Pressure has been mounting on the government to reconsider existing measures for capturing land value uplift in England. Much of this pressure has arisen as a result of concerns about the existing mechanisms; the Community Infrastructure Levy (CIL) and Section 106 of the Town and Country Planning Act 1990. The government's 2017 Housing White Paper promised a consultation on this issue.
The cross party Communities and Local Government Committee (CLG Committee) has now launched an inquiry into land value capture to seek opinions on new and existing means of capturing land value uplift associated with new planning permissions and infrastructure developments. The deadline for submissions is 2 March 2018.
This article sets out the headlines to assist developers, landowners and local authorities that may still be deciding whether to respond.
What is wrong with the current regime?
At present, uplift in land value is captured through two existing mechanisms: CIL and Section 106 of the Town and Country Planning Act 1990. Both of these mechanisms have drawn criticism. The Section 106 regime has been criticised for being too burdensome for developers and local councils as a result of its need for bespoke negotiations for each new development; and for its failure to ensure that smaller developments contribute to infrastructure development. These criticisms were in part what led to the introduction of the CIL regime with the Planning Act 2008.
It was hoped the CIL regime would streamline the process of obtaining developer contributions. Although the take-up of CIL has been successful in certain areas of the country, the regime has not worked as hoped. In February 2017, alongside the Housing White Paper, the government published a report entitled ‘A New Approach to Developer Contributions’, which recognised the problems of the CIL regime. The report acknowledged that the regime has not removed the need for Section 106 obligations in the case of large sites and accepted that broad exemptions from CIL meant that in some areas, over 40% of developments are exempt from the regime.
Together, these problems have produced a general belief that private landowners are too often enjoying the uplift in the value of their land that comes from local infrastructure developments, but without having fairly contributed to the cost of those improvements. This belief has led to the following proposals.
What are the government’s proposals?
In its Autumn Budget of 2017, the government re-stated its commitment to launch a consultation with detailed proposals on a number of measures, including:
- removing pooling restrictions on Section 106 obligations in low viability areas or where significant development is planned on several large strategic sites
- speeding up the process of setting and revising CIL to make it more responsive to changes in the market, as well as adopting a more proportionate approach to consultation and making it easier to set a higher zonal CIL in areas of high land value uplift, for example around stations
- allowing authorities to set rates which better reflect the uplift in land values between a proposed and existing use, including the power to set different rates for different changes in land use
- changing indexation of CIL rates to house price inflation, rather than build costs, which should mean CIL rates keep up with housing price inflation and viability issues are therefore avoided
- providing combined authorities and planning joint committees with the power to levy a Strategic Infrastructure Tariff to raise contributions for a small number of projects with wide benefits for the local area, mirroring the approach taken with London Mayoral CIL and Crossrail. This was one of the recommendations of the 2017 CIL report. The other – a local low-level tariff to be applied to virtually all developments to ensure more widespread contribution – is to be consulted on.
It is the government’s aim that the current regime for the capture of land value uplift can be reformed to create a fairer balance for those interested in, and benefiting from, infrastructure development.
What submissions is the CLG Committee inviting?
The CLG Committee is inviting written submissions on four specific points:
- Are current methods, such as the CIL, planning obligations, land assembly and compulsory purchase adequate to capture increases in the value of land?
- What new methods may be employed to achieve land value capture and what examples exist of effective practice in this area, including internationally?
- What are the possible advantages and disadvantages in adopting alternative and more comprehensive systems of land value capture?
- What lessons may be learned from past attempts to capture the uplift in value?
The deadline for these submissions is Friday 2 March 2018.
If you have any queries regarding the land value capture inquiry or possible submissions, please contact Gary Soloman or Laura Fuller.