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Small Scale Developer Contributions

Author: Heather Kershaw

The Community Infrastructure Levy came into force in April 2010. It allows local authorities in England and Wales to raise funds from developers undertaking new building projects in their area. The money can be used to fund a wide range of infrastructure that is needed as a result of development. This includes new or safer road schemes, flood defences, schools, hospitals and other health and social care facilities, park improvements, green spaces and leisure centres.

However, this placed a disproportionate burden on small-scale developers, custom and self-builders.  

The Government subsequently consulted on a series of measures to try and tackle this issue.  The measures included introducing a threshold beneath which affordable housing contributions should not be sought. The suggested threshold was for developments of ten-units or less (and which have a maximum combined gross floor space of no more than 1,000 square metres).

The Government also proposed a similar policy be applied to all residential extensions and annexes. Rural exception sites, which are defined in the National Planning Policy Framework as: ‘Small sites used for affordable housing in perpetuity where sites would not normally be used for housing. Rural exception sites seek to address the needs of the local community by accommodating households who are either current residents or have an existing family or employment connection. Small numbers of market homes may be allowed at the local authority’s discretion, for example where essential to enable the delivery of affordable units without grant funding.’ - would be exempted from any threshold introduced.  The consultation asked whether the threshold should be extended to include the tariff style contributions, which is where some authorities seek planning obligations contributions to pooled funding ‘pots’ intended to provide common types of infrastructure  for the wider area. (The Government also consulted on whether to restrict the application of affordable housing contributions to vacant buildings being brought back into use (other than for any increase in floor space)). This latter proposal was to boost development on brownfield land and provide consistency with exemptions from the community infrastructure levy.

Over 300 responses were received, many of which contained detailed submissions and local data. Following the consultation process, on 28 November 2014 the Minister for Housing and Planning set out changes to the way planning contributions for affordable housing should be collected:

planning obligations for small-scale developments of 10-units or less, and which have a maximum combined gross floor space of 1,000 square metres, affordable housing and tariff style contributions should not be sought. This will also apply to all residential annexes and extensions.

For designated rural areas under Section 157 of the Housing Act 1985, which includes national parks and areas of outstanding natural beauty, authorities may choose to implement a lower threshold of five units or less, beneath which affordable housing and tariff style contributions should not be sought. This will also apply to all residential annexes and extensions.

These changes in national planning policy will not apply to rural exception sites which, subject to the local area demonstrating sufficient need, remain available to support the delivery of affordable homes for local people. However, this does not apply to residential annexes and extensions.

A financial credit, equivalent to the existing gross floor space of any vacant buildings brought back into any lawful use or demolished for redevelopment, should be deducted from the calculation of any affordable housing contributions sought from relevant development schemes. This will not however apply to vacant buildings which have been abandoned.

The Government has only very recently published revised planning guidance to assist authorities in implementing these changes and, currently, some planning authorities in Surrey are now amending their policy documents to take account of the revised guidance and many have already taken effect whereby contributions are not being required for applications where a decision has not yet been made.

By lowering the construction cost of small-scale new build housing and home improvements, the reforms will help increase housing supply.  In particular, they will encourage development on smaller brownfield sites and help to diversify the house building sector.  It was previously perceived that the time and expense of negotiating Section 106 affordable housing contributions on small sites, and the subsequent payments, threatened the viability of small developments and acted as a barrier to the entry and growth of smaller building firms.

These changes to Section 106 policy complement the Government’s wider programme of reforms to get Britain building, including measures to actively support the custom and self-build sector that will help people design and build their own homes, who are exempted from paying the Community Infrastructure Levy.

The Government expects that implementation of these measures to have a significant positive impact on housing numbers by unlocking small-scale development and boosting the attractiveness of brownfield sites. This should provide real incentive for small builders and to people looking to build their own home. They will increase house building and help reduce the cost of such housing. 

Posted on 23/02/2015 by Pam Bowring

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