A significant change in the Levelling Up and Regeneration Act (LURA) comes in Part 4, with the introduction of the Infrastructure Levy (IL) – described as a non-negotiable levy which enables local authorities to raise money from development to regenerate their areas through infrastructure.
On the face of it, IL could be forgiven for sounding very similar to the Community Infrastructure Levy (CIL), which was introduced by the Labour Government through the Planning Act of 2008.
There are some notable differences, however, in terms of how it is levied and what it will fund. For example, rather than calculated as a charge per square metre, IL would be levied as a percentage of the end value of a scheme. Unlike CIL, IL would also directly fund affordable housing, and it would be mandatory for all local authorities.
With the exception of London’s Mayoral CIL and Wales, CIL's days are numbered. Its revocation is perhaps unsurprising following years of speculation and numerous reviews by the Conservative Government. That said, for all of its critics, the general sentiment towards CIL seems to be a case of better the devil you know. This is possibly even more so the case because alongside replacing CIL, IL will also, by and large, replace Section 106 with such legal agreements only to remain for “large and complex sites”.
Indeed, the overwhelming industry reaction to the Technical Consultation on IL undertaken earlier this year was one of concern. A letter issued to the Government in June 2023 with 30 signatories, including the Homes Builders Federation, British Property Federation, GI5, Royal Town Planning Institute, Chartered Institute of Housing and Shelter raised various concerns, including that:
- IL will make the provision of affordable housing and mixed and balanced communities harder than the existing system.
- The upheaval of a new system and the time that it would take to roll out would create prolonged uncertainty across the planning system, stifling efforts at a time when the need to build more affordable housing and infrastructure is pressing.
- IL charging schedules would be significantly more complex than CIL ones and would be difficult for under-resourced local planning authorities to develop.
- The financial risk of borrowing against future levy proceeds when the final amount is uncertain is too big for planning authorities to take.
The Government has yet to publish its response to the Technical Consultation, although with the exception of some amendments during parliamentary ping-pong ahead of the Royal Assent of the Act, mainly to provide greater assurances around affordable housing delivery, it has not wavered in its track to overthrow the current system and imprint IL on the statute books.
And importantly, as with many components of the Act, secondary legislation on IL is required before it comes into force, so the precise detail of how IL will work in practice is awaited, as well as who will be the “test and learn” local authorities as indicated in the Technical Consultation. With no clarity on timing and potentially significant changes to viability as a result of the move to fix the levy as a percentage of the end value of a scheme, there is naturally going to be nervousness across an already jittery industry to the point where some developers may even consider pushing forward with opportunities to guarantee the relative certainty that comes with the status quo of CIL and Section 106.