New PM Theresa May is believed to be considering paying Community Infrastructure Levy (CIL) directly to local residents in a bid to gain support for new developments, writes property developer Richard Carr.
Is CIL damaging house building?
The news comes after she announced proposals for cash from a scheme to share the proceeds of shale gas revenues to be handed straight to households.
The move is a step away from the first announcement in last year’s Autumn Statement when it was understood that shale revenues would go to community trusts and local authorities.
But Number 10 said that the new government has “changed the consultation to ensure a greater focus on control for local communities – including insisting on proposals to transfer funds directly to households rather than local authorities”.
Property Developer Richard Carr recently spoke out in the Bournemouth Echo about the need to rethink the way that property taxes such as s106 payments and CIL are being implemented, an opinion which is now being shared by an independent panel.
Is development tax a reason for increasing house prices?
The average price of a home in England and Wales has now surpassed £300,000 for the first time ever and Richard believes there are two main factors for this:
Demand outweighing supply
On the first point, he doesn’t understand the government’s current process. Developers are charged large amounts of CIL and s106 by local planning authorities which means that the price of the finished product is increased.
The government has therefore had to introduce a number of Help to Buy schemes to help first time buyers, using money funded by development tax!
Poole-based property developer wants clarification on CIL and s106 payments
Carr believes developers are put off by high taxes involved on developments
A relaxation in taxes would be beneficial for the industry and help the housing shortfall
Community Infrastructure Levy (CIL) and s106 payments are no longer viable property taxes according to Poole-based property developer Richard Carr.
Carr, who has worked in the industry for over 30 years, believes the taxes are seriously affecting the industry and are a factor in the current housing shortage that the country is battling with.
Expanding on the point, he said: “I’m very much for paying taxes and have done all my business life – and I believe property taxes can work and help projects such as social housing and community infrastructure if they are used correctly, however my problem is that I don’t believe they are.
“Community Infrastructure Levy is an outdated tax that developers have become disillusioned with. The line between CIL and s106 payments has become faded and clarification is need from the government to explain why they are in place.”
Currently, ministers are debating new proposals for development property tax and how it will be applied. Planning Minister Brandon Lewis is considering an overhaul of S106 payments and CIL.
Carr added: “I believe they should be abolished for 24 months on condition that the development is started within 12 months from grant; it should only be implemented on Greenfield sites that are inherently cheaper to develop.
“How can it be correct for a developer to pay £385 planning fees on a 500 square foot flat and the same for an 18,000 square foot house?”
Strengthening the presumption in favour of ‘starter home’ developments is one of a raft of changes to be implemented as part of a new national planning policy, writes Development Specialist Richard Carr.
Increasing the density of development around commuter hubs
Supporting sustainable new settlements and helping development on brownfield land and small sites
Helping the delivery of housing allocated in plans
Promoting and aiding the delivery of starter homes
If Ministers get the go-ahead, they plan on introducing a statutory requirement which would see a number of ‘starter homes’ delivered on all reasonably-sized housing developments. Another change would see the widening of low-cost homes to fall within the definition of affordable housing.
As discussed last week by Development Specialist Richard Carr, the government has stepped forward to conduct an independent review into Community Infrastructure Levy.
Review in motion
Richard Carr wants to see an end to s106 and CIL payments
Last week, Richard Carr criticised the development tax for being outdated and preventing economic growth. Former CEO of the British Property Federation Liz Peace will led the government review to assess if the tax is meeting its original objectives of providing a faster, fairer, more certain and transparent means of funding infrastructure via developer contributions.
Ministers will: “assess the extent to which CIL does or can provide an effective mechanism for funding infrastructure, as well as recommend changes that would improve its operation in support of the Government’s wider housing and growth objectives.”
Development specialist Richard Carr has long cited the effect that a lack of resources within local planning authorities (LPA) is having upon the planning system and his beliefs have been supported by a new Royal Town Planning Institute (RTPI) Report.
Staff cuts within planning offices will effect economic growth
The research undertaken by the RTPI found that staff cuts are undermining the planning service. Reports from the North West and Scotland revealed that cuts in planning staff of more than 30% in LPA over the past five years is now undermining economic recovery.
Although this research was based on LPAs in the north of the country and Scotland, Richard Carr believes that similar pressures and restraints are also been placed on staff in his local planning authority in the south of England.
He believes that the country’s ability to deliver homes, schools, hospitals and major infrastructure is being put at risk by the aforementioned cuts.
The association explained that it would like to see the present, outdated policy be replaced with “a more robust and transparent local viability assessment process”.
In the LGA’s submission to the government, they argued that a simplifying of CIL regulations and guidance and the removal of the restriction on pooling s106 contributions for strategic sites identified in local plans.
Property specialist Richard Carr believes that the number of taxes placed on developers is affecting the number of homes being built and is now pleased to see that the Federation of Small Business (FSB) has spoken out about the issue.
Costing the economy
Should CIL be dropped on social housing projects?
A report commissioned by the FSB explains that local planning authorities could be costing small house building firms millions of pounds in revenue. Like Richard, the FSB believe taxes such as the Community Infrastructure Levy should be blocked to prevent viable housing projects not being built at a time when the country has a big void to fill.
Small firms typically take on projects of 10 units of less and compared to larger developments they had significantly higher basic building costs. The FSB’s report found that the council wasn’t taking this into account when working out the level of CIL to be paid by developers.