Infrastructure Levy technical consultation - our response

The Government's proposed 'Infrastructure Levy' ('IL') is what remains of the Planning White Paper (remember that?), with its proposals for a zonal planning system which would have swept away the current development management system. Zonal planning needed a simpler arrangement for securing contributions towards infrastructure and affordable housing which did not rely upon a legal agreement - and IL was the government's answer. It is superficially attractive as it is "non-negotiable" and will deliver "as much" as the current system (or so the claims go).

Zonal planning was abandoned following uproar amongst Conservative backbenchers, but for some inexplicable reason, the IL was retained and included in the Levelling Up Bill. Like many others, we have been grappling with DLUHC's technical consultation on IL, which closes on Friday. I attach our response in the post linked below.

Every discussion I have been involved recently concludes that IL will achieve the exact opposite of its stated aims. The unanimous conclusion is that IL will be more complex than the current system of Section 106 and CIL (particularly at the rate setting stage) and deliver less outputs.

What IL fails to reflect is that development proposals (and the sites on which they are brought forward) are unique. The current system recognises this by setting ambitious affordable housing targets but accepting that those targets will not always be met. LPAs secure the maximum viable proportion of affordable housing, CIL and other planning benefits through site-specific viability assessments. The consultation wrongly characterises this as a process of developers "negotiating their way out" of their obligations. If affordable housing targets were non-negotiable, they would have to be set at much lower levels and probably still render many sites unviable.

IL attempts to 'simplify' the process of securing contributions by taking a proportion of scheme GDV above a threshold (to allow for land costs, construction and so on) as a financial contribution. The issue is that each development has its own viability characteristics that do not lend themselves easily to the structure the government proposes. Even if councils attempt to tailor the levy by having an array of different rates, it will result in many developments being rendered unviable and others providing less than the maximum viable level.

To illustrate the difficulties at the rate setting stage, we reworked some data from a Local Plan viability study undertaken for a London Borough. This indicated that the viability characteristics of development typologies varied so significantly that setting a range of rates that would be sufficiently tailored would be virtually impossible, with significant losses of income as a result. In comparison to the current system, we estimate in this one Borough that IL could yield between 25% and 50% less affordable housing and infrastructure contributions in comparison to the current system.

It might be that government prefers simplicity over revenue maximisation. But at this stage, there has been no assessment of the potential scale of the losses. When the impact is fully understood, the only logical conclusion is that IL should be abandoned and DLUHC should focus its energies on making the current system work better.