Here Andrew Harbourne highlights some of the most interesting points contained in the Government's planning gain report, which covers the financial year 2018-2019. There could be a change for developers just around the corner.
A fascinating snapshot of community development contributions from property development is revealed every few years when the Government publishes its report into ‘planning gain. Planning gain is of course, how communities and local authorities benefit from the S106 Agreement/obligations and the Community Infrastructure Levy (CIL). Here I have highlighted some of the most interesting points contained in the recent report, which covers the financial year 2018-2019. There could be a change for developers around the corner.
Those within the sector are already expecting change to the current regulations, if indeed the Government brings in its proposed and sweeping planning reforms. Details of these are contained in its consultation paper, ‘Planning for the Future’, which was published in August. It recommends replacing the S106 and CIL with a new Infrastructure Levy, which would be applied above a certain threshold and at rates set nationally. Watch this space, as I intend to review that in greater detail in the weeks ahead.
However, in the meantime, I would like to take this opportunity to share what I thought to be the most significant facts to come out of the report. There is certainly food for thought here.
There were 22,000 fewer planning permissions granted in 2018-19 compared to the year before and 39,000 fewer than 2016/17.
However, in the financial year 2018-2019, developer contributions went up by 16% to £7bn, whether by cash or in kind (for example, delivering affordable housing). 53% of those were paid in the South East - 5% less than the year before. All other regions saw an increase.
Only about 13% of those contributions were through CIL. The Mayoral CIL was an additional 3%. 66-67% comprised affordable housing required by S106 Agreements and the rest were other forms of planning gain under S106 Agreements.
About half of all local planning authorities (LPA) have adopted CIL and most of those think CIL speeds up the planning process and brings in more money than S106s alone.
There have been big increases in recent years in the proportion of planning gain going to healthcare, transport and education and a big reduction in the amount paid in kind by transfers of land.
Apparently, there is much inconsistency between LPAs as to the amount of planning gain that they demand and what for. The new proposed Infrastructure Funding Statements should create more consistency.
Although CIL brings in only 12-13% of planning gain, it is levied on twice as many sites as those where S106 obligations are required. Smaller sites often don’t trigger expensive affordable housing requirements. Bigger ones do and those therefore require a S106 Agreement.
Developers complain that CIL is not always spent in the area of their development. Local people then don’t see that the development has brought benefits as well as problems.
S106 Agreements are more flexible and site-specific. They lend themselves to bigger schemes. The Report says that larger developers prefer them, partly because they can expect to provide some of the planning gain (e.g. affordable housing and open space) on-site or nearby and thereby gain some positive publicity.
Some smaller developers believe that large developers have an unfair advantage. Big developers with big sites may be able to negotiate lower contribution rates than the smaller developers have to pay via CIL.
It is good to note that affordable housing obtained through S106 obligations has gone up from 13,000 homes in 2015/16 to 28,000 in 2108/19, but so has overall housing supply.
There is much comment in the Report about how long S106 Agreements can take to negotiate, even after the main terms have been agreed. One interesting side effect is that this delay can effectively extend the three-year time limit on a planning permission by many months. The formal planning permission is, of course, only issued once the S106 has been dated.
Pretty much all consultees were pleased that the old restriction on pooling of S106 contributions was abolished in September 2019. Before that, contributions from no more than five S106 Agreements could be pooled. Now there is no limit, LPAs can accumulate adequate cash to carry out substantial infrastructure projects.
The S106 system is thought to be very personal. Too much depends on the experience and attitude of the planning officer and the resources of the developer.
It can take well over two years from signing a S106 for the Council to receive cash contributions or other planning gains. That is a long time for the Council to wait to have the money to be able to mitigate the adverse effects of the consented development.
The report certainly gives us much to digest and, as already stated, change could well be upon us soon. However, whatever that change brings with it, there must always be a balance struck between the freedom of a developer to run their business effectively, providing employment and new homes, and ‘giving back’ to the wider community. Sometimes that can be a difficult balance.
If you require further information, just ask Andrew Harbourne on 01522 515591 or email: firstname.lastname@example.org