Market Insight

Community Infrastructure Levy – the challenge of striking the right balance

October 15, 2019

The Community Infrastructure Levy (CIL) was introduced as a fair means by which local authorities could obtain a financial contribution from new developments, to support the improvement of infrastructure in their local area.

This includes things such as schools or transport improvements which are needed to support new homes and businesses.

The contribution is calculated based on the floor area of a new development which has obtained planning permission, and it is sought predominantly from residential development. 

Councils can set their own levies but the amount has to be based on the viability of development within their area, and the calculations are subject to independent scrutiny.

Of the 11 districts in Surrey, 91% have a CIL in place, with the exception of Runnymede and Guildford.

As this table demonstrates, the maximum amount of CIL levied on residential developments across the county since 2013 varies quite significantly.

Varying CIL across Councils in Surrey

For example, Elmbridge and Epsom Councils quote a levy based on a figure of £125 per sq m for new residential development, whereas others charge a significant amount more. 

The amount of CIL charged by local authorities has to be set at a level which will not make development opportunities unviable. 

However, significant additional costs to developers will undoubtedly bring into question whether they, or a landowner, will commit to a housing development opportunity. 

Clearly, there must be a balance struck. 

Councils, need to be able to reinvest back into their communities to enable them to provide vital infrastructure and services to support development, and all that this will bring. 

Developers can benefit from the certainty of Councils having CIL rates in place. It manages their expectations and ensures they don’t have to make unknown contributions which might result from developments where Councils don’t have a CIL in place. 

Striking the right balance

At a time when the Government is encouraging housing to be built to meet the demands of our growing population, care needs to be taken to ensure that we don’t prevent potential development opportunities from coming to the fore. 

Exceptionally high CIL rates run the risk of deterring developers from bringing much needed housing to those places where they may be needed the most. 

This could have a detrimental effect on the level of affordable housing that can be delivered in areas where house prices may already significant, affecting people’s ability to gain access to affordable homes. 

It can also affect landowners who may be forced to accept that their land is potentially worth less than they expected, because they have to take a high CIL into account. 

A balance needs to be struck to ensure that landowners are able to sell their land for a price they recognise as realistic, Councils are able to reinvest into their communities, and developers are able to deliver the housing this country so badly needs. 

At Vail Williams we act for developers, landowners and local councils in relation to their CIL obligations, so we understand the challenges you might face in relation to CIL.

So, whether you are a local authority seeking to implement CIL, or a landowner or developer seeking to understand CIL implications for a potential scheme, our property advisers can provide rounded advice, drawing upon experience from all sides of the fence. 

For more information about CIL and how we can help, don’t hesitate to get in touch with us.