Draft Charging Schedule - Jan 2017

This representation is submitted by Savills (UK) Ltd on behalf of Lioncourt Strategic Land Limited (LSL), in respect of their role as lead promoters of the proposed urban extension at Kings Hill which is allocated for residential led development within the emerging Warwick Local Plan.
It has been submitted in response to the Community Infrastructure Levy (CIL) Charging Schedule which has been published for public consultation by Warwick District Council (WDC) between 16th January and 20th February 2017.
Savills has been instructed to scrutinise the available evidence, notably in respect of infrastructure provision and the testing of viability against both the planning policy requirements and the identified housing land supply. Kings Hill is proposed for allocation as Site H43 within the emerging Warwick District Local Plan.
The objective of this representation is not to oppose CIL; it merely seeks clarity in regard to the proposed rates, based on the evidence and a collective interest to deliver well planned, viable and feasible development in the District.
In submitting this representation, LSL is only commenting on particular key areas of the evidence base. The lack of reference to other parts of the evidence base and the DCS cannot be taken as agreement with them and LSL reserves the right to make further comments at future stages of consultation and at Examination.
This representation covers the following particular areas:
* The proposed DCS strategic residential rates;
* The relationship between Section 106 and CIL;
* The draft Regulation 123 List; and
* The effective operation of CIL (including relief, instalments and review)
We note that the Government has recently published a report by the CIL Review team. This identifies a number of issues with the current system and makes a series of recommendations which the Government proposes to respond to later this year. This includes the abolition of CIL and its replacement with a 'hybrid system' of Local Infrastructure Tariff (LIT) and Section 106 Agreements.
Whilst it is not anticipated that changes to the legislation or Regulations will be made imminently we request that WDC take account of the prospect that a new system is introduced in the future when preparing their CIL.
The Proposed CIL Charges
This representation is concerned with the proposed CIL rates for strategic residential sites allocated within the
Local Plan. WDC propose differential rates for such development by geographical location. The proposed
allocation at Kings Hill is located within Zone D and as a strategic residential development site, would be
subject to a proposed rate of £55 per sq m.
LSL welcome the reduction in the CIL rate for this area from that proposed within the Preliminary Draft
Charging Schedule (£110 per sq m). However, we would still request that full and proper consideration of the
scale of strategic development proposed to come forward to the south of Coventry is given, particularly in
view of its importance for delivery of the Local Plan. This should include an understanding that development
within this area will be affected by the Coventry residential market area in addition to on site strategic costs.
We also have some reservations over the assumptions used by BNP Paribas in respect of strategic
residential build costs. The £12,000 per unit allowance for on site infrastructure is considered to be too low.
Whilst it is stated that this is based on average infrastructure costs on strategic Greenfield sites in the south
east no evidence is provided to support this within the BNP Paribas Study.
It is crucial that the assumption on infrastructure costs is not underestimated as this will have a significant
impact on site viability, and if underestimated across the District, housing supply will be severely
compromised.
Viability is at the forefront of Local Plan and CIL testing. It is therefore important that the Council fully
understands the trade-off that occurs between affordable housing, Section 106 contributions and CIL when
assessing the potential for charging a CIL rate in the District.
The fundamental premise is that to enable delivery, sites must achieve a competitive land value for the
landowner and provide developers the required return on investment, otherwise development will be stifled.
This is recognised by the National Planning Policy Framework1
(NPPF) and is 'in-built' within the CIL
Regulations (as amended).
Regulation 14(1) of the CIL Regulations sets out the key test that the Charging Schedule is measured
against:
"In setting rates (including differential rates) in a charging schedule, a charging authority must strike an
appropriate balance between -
a) The desirability of funding from CIL (in whole or in part) the actual and expected estimated total cost of
infrastructure required to support the development of its area, taking in to account other actual and expected
sources of funding; and
b) The potential effects (taken as a whole) of the imposition of CIL on the economic viability of development
across its area."
The CIL Regulations previously required the Charging Authority to 'aim to strike what appears to the
Charging Authority to be an appropriate balance...' (emphasis added), but the amendments now mean that
the Charging Authority is required to 'strike an appropriate balance'. The onus has therefore shifted away
from being a matter of opinion to a matter of fact.
It is therefore of paramount importance that the proposed CIL rates are supported and consistent with the
viability evidence and that the Council has undertaken sufficient work to demonstrate that the proposed rates
will not put their housing supply at risk.
1 Paragraph 174, NPPF, March 2012
Deliverability of the Development Plan
As discussed above it is critical for the adequate delivery of housing that CIL does not threaten the delivery of
the development plan. This includes ensuring that the trajectories required by those allocations proposed
within the emerging plan are not made unviable.
The NPPF confirms and supports this by highlighting that for Local Plans to be found 'sound', the identified
housing supply should be deliverable within the plan period. Paragraph 137 of the NPPF states:
"Plans should be deliverable. Therefore, the sites and the scale of development identified in the plan should
not be subject to such a scale of obligations and policy burdens that their ability to be developed viably is
threatened. To ensure viability, the costs of any requirements likely to be applied to development, such as
requirements for affordable housing, standards, infrastructure contributions or other requirements should,
when taking account of the normal cost of development and mitigation, provide competitive returns to a
willing land owner and willing developer to enable the development to be deliverable."
The introduction of CIL represents an additional obligation and therefore must be assessed holistically to
establish the combined impact of CIL and existing planning obligations to ensure that the delivery of
development would not be threatened by the introduction of CIL. We have therefore reviewed the identified
housing supply for the District to determine whether the proposed CIL rates would threaten the delivery of
development during the Plan period.
The CIL Guidance2
confirms that Local Authorities must have an "up-to-date" development strategy for the
area in which they propose to charge CIL. In addition, it states that a Charging Authority must be able to
demonstrate how the proposed levy rates will contribute towards the implementation of the Local Plan. This is
not exclusive in approach and stems from the contents of Paragraph 137 of the NPPF.
The emerging Warwick District Plan, which was subject to Examination in 2015 and 2016, plans for at least
16,776 new homes between 2011 and 2029. The revised requirement is borne out of the fact that Coventry
City Council is unable to accommodate the whole of its new housing requirements for 2011-31 within its
administrative boundary and that some provision is being made in adjoining areas to help meet its needs.
To address this WDC has proposed the allocation of land to the south of Coventry within the emerging Local
Plan. This includes the allocation of land at Kings Hill for 4,000 dwellings, with 1,800 of these to be delivered
within the plan period. The strategic nature of this site, and the fact that it is fundamental to the delivery of the
overall strategy means that it is essential that sufficient viability testing has been undertaken at this stage in
the process.
Large, strategic sites require a significant amount of land to enable them to deliver on-site infrastructure, such
as public open space, suitable alternative natural green space, education facilities and highways
infrastructure. The Council should therefore take steps to ensure that the CIL charges are set well below the
margins of viability to ensure that they do not threaten the delivery of the identified housing need. An
argument supported by the CIL Guidance, which states that "charging authorities should set a rate which
does not threaten the ability to develop viably the sites and scale of development identified in the relevant
Plan.
It is also the case that the large strategic sites are inevitably the more complex and challenging to plan and
deliver than smaller developments. They frequently involve a number of landowners and often have a
patchwork of developers/promoters working on a consortium basis.
Given the timescales and phasing which would inevitably be a part of developing a site of this strategic scale,
it is important that CIL is considered in the round across the entire land in the Consortium's control. The
complexity that goes hand in hand with large strategic sites therefore requires careful consideration of both
infrastructure funding and delivery mechanisms.
2 Paragraph 010, Reference ID: 25-010-20140612. PPG Guidance on CIL.
Regulation 123 List
The Community Infrastructure Levy (Amendment) Regulations 2014 require the Regulation 123 list to form
part of the evidence base (Regulation 14 (5)).
Warwick District published a Draft Regulation 123 List in January 2015 as part of a 'first' round of consultation
on the Draft Charging Schedule however this has not been updated and published as part of the current
stage of consultation. This is unfortunate, not least because they serve as a useful guide as to the direction
that the Charging Authority envisages taking in providing for the delivery of infrastructure to support the Local
Plan. It is essential that there is an appropriate opportunity to comment on this in respect of the CIL rates
which are proposed.
Under the CIL Regulations, the Regulation 123 list should only include infrastructure necessary to deliver the
objectives set out in the development plan. Infrastructure specific to a development therefore should not be
included on this list, as set out in the CIL Guidance which states:
"Charging authorities should work proactively with developers to ensure they are clear about the authorities'
infrastructure needs and what developers will be expected to pay for through which route. There should be no
actual or perceived 'double dipping', with developers paying twice for the same item of infrastructure."
Allied to the above, we wish to stress to Warwick District that any projects that are classified as infrastructure
on the 123 list will not be able to be funded by Section 106 contributions, where more than five are required
to be pooled or have already been secured since April 2010. Indeed, after the CIL Charging Schedule is
published (or after April 2015), no more than 5 developments can make S106 contributions to one piece of
infrastructure:
"At no point no more may be collected in respect of a specific infrastructure project or a type of infrastructure
through a section 106 agreement, if five or more obligations for that project or type of infrastructure have
already been entered into since 6 April 2010, and it is a type of infrastructure that is capable of being funded
by the levy. Where a section 106 agreement makes provision for a number of staged payments as part of a
planning obligation, these payments will collectively count as a single obligation in relation to the pooling
restriction" (PPG Paragraph 99, Reference ID 25-99-20140612).
This is important as a single development and Section 106 agreement can have more than one obligation in
relation to a type of infrastructure and as such restricts the Council's ability to pool obligations.
In the absence of an updated Regulation123 List it is unclear whether WDC fully understand the implications
of Section 106 pooling post-CIL and its impact on its intended delivery mechanism for vital infrastructure in
the District.
We therefore recommend that WDC produces a draft Planning Obligations SPD document to set out how CIL
and Section 106 will work alongside one another on all sites. This will provide certainty to the development
industry and ensure that no 'double-dipping' occurs. This should be prepared in conjunction with the draft
Regulation 123 list to ensure that no items included on the list are items that the Council anticipates wanting
to collect through Section 106.
In preparing this document, we would advise that the Council has suitable regard to the provisions of
Regulation 122 of the CIL Regulations which states:
"A planning obligation may only constitute a reason for granting planning permission for the development if
the obligation is -
(a) necessary to make the development acceptable in planning terms;
(b) directly related to the development; and
(c) fairly and reasonably related in scale and kind to the development."
We would therefore ask that WDC review and update their Draft Regulation 123 lists in light of the above to
ensure that those items anticipated to continue to be sought through Section 106 obligations are not included
on the Regulation 123 list. This should then be published for consultation.
Effective Operation of CIL
Despite the narrow scope of the Examination, we urge WDC to make clear at the earliest opportunity, the
supporting documentation needed to operate CIL and to make it available for consultation, particularly the
Regulation 123 List.
Practically, this needs to be done as soon as possible, so that participants and stakeholders are able to
comment on the effective operation of CIL. Whilst this supporting information is not tested at Examination,
this information is critical to allow for the successful implementation of CIL and to demonstrate that the CIL
has been prepared positively and supports sustainable development.
Relief
It is noted that CIL Regulations 2010 allow for specific exemptions from CIL for certain forms of development.
In addition, under these Regulations, charging authorities also have discretionary powers to provide relief in
exceptional circumstances.
The Warwick District CIL Charging Schedule proposes that where a developer can clearly demonstrate that a
CIL Charge will impact on scheme viability and that the scheme can clearly deliver sustainable development,
then the Council may consider the case for exceptional relief on a case by case basis".
LSL welcomes the Council's stance in understanding that there may be legitimate viability concerns that
would otherwise impede the delivery of housing. This should be a factor in the consideration of a CIL rate for
strategic residential sites such as Kings Hill, for which the delivery of the emerging Local Plan depends on.
Instalments
We note that WDC state that they are prepared to accept payment of CIL in instalments (depending in the
total amount of the liability). WDC state that details of the instalments policy will be determined prior to
adoption of CIL.
BNP Paribas have modelled instalment policies of 3 payments for all sites regardless of size. We request
further clarity as to the extent this reflects current WDC policy, as if in some of the cases there will only be
one instalment, this may adversely affect the residual land value, which will impact on the viability of the
schemes, and thus the proposed CIL rates to be charged. This is particularly relevant to the strategic
allocation proposed at Kings Hill.
Ultimately, developer cashflow is an important consideration, notably in respect of upfront infrastructure costs
typically associated with strategic development. The Instalment Policy should aim to reflect, as closely as
possible, the timing of delivery of the development, to ensure that the CIL does not put unnecessary pressure
on cashflow and viability.
Review
The CIL Guidance states that charging authorities 'must keep their Charging Schedules under review'3 to
ensure that CIL is fulfilling its aim and responds to market conditions. The Consortium therefore requests that
regular monitoring is undertaken by WDC to ensure that any detrimental impact of CIL on housing delivery is
noticed promptly and remedied. A review period of between 2-3 years from adoption, or sooner if there is a
substantive change in market conditions or Central Government policy, should be publicly committed to by
WDC.
3 Viability Testing Local Plan (June 2012), Page 44
Conclusion
This representation has been submitted by Savills on behalf of Lioncourt Strategic Land Limited to influence
the Draft Charging Schedule (DCS) proposed by Warwick District Council. Our client's particular comments
relate to the rates for strategic residential development, in the context of land they are promoting within the
emerging Local Plan at Kings Hill.
As outlined at the start of this letter, the above observations are set in the context of the key points for
consideration as part of the CIL Examination process permitted by the Statutory CIL Guidance4:
We trust these comments are helpful. To assist, our client would welcome further dialogue with Warwick
District Council and, where appropriate, their advisors BNP Paribas to discuss our observations.
We reserve the right to provide comments in connection with a Draft Charging Schedule (DCS) and to be
notified when:
* the DCS is submitted to the Examiner in accordance with Section 212 of the PA 2008;
* the recommendations of the Examiner and the reasons for these recommendations are published; and
* the Charging Schedule is approved by the charging authority.