COMMENT | Infrastructure levy could hinder brownfield delivery

The Government’s planning white paper proposes a “value-based minimum threshold” for a new infrastructure tax, which could end up restricting housing land supply in lower value areas, write Murray Graham of Nexus Planning and Gary Goodman of BXB Land Solutions.

Goodman, BXB Land Solutions

The Planning for the Future white paper, published in early August, set out the Government’s proposals to merge the existing Section 106 planning obligations and community infrastructure levy systems into a new ‘infrastructure levy’, with payments based on a nationally-set flat rate applied to a development’s final value – that is, a standard levy on all development, including permitted development.

Under this system, local authorities would be able to use funds raised through the infrastructure levy to secure affordable housing and deliver new infrastructure to support growth.

The white paper references a “value-based minimum threshold”, below which the infrastructure levy would not be charged, to prevent low viability development becoming unviable. The setting of that minimum threshold is going to be fundamental to the success of the proposed new system. It is also going to be especially important for the delivery of brownfield land, which remains a key component of housing land supply across the North West and a vital part of the regeneration of our towns and cities.

The latest draft of the Greater Manchester Spatial Framework, published last week, has as part of a mixed land supply identified brownfield capacity in the city-region for up to 144,221 homes. Meanwhile, Liverpool City Region has identified enough brownfield land deemed sufficient to build 42,000 homes. There will certainly be an increasing need in the post Covid-19 world to rethink urban areas, particularly in the context of town centres and edge-of-centre locations, and how reuse and recycling of existing land might contribute regional growth and levelling up agendas.

However, the fact remains that delivering brownfield land is far from straightforward, with viability a common issue for many landowners and developers. Brownfield sites often become stuck in the planning system because of their high buy-in value, as well as concerns over financial viability and the amount of upfront funding required.

Such situations can create tensions between developers and local planning authorities, particularly in instances where affordable housing and S106 contributions are not delivered in full.

Over time, the planning process has adapted and built in flexibility to the S106 process, allowing applicants to provide viability analysis to accompany planning applications. This provides a basic mechanism to allow stakeholders the flexibility to consider the regeneration benefits of delivering a brownfield site and pit their own political priorities against the financial constraints of a project. It is not a perfect process, but it is a functioning one.

Experience of CIL has shown it to be a blunt tool with no built-in flexibility, which often places an additional financial burden on brownfield land and disregards its historic constraints. The positive swing generated by redevelopment in terms of environmental quality and property values in the immediate local area, and, more importantly, the concentration of direct and indirect investment, need to be fully considered on a case-by-case basis.

If policy makers want to ensure an improvement to environmental quality, built form and the value of an area, in order to fund additional amenities, then flexibility at local level must be preserved. The placing of additional financial hurdles on brownfield land is counterintuitive. Should the infrastructure levy rate be set too high, this could have implications in terms of restricting housing land supply in lower value areas. Careful consideration should therefore be given to the merits of setting area-specific rates instead, which would better reflect regional conditions and housing markets and ensure that brownfield sites across the region are not hamstrung by a top-down approach.

In higher value authorities, a much greater proportion of the development value would be above the exempt amount, and subject to the infrastructure levy. The Government should therefore consider how sufficient investment can be distributed to lower value authorities across the region, where the amount of income generated through the infrastructure levy may not be sufficient to deliver key infrastructure projects and unlock the land to realise growth.

The Government’s proposals are intended to provide greater levels of certainty both for communities and developers over the level of contributions expected alongside new development, and this element is welcomed.

However, the risk remains that without adequate flexibility, many brownfield sites across the region may not create sufficient value to incentivise their redevelopment.

• Murray Graham is director of Nexus Planning and Gary Goodman is land and planning director at BXB Land Solutions