Consultation on Community Infrastructure Levy further reforms

Transcription

1 A British Property Federation response to: Consultation on Community Infrastructure Levy further reforms Introduction 1. The BPF is the voice of property in the UK, representing companies owning, managing and investing in property. This includes a broad range of businesses commercial property owners, the financial institutions and pension funds, corporate landlords, local private landlords as well as all those professions that support the industry. 2. We are pleased that further reforms to the community infrastructure levy (CIL) are being considered and we welcome the opportunity to comment on the finer details in this latest consultation. We have been fully engaged in the establishment and introduction of CIL, both through BPF members engagement with local authorities in their role as charging authorities, and through our conversations with Ministers and officials over the past few years. 3. We are greatly concerned however that the levy is, in some areas, frustrating growth and development a consequence of CIL that is entirely contrary to the Government s other pro-growth measures that are intended to ensure speed and certainty in the development sector. 4. The proposed amendments in this latest consultation should go some way towards helping resolve some of the most critical issues arising from CIL to date. However, we do have some comments on both the detailed mechanics of the proposed amendments and some other wider observations. Key comments Amendments to the CIL regulations are welcomed, but further changes are required to enable efficient operation of the CIL system. In order to allow large strategic schemes to go ahead, the introduction of an optional Framework Agreement is recommended. CIL charging schedules should be part of the wider plan for an area rather than a stand-alone tariff. The local plan and the local infrastructure plan should be fully integrated in a coherent action plan so as to deliver priority infrastructure, jobs and homes. Any changes to the deadline relating to ending the pooling of s106 contributions for infrastructure and by which charging schedules are to be in place must be announced as soon as possible. The vacancy test must be removed. The levy should generally only be payable on any increases in floor space in refurbishment and redevelopment schemes, provided that planning permission is not required to resume the use of the relevant existing buildings. Exceptional circumstances relief should be based on the merits of the scheme rather than the value of the s106 obligation. There are many other potential reasons why a particular development may be unviable, and these should be taken into account.

2 Other CIL issues Framework for phased developments 5. The consultation contains some proposals that attempt to simplify the process for phased developments. However, large scale multi-phased outline planning permissions that are commonly used for strategic regeneration sites are often very complicated. Indeed, there are often "phases within phases" which make the current regulations regarding phased payments incapable of being operated. A one size fits all approach does not allow for sufficient certainty and often does not have the flexibility to meet the needs of the project. This will seriously impact growth and development at a time when it is crucial. 6. We suggest the introduction of a discretionary option for a developer and a charging authority to enter into a CIL Framework Agreement. In this Framework Agreement (which could be both for multi-phased outline permissions and large scale detailed permissions), the trigger(s) for the payment of CIL should be agreed to reflect the phases on a development by development basis. 7. A process should be established to enable a Framework for Payment to be agreed on larger, phased sites to enable a number of matters to be taken into account in agreeing a phased schedule of liability in circumstances where the strict application of the Regulations would produce anomalous results including: Calculation of CIL on a phase-by-phase basis; Ensuring that CIL is not paid twice on the same development; Enabling CIL liability to be set on outline planning permissions; Enabling CIL rates to be fixed at the time of consent; Enabling site clearance and preparation works to be exempt from the definition of commencement of development; Allowing credit to be claimed against later phases for buildings demolished in early phases; and Allow CIL to be paid on first occupation or at the point when calculation is first practicable. CIL and the local plan process 8. We have long suggested that CIL should be embedded in the local plan process, with an infrastructure list that is evidence-based and tied to, or part of the local plan. In an ideal world, the local plan and the local infrastructure plan should be integrated to form a coherent action plan that delivers priority infrastructure, jobs and homes. Although this could be achieved without Government intervention, it is clear that local authorities often move at a rather slow pace when creating local plans.

3 Tax deductibility of CIL 9. In our original response to the CIL consultation in 2009, we voiced our disappointment that that the Government did not intend to entitle developer-investors to any tax relief for CIL. This is, and will continue to, adversely affect many important developers, including Real Estate Investment Trusts (REITs), institutional investors and other developer-investors, as well as owner-occupiers considering developing their own property, and discourages capital investment at a time when it is badly needed. It is common for developers to treat development as a fixed capital asset and to view it as a long term investment. Both Government and local communities should view that sort of development positively. It is therefore disappointing that more favourable treatment is proposed for the developer who is seeking to make a quick profit by disposing of a development than for the developer with a long term stake in a project. 10. If CIL were treated as an allowable cost for corporation tax and capital gains tax purposes, the developer-investor would still have to make the full CIL payment up front, while relief would only be obtained on disposal of the investment, potentially many years later, when the cost of CIL would be added to other allowable development costs and indexation to reduce the capital gain then arising. That would reflect the way in which expenditure under s.106 obligations is currently treated. Denying tax relief to developer-investors will effectively increase the true, after-tax cost of CIL; it would also reduce the indexation allowance available (indexation relief is intended to ensure that tax is not payable on the increase in value of an asset to the extent attributable to inflation, but it is only applied to allowable costs. So if CIL is not allowable, indexation relief will not apply to it). 11. It is significant that the approach proposed by the Government would represent a change to the detriment of developer-investors as compared to the position today, creating a tax nothing where expenditure is currently allowable for the large and important category of developer-investors. In the light of that fact, we are particularly disappointed that Government has adopted its current stance on this issue without any transparent explanation of the reasons for it or examination of its possible consequences, and without specifically including a consultation question on it. 12. This issue potentially affects REITs, notwithstanding their tax exemption for property investment activities. Many REITs carry out developments on their own account and would typically do so with a long term investment intention. If the relevant asset remains within the REIT s tax-exempt ring-fence, any gain on a later disposal would not be subject to tax, so denial of relief for CIL paid would have no more than a limited, indirect impact. However, there are perfectly ordinary circumstances in which REITs could be affected. In particular, if (i) a development were sold within three years of completion and (ii) the sale were treated as the disposal of a capital asset, any gain would be subject to tax, and any CIL cost would be excluded from the allowable base cost.

4 13. It is thus surprising and disappointing, in the current, extremely challenging environment for development and regeneration, to see the Government bringing forward new policy measures which will discourage development by an important category of developers: those with a long term interest in the project. The deductibility position adopted currently risks imposing a disproportionately high cost (in real, after-tax terms, which is what counts) on developer-investors. The consequences are likely to involve tax planning by developer-investors to put themselves on a level playing field with developer-traders; or less development by those with a long term interest; or less development altogether and it is hard to see what revenue advantage the Government can be assuming it will derive from this poorly-conceived proposal to outweigh those undesirable consequences. 14. We urge Government to accept that, in policy terms, a measure that discourages capital investment is undesirable, particularly in the current financial and economic environment. Government should explore whether HMRC could issue a clear and plausible (non-concessionary) interpretation of the tax rules, for treating CIL as an allowable cost. Alternatively, an amendment to the relevant tax statute is likely to be needed to reach that position. Amendments to the Community Infrastructure Regulations 122 and We welcome the Government s intention to amend the wording in Regulations 122 and 123 in order to deliver greater clarity and help dispel the current confusion. Consultation questions Question 1 - We are proposing to require a charging authority to strike an appropriate balance between the desirability of funding infrastructure from the levy and the potential effects of the levy on the economic viability of development across the area. Do you agree with this proposed change? 16. Yes. We support this proposed requirement. It is a very helpful re-emphasis of the Guidance that was published in December 2012 (and re-issued in April this year, with reference to neighbourhood funding). 17. There should be a requirement in the regulations that a charging authority must strike an appropriate balance between the desirability of funding infrastructure from the levy and the potential effects of the levy on the economic viability across the area. This balance is critical to ensuring that the cumulative impact of policy costs and CIL does not make development unviable. The current regulations place this balance in the hands of the charging authority and the examiner s role is limited to testing what is in effect the opinion of the charging authority with little or no scrutiny of the evidence behind the decision. This proposed change places a new responsibility on the charging authority to provide evidence of their assessment and allows the examiner to reach a view as to whether that balance is correct and will contribute to the delivery of the relevant plan.

5 18. We believe that the charging schedule and the accompanying regulation 123 infrastructure list should be part of an integrated and enforceable strategy to define, fund and deliver necessary infrastructure. Charging authorities should be required to actively demonstrate that their charging schedules are compatible with development plan policy, and will assist its implementation. The guidance accompanying the CIL regulations as amended should state that this evidence should be to the same standard of soundness as evidence supporting local plans, including a consideration of the evidence for affordable housing delivery. The effects of all the charging schedules should be tested on individual strategic sites allocated in the development plan, with lower or zero-rate areas set where necessary. Given the fact that, once set, rates are intended to be non-negotiable, it is fundamental that there is a rigorous process in place to test them beforehand. 19. Neither the primary legislation in the Planning Act 2008, nor the regulations as amended to date, contain specific requirements for the monies raised by CIL to be spent on infrastructure provision. Instead, the rules governing CIL simply prevent (with major exceptions) monies being spent elsewhere. There should be no question that simply passing on levy funds to another agency counts as expenditure CIL monies must be used so that infrastructure is actually be delivered. 20. In order to ensure that a charging schedule will not render developments unviable, we believe that the examiner must be under a duty to check the robustness / soundness of the evidence base. Currently, the evidence used is chosen by the charging authority, and could, therefore, unintentionally miss important elements and influencing factors. We believe that examiners should be able to challenge the nature and content of the evidence out forward by the charging authority. Question 2 - We are proposing to allow charging authorities to set differential rates by reference to both the intended use and the scale of development. Do you agree with the proposed change? 21. Yes; we agree that this is a useful change, given the current evidence of greater viability concerns particularly for larger residential and mixed use developments and the importance of strategic sites. 22. However, there are concerns that this will be used as a policy tool in some areas to target and thereby resist developments for large retail superstores, tall buildings, big offices and student accommodation. In some areas there is some evidence that this is already occurring. In addition, there is potential for geographic, land use and scaled differentials cumulatively being confusing and inconsistent. The revised Guidance will need to make clear how this might work, if it is to be adopted to avoid these intended consequences. Question 3 - Should the period of consultation on the draft charging schedule be extended from at least 4 weeks to at least 6 weeks?

6 23. Yes. We support this proposal, but would propose that the consultation period be extended to eight weeks to accommodate the necessary testing of evidence and analysis required for a meaningful response. Question 4 - Should the regulation 123 list form part of the relevant evidence under section 211(7A) and (7B) so that it is available during the rate setting process, including at the examination? 24. Yes. We fully support all of the elements of this proposal. It is crucial that the regulation 123 list is published at an early stage alongside the preliminary draft charging schedule in order to fully inform the consultation. This should be a requirement under the regulations rather than a discretionary option.if charging authorities are required to provide the regulation 123 list at the outset of the chargesetting process, this should ensure greater clarity and certainty well before, and then at examination. The scope for potential retained planning obligations must also be made clear at this point so that this can be taken into account during rate-setting Very few charging authorities properly assessing the likely balance between CIL and other planning obligations (including s106 and s278 agreements) required to deliver the Local Plan and, importantly, the strategic sites required to deliver that plan. Viability assessments have assumed that s106 obligations can be scaled back without assessing whether strategic sites can still be delivered. 26. In addition to this new requirement, we suggest that the examiner should be able to require the charging authority to make changes to the list, in the same way that the examiner can require modification of the draft charging schedule if it does not comply with the drafting requirements of primary and secondary legislation. This would ensure that infrastructure lists are sound, reasonable, clear and capable of implementation. Question 5 - We propose to amend the regulations so that a new infrastructure list can only be brought forward after proportionate consultation with interested parties. Do you agree that this approach provides an appropriate balance between transparency and flexibility? 27. Yes. It is crucial for investors and developers contemplating a scheme that there is a high level of certainty when assessing the impact of CIL on the viability of the development proposed. Any changes to the regulation 123 list must be appropriately advertised and consulted upon. 28. We believe that it would be helpful for the revised Guidance to prescribe a minimum level of consultation (such as a minimum consultation period and the requirement to advertise the proposed changes on the relevant website), to ensure that the development industry has a chance to engage with any proposed changes. Question 6 - We are proposing to move the date from when further limitations on the use of pooled planning obligations will apply (to areas that have not adopted the levy) from April 2014 to April 2015.

7 Do you agree? 29. Yes. However, our view is that this proposal should be taken a step further and the deadline should be moved further i.e. from April 2014 to April This would allow charging authorities to take a more considered approach to their charging schedules. In particular, the additional time should allow charging authorities to prepare a sound evidence base dealing with balancing infrastructure needs and costs with development viability. It would also allow the development community the chance to engage at the earliest stage and fully with each charging authority, to help try and ensure that the levies are set at sensible rates that will not inhibit development and undermine the growth agenda. 30. The National Planning Policy Framework (NPPF) states that where practical, CIL charges should be worked up and tested alongside the local plan (para 175). It is clear from recent experience that although local plan creation is a time consuming and resource intensive experience, the benefits of planning infrastructure together with policies and allocations for development are so significant that they should be achieved wherever possible. The current statutory CIL Guidance is clear (at paragraphs 11-19) that charging schedules should be based on an up to date plan and up to date infrastructure planning. Many local authorities are reviewing their plans to be consistent with the NPPF and some are still in the process of creating a local plan. It is crucial that each local authority has time to create an adequate, properly tested local plan that addresses infrastructure planning needs too. 31. Following the announcement of neighbourhood funding, the engagement process with developers and prospective applicants is even more crucial, to ensure that the priorities of the parish or town council, neighbourhood forum or local planning authority are clearly understood and the implications of neighbourhood funding are taken into account in the creation of the regulation 123 list. In order for the infrastructure priorities at both levels to be correctly identified, consistent, complementary and potentially agreed upon, the charging authority, the parish/town council/neighbourhood and the development community should all be involved from the outset in the consultation process. 32. The changes proposed in this consultation and those contained in the statutory Guidance published in December 2012 are significant. If the deadline is not extended, there will inevitably be many charging schedules being put in place that do not fully reflecting these changes. The changes are important in order to ensure that sustainable development can continue and its rate can accelerate. It is imperative that any change in this area is communicated to charging authorities as soon as possible after this consultation has closed in order to stop a rush of substandard charging schedules being rushed through examination in advance of the April 2014 cut-off. Question 7 - Do you agree that regulation 123 (excluding regulation 123(3)) should be extended to include section 278 agreements so that they cannot be used to fund infrastructure for which the levy is earmarked?

8 33. Yes. We are delighted to see this proposal included in the consultation, and fully support the Government s intentions to demonstrate the very obvious and indivisible relationship between s278 agreements and the levy through the extension of regulation 123. There has been increasing concern around the potential for doublecharging via both the levy and s278 agreements. However, we do not think that the proposed amendment fully addresses the problem. We believe that this proposal is particularly important as s278 agreements are often not covered in viability assessments and the cost involved can be very significant on some projects. 34. As far as practical, the cost of items funded by way of s278 agreements and the reg 123 list should be known and co-ordinated at the same time. We believe that there would be real benefits in incorporating s278 agreements fully into the CIL regime and that s278 agreements should be fully included in regulation 123. There is no reason in principle for s278 to be used to seek pooled contributions. All pooled contributions should be brought entirely within the remit of CIL and the existence of a separate additional liability should be avoided. Thus s278 agreements should also be subject to the same tests as s106 obligations, as set out in Regulation 122. Changes to the regulations will need to be carefully drafted to ensure compatibility with provisions for payment in kind. 35. Without such provisions, there is no mechanism to prevent double dipping, in terms of direct developer contributions towards highway infrastructure provision via a s278 agreement and via CIL. The concept of CIL is built on the premise of an infrastructure plan required to support the level of development within a plan. Developers contributions towards that infrastructure should not be duplicated and should be clear and transparent. 36. This proposal would have the added benefit of bringing agencies such as highway authorities and the Highways Agency into a closer discussion with charging authorities and developers about the total contributions towards infrastructure and their effect on the viability of development and delivery of the development plan s objectives. Question 8 - Do you agree that, where appropriate and acceptable to the charging authority, the levy liability should be able to be paid (in whole or in part) through the provision of both land and/or on-site or off-site infrastructure? 37. Yes. We strongly support the Government s intention to introduce an extended payment in-kind mechanism. In BPF members discussions with charging authorities on their preliminary draft and draft charging schedules, the authorities have regularly expressed the view that they would like to have the alternative option of accepting infrastructure as an in-kind contribution for the levy. This would involve no change, in principle, from what already happens through s106 obligations. The charging authority would continue to identify, through its planning powers, the infrastructure required in the area (including site specific infrastructure which would probably be included in Local Plan documentation and in the regulation 123 list). Through the development management process (pre- and post-application), it would be agreed that the developer would provide such infrastructure on- or off-site, and the developer would provide it (the same way as currently). The only difference would be that the

9 charging authority would accept the (verified) costs of payment as part / full payment towards the levy liability. 38. Such an approach could also bring wider benefits for local planning authorities; during the s106 negotiation process, they often express a preference for the developer to deliver the infrastructure, with associated planning conditions. This approach allows the developer to be in control of scheme-critical infrastructure delivery, and can have benefits to the public purse in that the public sector can benefit from lower costs. 39. The payment in-kind process should be designed to relieve the burden of infrastructure delivery that is placed on the public sector. It should allow developers, with the agreement of a local authority, to deliver infrastructure which is wholly or partly funded through the levy and then to deduct the value of the infrastructure from their levy liability. This is vital to ensure the timely delivery of infrastructure which is integral to the delivery of the development. This approach also ensures that the impacts of a development are appropriately mitigated in that the delivery of the required infrastructure is guaranteed. Question 9 - Do you agree that actual construction costs and fees related to the design of the infrastructure should be used to calculate the sum by which the amount of levy payable will be reduced, when the levy is paid by providing infrastructure in kind? 40. Yes, in principle. It is crucial that there is complete transparency over the actual costs and fees incurred. Liability will often be triggered and CIL paid before the actual costs of infrastructure are identified, so there will need to be a reconciliation exercise at a later date when the actual costs can be fully identified. We support the proposal that there should be an agreement between the charging authority and the developer, in whatever form they both agree is appropriate, regarding the delivery of infrastructure and the mechanism for this subsequent reconciliation exercise can be addressed in that agreement. 41. The further guidance proposed on process and 'bonds and guarantees is absolutely crucial, and we would be delighted to assist with drafting such guidance, and to give some thoughts to the mechanics of the process. Question 10 - Should the payment in kind provisions be limited to the capital value ceilings as set out in the EU procurement rules currently thresholds of 173,934 for goods and services and 4,348,350 for works? 42. No. We are concerned by the thresholds suggested in the consultation as for many sites they would prevent the infrastructure from being provided. If there is not greater flexibility in this area then the likelihood of large sites being proposed and developed will be significantly reduced they will be providing on-site infrastructure (of wider public benefit) and paying the levy as well, a combined cost that will be prohibitive.

10 On large sites where on-site infrastructure would normally be built and funded by the developer, we consider it absolutely essential that the developer has a right to carry out the works and claim a deduction from their levy liability. 43. This issue does not need to be addressed in the CIL regulations. Under current Government legislation (in the 2010 CIL regulations) in relation to s106 obligations, local authorities need to assure themselves in each case that the relevant conditions are satisfied. There seems to be no reason why there should be any general restriction, in advance, on whether such infrastructure should be used in partpayment of the levy. The case law suggests that procurement is only required if there is a contractual obligation on the part of the developer to deliver the piece of infrastructure. A S106 agreement, because it precedes the delivery of the infrastructure and because it is conditional does not form a contract for EU procurement purposes. The liability to the levy arises prospectively upon, and only upon, the implementation of a planning permission and not in advance of that implementation. 44. The issue seems to be that currently the infrastructure may not be delivered through a s106 agreement and, therefore there is a possibility that provision would be considered as a contract if it was simply to be a payment in kind in lieu of tax. It must be remembered that payment in kind could be helpful in circumstances where an item of infrastructure might meet the regulation 122 test (in part or whole) but also be strategic infrastructure for which CIL might be expected to pay. It is not intended to be a general alternative payment mechanism. 45. We suggest therefore, that regulation 73 (7)b, stating that land transactions must be outside a S106, is removed and not applied it to any revised regulation relating to in kind infrastructure. 46. The use of on-site infrastructure as an in-kind contribution would involve no change in practice from the current process through which developers are required by local authorities, exercising their planning powers, to provide infrastructure on-site. We are therefore concerned that the suggestion that EU procurement regulations impact on in-kind payment of CIL (any more than they do to s106) is not a function of the regulations but would constitute gold plating regulations on which Government has already issued clear guidance. 47. Charging authorities should be encouraged to make their own decisions in relation to whether each particular case requires a competitive tendering process. We have, for many years, discussed with officials the need to clarify this complex area of law. We suggest that there is a need for the revised guidance (rather than regulations) to state that the local authority should consider whether an in kind contribution is affected by EU procurement regulations on a case by case basis. Question 11 - Should all planning permissions (outline and full) be capable of being treated as phased development with each phase a new chargeable development?

11 48. Yes. We fully support this proposal. However, there is a fundamental oversight. The current regulations do not recognise that full planning permissions can cover largescale developments for multiple buildings and phases. In some cases, particularly in urban areas, local authorities may require an application type owing to specific circumstances. Often, an outline application will not be suitable for complex multiphased development; applications for any changes of use have to be made in full, too. 49. Currently, those who have to make full planning applications are at a disadvantage. For a multi-phased scheme the levy is payable in full (for the entire development) upon commencement. The payment of the levy for such schemes does not follow the actual delivery of development. This position imposes a substantial penalty on development and act as a disincentive. 50. Regulation 2(3) should be subdivided between outline and non-outline permissions. We suggest that a non outline planning permission, subject to conditions requiring further approval(s) to be obtained before development, can commence permits or requires development to be implemented in phases if, according to its terms, it provides for the discharge of pre-commencement conditions in stages or within separate periods for separate phases/parts of that development. As noted at paragraph 5 above, the regulations also require further amendment to reflect the way in which schemes permitted under outline permissions are delivered in practice, through a multi-layered phased approach. 51. We believe that the above referred to Framework Agreements should be available to charging authorities and developers to assist in dealing with the practical difficulties in applying the levy to large-scale, complex schemes. Question 12 - Do you agree that the phasing of levy payments will make adequate provision in relation to site preparation? 52. No. The current provisions are a critical brake on growth as the cash flow implications arising from the liability arising from a material operation are serious and prohibitive. Liability should be triggered from the date on which a building which is liable for CIL is commenced (or preferably completed). Question 13 - Do you agree that the regulations should make it possible for a charging authority to re-calculate the levy liability of a development when the provision of affordable housing is varied? 53. Yes, we support this proposal. The levy should be payable at the rate appropriate on the completion of the development, and should allow for both under and over payment of CIL. 54. This amendment will require careful drafting and definitions. We would be more than willing to assist with this process.

12 Question 14 - Should we amend the regulations so that the date at which planning permission first permits development is the date of the final approval of the last reserved matter associated with the permission or phase? 55. No. Regulation 8 already provides for this proposal. The real issue is that is would be more appropriate that the charging schedule rates used in calculating a CIL liability are those that are in effect on the date on which planning permission is granted whether in outline or in full. The date on which a planning permission first permits development will usually be some time after the date of the grant of planning permission (i.e. sometime after a developer has needed to assess development viability and commit to planning obligations, including affordable housing). It is possible that a charging authority could substantially revise its CIL rates within this intervening time period, resulting in a potential increase in liability and therefore increased uncertainty for developers. Making this change instead of the consultation proposal would bring more certainty of future revenue streams to the charging authority, allowing for the sensible and certain implementation of the infrastructure plan. 56. Put simply, CIL should be calculated on the basis of the rates in a charging schedule that is in place on the date of the grant of outline or full permission, creating greater certainty and predictability for developers. 57. We also suggest that a chance is made to regulation 8(6). Under this regulation, a full planning permission with pre-commencement conditions will have its levy liability calculated on the day that the final pre-commencement condition is discharged. In practice, this is onerous for charging authorities to monitor and creates another layer of uncertainty for developers. Regulation 8 should be amended to allow for full planning permissions to have their levy liability confirmed on the date on the decision notice that planning permission is granted. Question 15 - Should we change the regulations to remove the vacancy test, meaning the levy would generally only be payable on any increases in floorspace in refurbishment and redevelopment schemes, provided that the use of the buildings on site had not been abandoned? 58. Yes; the current use test should be removed. However, we are not convinced that the suggested replacement and its basis on abandonment is workable in practice. Case law on abandonment is complex; and we are concerned that the replacement test should not rely upon a planning concept which is uncertain. 59. As a matter of principle, the levy should only be payable on any increases in floor space in refurbishment and redevelopment schemes, provided that planning permission is not required to resume the use of any existing buildings. If this causes grounds for dispute over the use of any existing building, there is a mechanism open to a developer to establish that planning permission would not be required to resume the use of the buildings through the submission of an application seeking a certificate of lawfulness of proposed use or development.

13 Question 16 - We are proposing to amend the regulations so that new applications bringing forward design changes, but not increasing floorspace (other than section 73 applications) would trigger an additional liability to pay the levy but the amount payable would be reduced by the levy already paid under the earlier permission. Do you agree with the proposed change? 60. Yes, we support this proposal. However, it should be taken a step further. The provisions should go beyond design changes and incorporate all new permissions overlaid on existing CIL liable schemes such that any resulting changes in floorspace can be taken into account in amending the CIL liability, either in terms of a net increase or net reduction in floorspace. 61. As the consultation document notes in paragraph 68, new, stand alone planning applications may be lodged to make changes to an existing scheme "prior to or during its construction". It is important that such stand alone planning applications can be pursued at any stage of the planning process without triggering an additional liability, provided that the overall floor space within the development is not increased. If the stand alone planning permission does result in additional floor space being provided, the levy should be calculated using the charging schedule in force at the date on which planning permission for the overall development was originally granted. Question 17 - Would you support giving charging authorities the discretion to apply social housing relief for discount market sales within their local area, subject to meeting European and national criteria? Question 18 - If the social housing relief was to be extended, do you agree the key national criteria for defining the types of affordable housing provided through intermediate tenures, to which social housing relief could apply, should be that: The housing is provided at an affordable rent / price (at least 20% below open market levels); The housing is meeting the needs of those whose needs are not being met by the market, having regard to local income levels and local house prices (either rent or sales prices); and The housing should either remain at an affordable price for future eligible households or, if not, the subsidy (amount of social housing relief) should be recycled for alternative affordable housing provision? 62. Answers to questions 17 and 18 are grouped together. The consultation document suggests that Discount Market Sale (DMS) homes do not currently qualify for social housing relief. It has been the understanding (both on the part of industry and some charging authorities) that affordable housing, including DMS, that meets the 4 tests in Regulation 49 qualifies for social housing relief are already eligible for relief. The proposed changes cause uncertainty prior to their implementation, and would probably reduce their use as some charging authorities will not allow the relief on principle and others will be discouraged by State Aid criteria.

14 63. Affordable housing that meets the four tests in Regulation 49 qualifies for relief as explained in the CLG guidance document on CIL relief. It is critical that the Government clarifies that, contrary to the consultation document, all affordable housing products that meet the four tests qualify for social housing relief. 64. To ensure clarity and avoid any disputes on applications and delays to development, the Regulations should be amended. Extending social housing relief to other DMS products that do not meet the four tests should not be at the discretion of the charging authority. Question 19 - Do you agree that we should amend regulation 49 so that the areas taken into account when assessing eligibility for social housing relief include the gross internal area of all communal areas (including stairs and corridors) and communal ancillary areas (such as car parking) which are wholly used by - or fairly apportioned to - people occupying social housing? 65. Yes. We agree with this proposed amendment. Question 20 - Which of the following options do you prefer (a) remove the requirement for a planning obligation which is greater than the value of the CIL charge to be in before discretionary relief in exceptional circumstances can be provided, or (b) change the requirement so that the relevant planning obligation must be greater than a set percentage of the value of the CIL charge (for example, 80%), or (c) keep the existing requirement? 66. We prefer option (a) and would ideally want it to be introduced. In order to ensure that the need for growth can be satisfied, it is crucial that it is understood that there will always be a number of exceptional sites. 67. We are aware that some charging authorities are taking a very narrow approach to this exemption already, due to unnecessary fears of state aid issues - we do not know of any charging authorities that have an exceptional circumstances relief policy in place. It must therefore be made clear in any guidance that this is a state aid compliant mechanism and should be made use of where appropriate. 68. Regulation 55 already subjects relief to a high level of control. Exceptional circumstances relief should be based on the merits of the scheme rather than the value of the s106 obligation. There are many other potential reasons why a particular development may be unviable the heavy contamination of land, or other exceptional costs arising from a site s specific characteristics, or even that the development may not have an inherently high value, especially if it is incorporating a mix of uses or measures which themselves are of benefit to the local community. Question 21 - Should we introduce a relief from the payment of the levy for self-build homes for individuals as set out above? Question 22 - We are proposing to amend the regulations to reflect the above process and the evidence self-builders would need to provide to qualify for relief from the

15 levy, including provisions to avoid misuse by non-self-builders. Do you agree that this approach provides a suitable framework to provide relief for genuine selfbuilders? 69. Answers to question 21 and 22 are grouped together. Although well intentioned, the practicalities of operating this suggested relief will be immensely complicated, and may well have some severe unintended consequences. There are a number of factors in the suggested approach that are of particular concern: It is proposed that the home must be occupied by the self builder for seven years. This will therefore need monitoring, presumably by the charging authority. If the property is sold within this time frame, the charge will be payable, and will add another layer of searches to the already complex conveyancing process. The proposals suggest a need for documentary proof upon completion. This will be complex and burdensome. Some may be tempted use a company is to purchase the land and acquire planning permission with the intention of splitting the scheme into self build units. Is this CIL evasion? The proposal risks creating a two-tier land market where self builders would obtain a substantial advantage over speculative developers for market land. The higher the local CIL levels, the bigger the self build advantage would be. Question 23 - Should we change regulation 120 so that any comments must be received within 14 days and allow discretion for the appointed person to extend the representations period in any particular case? 70. Yes. We support this proposal. Question 24 - Should we amend the regulations to allow for the review or appeal of the chargeable amount in relation to planning permissions granted after development has commenced? 71. Yes. We support this proposal. Question 25 - Do you agree that changes related to the charge setting process and examination should not apply to authorities who have already published a draft charging schedule? 72. No. We believe that all charging authorities should have to abide by any amendments to regulations that are introduced as a result of this consultation, particularly since many of the proposals are of benefit to charging authorities and others are merely enshrining in regulation the changes that are in the revised statutory guidance. 73. Although it would be preferable for all charging authorities to have to abide by the regulatory changes, in practice, there may be some resistance to this. It should be

16 mandatory for those authorities who have old style charging schedules to review at a suitable (and early) juncture. For more information, please contact: Ghislaine Trehearne Senior Policy Officer Gtrehearne@bpf.org.uk