LGA submission to the APPG for Housing and Planning inquiry into developer contributions

Councils need a developer contribution system that is transparent, efficient and effective in bringing forward the affordable housing and funding for the strategic and local infrastructure communities need.

Developer contributions should be non-negotiable, and developers should not be able to use viability as an argument to not meet local plan policy requirements.

Councils must be properly resourced to maximise the efficiency and expediency of the developer contribution system. They must have the ability to set planning fees locally where national fees do not cover the full cost of processing applications. 

Section 106 and CIL are well-established and together bring forward a considerable amount of the funding for the infrastructure and affordable housing that communities need. 44 per cent of affordable homes delivered in 2021-22 were funded through S106 agreements, approximately 26,000 homes. Flexibility in setting CIL schedules across the country has resulted in the collection of billions of pounds which have been directed towards many different strategic and local infrastructure priority projects. However, infrastructure funding gaps exist across the country, and many are significant – London alone predicts a £1.3 trillion funding gap.

Viability pressures remain one of the greatest challenges for local authorities trying to bring forward affordable housing units. Despite the amendments made by Government in the Planning Practice Guidance (PPG) for viability in 2019 which stated that the “cost of fully complying with policy requirements should be accounted for in benchmark land value” and that “under no circumstances will the price paid for land be relevant justification for failing to accord with relevant policies in the plan”, councils continue to report that the plan-led system is being undermined by the use of viability arguments to avoid meeting local plan policy requirements. The government should undertake a review on the effectiveness of the amendments made to the PPG in 2019.

We want to see amendments made to the viability system – for example, removing the requirement to factor in an assumed developer or landowner return or removal of viability assessments as a material planning consideration entirely. 

S106 agreements are a vitally important tool in bringing forward affordable homes, and site-specific infrastructure requirements.

S106 agreements by their nature vary for each site, and therefore work well on large or more complicated sites as they allow for phasing and give additional flexibilities to both developers and local authorities. S106 agreements are also transparent for communities and developers, setting out what money will be spent on infrastructure and when.

The speed that S106 agreements are prepared could be improved by the creation and standardisation of a template that removes most of the drafting requirements and gives certainty to developers. The Government should work with local authorities to develop a standard template, which can then be tailored by each council as required.

Changes should be made to legislation which means S106’s should only be amended post negotiation in exceptional circumstances. This would give more power to local authorities to secure the infrastructure and funding required to support development.

The LGA urges Government to remove all national exemptions to the use of S106 agreements, with councils being made able to determine any exemptions at a local level. This would allow councils, with appropriate evidence and justification, to collect funding from or bring forward affordable housing on developments they would not be able to under the current system.

The process by which S106 agreements are negotiated and agreed would be supported by a fully resourced planning system, with local authorities operating with increased capacity and skills. Local authorities have experienced a £15 billion reduction, almost 60 per cent in real terms, to core government funding between 2010 and 2020. Planning departments have faced the highest cut of any service between 2009/10 and 2020/21 with net spending per person on planning dropping by 59 per cent, as councils have had to make difficult spending decisions and route funding to other core frontline services. We welcome the Government’s announcement that planning fees will be uplifted, however councils should be given the power and flexibility to set fees at a local level to fully cover the costs associated with planning, where national fees fall short.

Whilst there are no up-to-date cumulative nationwide figures, CIL collects hundreds of millions of pounds per year across local charging authorities – in 2016/17, £945 million was raised.

However, not all eligible local authorities charge CIL. Reasons vary by councils, but many report that there would be little to no benefit of setting a charging schedule in an area where low land values and poor returns from development may result in unviable schemes, should CIL be introduced. Some do not have sufficient resources or capacity to evidence, implement, undergo examination and monitor a CIL, and others reported that the Government’s consistent amendments to Regulations led to uncertainty. The Government should work with local authorities to understand individual challenges and barriers to CIL introduction. Lessons learnt from such engagement could influence further improvements to the developer contribution regime. 

The CIL Regulations have been subject to regular amendments since they were introduced in 2010. In order to make the system more transparent and user-friendly, these should be streamlined.

National compulsory and discretionary exemptions for CIL cumulatively reduce the amount of funding to invest in critical infrastructure to facilitate development and reduce flexibility for charging authorities to deliver on local needs and priorities. These should be removed, with councils being made able to determine any CIL exemptions at a local level. These include exemptions for self-build homes, of which more than 50,000 permissions have been granted since the introduction of the Self-build and Custom Housebuilding Act 2015. The construction of self-build homes should not be subsidised by the local area, through the forgoing of infrastructure contributions.

CIL Regulations allow charging authorities to borrow against future CIL receipts to deliver infrastructure up front. However, this depends on the Secretary of State (SoS) to set a percentage to calculate the amount of CIL borrowing that is permissible. This percentage is set against the previous years’ receipts and the percentage is currently zero as no direction has been made by the SoS. The Government should set the percentage at a level that is meaningful and would facilitate the delivery of infrastructure.