S106, Developer Contributions & Delivering Infrastructure - PowerPoint Presentation

Slide1

S106, Developer Contributions & Delivering Infrastructure

Steve Dennington

Plan Making Team Leader (Deputy Service Head – Spatial Planning)

LB

Croydon

Chair

ALBPO London – Development Plans Slide2

S106 Origins

The history of various compensation and betterment laws is not a happy one, as generally they have not been successful. The main milestones have been:

The

Uthwatt

Committee into compensation and betterment (1942)

The 1947 Planning Act, introduced a development charge to capture planning gain – abolished by the 1954 Town and Country Planning Act

Compulsory Purchase Act 1965 introduces compulsory purchase provisions

Town and Country Planning Act 1971 – introduced S52 agreements (now S106 of 1990 Act)

Community Land Act 1975 allowed for the taking into public control of development land

Development Land Tax Act 1976 attempted to tax development value from landSlide3

S106 Rules

Statutory

tests (

Reg

122 of 2010 CIL

Regs

as amended):

Necessary to make the development acceptable in planning terms

Directly related to the development

Fairly and reasonably related in scale and kind to the development

What

they can do:

Mitigating harm (eg highway works or education & health contributions)

Compensating for loss (eg public open space and play equipment)

Properly controlling the development (eg securing social housing

element)

Relationship with CIL:

Regulation 123 List of infrastructure items

Pooling restrictions (post March 2015 from

2010 )Slide4

Setting S106

formulae

Works well when

there

is a close relationship between development generally and the need for additional infrastructure

Having formulae makes the negotiation process much easier

You must demonstrate two things:

There is no existing capacity that can serve the development

The development creates the need for that infrastructure

HUDU model in London

The benefits of publishing your approachSlide5

Negotiation tips

Start negotiations as early as

possible – Pre App / S106 & CIL guidance / model S106 Agreements

Frontloading

contributions reduces the potential S106

pot – think cash flow and when obligation are actually needed

Viability: the

three most important things to remember:

It’s an opinion and not a fact

– basic understanding needed

It’s

dynamic – the numbers will change over time

Impacts still have to be mitigated – its not a get-out-of-jail-free

cardSlide6

Getting it drafted & signed

Negotiate the heads of agreement in pre-application stage

Draft the agreement in the application stage so it’s ready to sign once a decision is

taken

Use the Planning Bar

proforma for the main body and publish your

obligation proforma on your website

Be firm with your lawyers and if necessary get the applicant to do the same – they can waste a lot of time arguing about marginal issues

Developers

can “take their foot off the metal” once a scheme has been to planning committee

Having a resolution “That, if by [X date] the legal agreement has not been completed, the Director of Planning is delegated authority to refuse planning permission” will focus their

attention,

provided you stick to it!Slide7

Collecting the cash

You

MUST monitor

your S106 agreements so that you know what you are owed and when

Monitoring also enables you to manage the number of pooled contributions when CIL is in place

Since putting this in place in

Croydon

we have recovered circa £3.5M that was owed to us

A simple set of proforma letters will often work without the need to get heavy with solicitors, especially when interest and indexation is attached to the agreement. Slide8

Spending the money

Bizarrely, this seems to be the hardest bit

It is a whole Council task

Set up a body (Infrastructure Finance Group) that can act as the place where these discussions

/ approvals take

place and ensure conformity with the S106 agreement

and

legislation

It’s about delivering your Council’s strategic capital priorities and the Infrastructure Delivery Plan that supports your Local Plan

Also involves engagement with third parties who have responsibility for delivering infrastructure Slide9

Review & monitoring

Authority’s Monitoring Report

You must report collection and spending of CIL

Reporting (voluntarily) collection and spending of S106 is a very good discipline

Whilst increased development values may enable you to increase your CIL rates, being able to negotiate a greater affordable housing contribution may be a better

policy option

What are your plans for S106 post March 2015?Slide10

S106 & CIL

CIL was introduced as a solution to S106 with provisions in the legislation that sought to “put a spanner in the works” of S106 (ie the limits on pooling)

CIL and S106 are good at different things:

CIL is an efficient up-front pooling

mechanism – brings

in more money to an LPA because nearly everyone pays something, rather than just a few paying; as little as 7% of developments have S106 …

… however, CIL does have a high set-up cost that can make it uneconomic for many small local planning authorities to implement.

S106 can be a good, flexible tool to deal with specific issues that are related to the actual development, rather than development generally …

… however, S106 does have high transaction costs (eg legal fees and negotiation time) that render it uneconomic for small developments.Slide11

The challenges

Infrastructure that is necessary because of development generally

Infrastructure that is necessary because the need for it is caused by a particular development or group of developments

Mitigation or compensation that is necessary to enable a development to proceed

Securing affordable housing to meet the housing needs of an area

INFRASTRUCTURE

OTHER (NON-INFRASTRUCTURE) MITIGATIONSlide12

How might we fix it?

POS

believes that any solution should have the following characteristics:

The intention for CIL to be funded via the land value rather than through development finance should be clearly stated by government and become a clear feature of the CIL setting process and Development Management viability assessments

There should be a basic national levy rate that can be easily adopted

Alternative levy rates should follow the current CIL setting process

Flexibility between levy and agreements should be a standard feature of the system subject always to the levy amount being the minimum payable in any

circumstances

A new combined system needs a new name to give it a fresh startSlide13

What would it look like?

Development Management Agreement

Development Management Levy

Infrastructure that is necessary because of development generally

Infrastructure that is necessary because the need for it is caused by a particular development or group of developments

Mitigation or compensation that is necessary to enable a development to proceed

Securing affordable housing to meet the housing needs of an area

INFRASTRUCTURE

OTHER (NON-INFRASTRUCTURE) MITIGATIONSlide14

Options for levy LPAs

For non-major development, a compulsory levy would apply for infrastructure. An agreement could apply to:

Mitigation or compensation that is directly necessary to enable a development to

proceed

Securing

affordable housing

For major development, the levy would apply plus an agreement to secure:

Infrastructure that is necessary because the need for it is caused by a particular development or group of

developments

Mitigation

or compensation that is directly necessary to enable a development to proceed

Securing affordable

housing

Plus

if the LPA considered it appropriate adjustment could be made in response to viability issues between the levy and the agreement, subject always to the levy sum being the minimum payable

.Slide15

Options for non-levy LPAs

For

non-major development, neither the levy nor an agreement would apply for infrastructure. An agreement could apply to:

Mitigation or compensation that is directly necessary to enable a development to proceed

Securing affordable housing

For major developments, an agreement to

secure:

Infrastructure that is necessary because the need for it is caused by a particular development or group of developments

Mitigation or compensation that is directly necessary to enable a development to proceed

Securing affordable housingSlide16

S106 Updates

S106 Monitoring Fees – Oxfordshire Judgement

Monitoring fee not justified under CIL

Reg

122

Monitoring of S106 in most cases is a function of the Council

Standardised monitoring fees with no relationship to the scale of the development, or the monitoring task involved are unjustified

Monitoring fees, could be justified if the

scale of the development, or the monitoring task

involved justify a specific monitoring fee

Implications remain to be seen as many Councils

operate Standardised monitoring fees Slide17

S106 Updates

S106 speeding up negotiations – DCLG consultation

Belief agreeing S106s is delaying the planning process

Expectation of early S106 engagement

Greater use of standardised clauses

Support for local S106 signing time limits

Agreeing time extension is advocated

S106 monitoring and assignment transparency

Entertaining primary legislation to unbl

ock

stalled S106s

An automatic / deemed solution – workable though

Engage external dispute resolution – mediation – final

conclusion on the matters Slide18

Questions