CILs, CPOs and You
In the context of both a new government and a new DLUHC Secretary of State, the United Kingdom continues to struggle with defining its Levelling Up ambitions and how best to achieve them. Politicians from across the tiers of Government have long sought the best path forward for the delivery of housing to meet the urgent national need, often conflicting with each other in the process. This ambition has led to the creation of the Levelling Up and Regeneration Bill (The Bill) currently making its way through Parliament. The Bill prescribes changes to town and country planning at large and contains revisions to two less discussed, but nonetheless important, components of planning: the Community Infrastructure Levy (CIL) and Compulsory Purchase Orders (CPO).
What is a Community Infrastructure Levy or ‘CIL’?
CIL is a charge that can be levied by a council on new developments local to them and plays a key role in securing the delivery of infrastructure needed to support new development and residents. The levy applies only to developments that will either create net additional floor space of 100+ sq. m or create a new dwelling where one did not exist previously, or both.
Given that a perceived lack of services and infrastructure underlies a notable amount of public opposition to building more housing, CIL’s importance is perhaps understated.
What is a Compulsory Purchase Order or ‘CPO’?
A CPO is a legal process that gives acquiring authorities in the UK the ability to purchase land and property without the consent of the owner when used to advance the ‘greater public good’.
What is to become of CILs and CPOs? And how might this impact the planning process?
CILs would, under The Bill, cease to exist and would be replaced by the Infrastructure Levy (IL). In addition to the dropping of the word ‘community,’ the new IL would differ in a few notable ways. An IL will be mandatory to charge and will be calculated based on a percentage of the final gross development value (GDV) or the forecast revenue that is anticipated from the developed scheme.
This stands in stark contrast to CILs which are based on the physical floorspace of a development. This shift in basis for the calculation of the levy would present greater uncertainty, as the calculation of the relevant GDV would need to respond to updated estimates of future revenue, estimates that are almost bound to be altered by changing construction costs and inflation.
Furthermore, the IL will apply to material changes of use as well as to new buildings, bringing already permitted development under its remit. These changes represent a ‘give and take’ towards local authorities as they require the would-be chargers to consider a long list of factors in drafting the levy while also allowing them to spend the funds on a wider range of infrastructure than previously allowed with CILs.
Notably, IL revenue would be able to be spent on affordable housing, facilities for emergency services, natural environment improvements and global warming mitigation. While Section 106 (s106) charges would not be done away with under The Bill, the role of s106 would be narrower and more targeted with use only retained as a means to pay the levy in limited circumstances such as the on-site delivery of affordable housing or the delivery of infrastructure that is deemed particularly important to the operation of a site (flood mitigation measures etc).
The Government wants to see a faster, more efficient CPO process. CPOs currently grant all objectors the right to an inquiry however this right would be removed under The Bill, with the relevant Secretary of State instead able to decide whether or not to hold an inquiry. This change will very likely increase the efficiency of the process but will perhaps increase the risk of legal challenges.
Conditional confirmations would be implemented as a result of The Bill, meaning the relevant Secretary of State would be able to confirm a CPO subject to the discharge of certain conditions by a certain date. This added flexibility differs from the current CPO system which only allows a Secretary of State to confirm or reject a CPO at the moment in time of decision making.
In addition to relevant parties being able to postpone a CPO upon coming to a written agreement, the period for implementing a CPO would no longer be fixed at three years; rather a Secretary of State would be able to specify a longer period where deemed appropriate. This would in effect give additional flexibility in the CPO process, an especially useful provision for developers.
Finally, and perhaps most interestingly, CPO changes under The Bill would necessitate the inclusion of the so-called ‘hope value of land in determining how much the obtaining body must pay for it. The open market value of the land in question forms the basis for determining how much the landowner will be paid, and under The Bill this amount would include the value attributed to the land should prospective planning applications be hypothetically granted for it in the absence of the CPO.
The Verdict
The Bill was designed, among other reasons, to increase planning efficiency and give local communities a greater say in their futures; might its proposed changes to CILs and CPOs help achieve this? Changes to the now much discussed planning mechanisms taken at face value would not appear to constitute a significant increase in planning efficiency. Developers would have new considerations to make in determining the viability of potential schemes, namely the calculation of the GDV and potential changes to construction costs, and this uncertainty may slow the development and delivery of schemes. CPOs, in dropping the guaranteed right to an objectors’ inquiry hearing, could lead to costly legal challenges (both in time and money) that could delay timely land acquisition needed for infrastructure delivery.
The Bill has progressed through the House of Commons to Committee, where it currently resides. The jury is still out on whether or not it, and accordingly the aforementioned changes to CILs and CPOs, will ever come into effect, as a result of changes that could be made at the Committee. Additionally, the new PM has not yet indicated whether or not she will support The Bill in its current form with this fact in effect placing a reasonably sized asterisk next to any current analysis. In any case, it will be interesting to see what happens as things progress.
If you are a developer considering what this may mean for you or your projects, we would be happy to have a conversation about it. Please contact our planning communications department via Julian Seymour to hear more.
