Member Article

At what level of charge, is the Community Infrastructure Levy fit for purpose?

The property industry is under pressure to meet the Government’s ambitious new home targets, yet at the same time, the high costs of the Community Infrastructure Levy (CIL) imposed by Local Authorities will hinder housing developments.
Scott Winnard, Partner at Bruton Knowles reflects on why the CIL has come under fire from the property industry.

The CIL is described as a planning charge with the purpose to help Local Authorities to deliver infrastructure projects. In a nutshell, when a developer builds homes, a local council has the option to impose a levy on the development, which will help to fund existing community infrastructure in that area, such as schools or roads.

While the Community Infrastructure Levy has been around for a number of years, some local authorities are only now starting to adopt it. Tamworth Borough Council introduced the levy on 1st August 2018, while Gloucester City Council, Cheltenham Borough Council and Tewkesbury Borough Council have plans to implement the levy later this year.

For instance, developments of 11 units or more in Tewkesbury and Cheltenham could see an extra cost of £200 per square metre. Shockingly, this means that a 250 square metre house could have an additional £50,000 tagged on to the cost. Because house prices are generally lower in Tewkesbury than in Cheltenham, this is likely to be far more noticeable.

In layman terms, this means that in Tewkesbury, a developer is going to see less of a return on investment from developments in locations where house prices are lower. This is because the local authority’s CIL cost has to be paid no matter how much or where the house is. Surprisingly, neighbouring authorities Malvern and Wychavon are £40 per metre square. It is a postcode lottery.

In the future, we may see a concentration of new housing schemes in high value areas, so the house values can absorb the high CIL costs. Some developments could even end up being scrapped or severely delayed, especially in areas where house prices are lower.

At a time when the Government has targeted one million homes to be built by 2020, this means the levy, which is meant to support future housing including affordable housing, is in fact a hindrance when the CIL is set too high. Now is the time for authorities to assess what benefits it does bring and adjust where necessary by discretionary policy.

Only then, will the industry be able to meet the growing demand for affordable homes across the country.

This was posted in Bdaily's Members' News section by Rebecca .