One of the few survivors of the planning reforms from the 2020 White Paper is the new Infrastructure Levy. Following on from last week’s Queen’s Speech and the subsequent publication of the draft Levelling Up and Regeneration Bill, we now have some meat on the bones of the Government’s thinking on the way forward for Developer Contributions.

The original White Paper proposed scrapping the Community Infrastructure Levy (CIL) and Section 106 Agreements, to be replaced by a new flat rate National Infrastructure Levy. It would apply to developments above a certain threshold as a percentage of the future sale value and be applied upon occupation of the development.

The Government has since rowed back, with February’s Levelling Up White Paper indicating that the Levy would be set locally instead. The draft bill says the Levy will still be charged as a percentage of the gross development value of a scheme, above a minimum threshold to reflect build costs and, as expected, be set locally.

Councils will set the threshold for implementation and their own charging schedule, not dissimilar to CIL. However, unlike CIL, it will be mandatory and has the potential to bring in much greater contributions. In London, Mayoral CIL will remain in place, to be applied alongside the new Levy.

Sensibly, the Bill does not spell the end of Section 106 Agreements, although they will be scaled back and implemented only for much larger applications, where delivery of infrastructure integral to the operation and physical design of a site is required.

In terms of detail, there are some interesting proposals designed to safeguard and boost affordable housing provision, most notably a new ‘right to require’ which removes the role of negotiation in determining levels of affordable housing on site and allows Local Authorities to determine the portion of the Levy they receive in-kind as on site affordable homes. In theory, this would allow Local Authorities greater autonomy in affordable housing delivery with no reliance on Viability Assessments.

The Bill will also require local authorities to prepare Infrastructure Delivery Strategies (IDS) to plan effectively for spending Levy proceeds and delivering infrastructure.

Some elements remain unclear, in particular whether these measures will deliver desired levels of affordable housing in practice and how IDS will create joined up infrastructure delivery within two-tier authorities and enable Local Authorities to spend the Levy income more efficiently than CIL money.

Nevertheless, we are now a bit clearer on the Government’s overall approach, with further details to follow. If passed into law, it will be rolled out cautiously over a number of years through a ‘test and learn’ approach, demonstrating that the Government recognises the significant risk of the new model stymying development. Whilst any reform of development taxation will always present a significant risk of undermining regeneration and growth, the societal impacts of this could be especially severe given the projected economic scenarios over the next few years. The Government is therefore understandably not rushing this reform.

Iceni Projects will be monitoring the development of the new Infrastructure Levy and the wider Planning and Regeneration Bill as it comes forward and will be able to advise on how this may affect your project.