to be paid for out of s. 106 agreements. Indeed, local authorities can decide not to impose a CIL in their areas at all, but can continue to rely on s. 106 revenue for all their infrastructure needs.

And there is evidence that it can work. Milton Keynes has famously introduced a so-called roof tax or tariff on each property built which goes to pay for the necessary infrastructure. English Partnerships is funding the provision of infrastructure and will be repaid once the tariff is collected (Hayman, 2007). Other local authorities have followed suit, but there is concern that such a system which appears to work well on green field sites, will not be so successful given the additional complications of developing brownfield sites and contaminated land which have not been reflected either in the amount of the levy nor in the process of fixing it. There is also concern about the contractual obligation on the local authority to provide the infrastructure in a timely fashion (Firth, 2008).

There is nothing within the proposed CIL legislation about maintaining the existing infrastructure, some of which is in dire need of repair. The implication is that existing government funding will continue to be made available for existing needs – but will this happen? Given the pressure on the public purse, will CIL be expected to improve existing infrastructure in place of government funding which would otherwise be available? And if so, what about those municipalities with little or no development potential in their area and therefore little expectation of significant revenue from the CIL?

If this is the outcome, then the increasingly poor state of our infrastructure will not get any better (on the contrary), and local communities will see both increased need (as evidenced by new developments) without increased or improved infrastructure – the money can only go so far and the method of fixing the tax is not designed to reflect existing needs.

However, all of this may never happen – at least not for some while. Given the rapidly falling house prices and the current recession affecting the building industry, there seems to be little appetite for development and therefore little incentive for landowners to bring their land forward for development. Even in a period of increasing property prices, the reduction in the sale price of land which the levy is expected to achieve could well reduce the supply of land onto the market, which will increase further the delay in achieving the government’s housing targets.

Of course, being cynical, what is more realistic is that the sale price of the land will be unaffected by the CIL, but that the levy will be absorbed into the costs of production and increase the ultimate sale price to the consumer.

Given the current shrinkage of mortgage products and opportunities, together with the falling house prices, CIL is not being introduced as the most auspicious time.

But the real sting in the proverbial tail comes in the Bill itself – Clause 166 (4) (b) to be precise, under which “… regulations may- (b) permit or require calculation [of CIL] by reference to increase in value arising from permission for development.” So, while CIL as proposed may not be a tax on land values, if these clauses are enacted as originally drafted, the legislation will give government the power to change the basis on which the levy is fixed to the increase in value on the award of planning permission, and presumably will do so if CIL does not operate to its satisfaction. What will that do for the recovery of the housing market and the government’s 3m homes by 2020? Those of us who remember the 1960s and 1970s know!

Frances Plimmer