The community infrastructure levy (CIL) has failed and should be replaced with a tariff and locally-agreed contributions from developers to infrastructure costs.
Those recommendations have come from a review established by the government to determine why CIL has been patchily implemented and raised less money than expected.
The review group’s report concluded CIL should be scrapped in favour of a local infrastructure tariff (LIT) calculated using a national formula but charged per square metre according to local market values.
LIT would contribute to councils’ infrastructure costs which were unrelated to a specific project - new roads to serve a rising population, for example.
The long-established section 106 planning gain mechanism would be used alongside LIT to agree payments for site-specific infrastructure and for affordable housing provision, the review group suggested.
Combined authorities would gain new powers for a levy towards major infrastructure, similar to that used for Crossrail in Greater London whereby all boroughs in the capital had to charge a levy on new development to raise £300m.
CIL was intended as a locally-set tariff charged by project size, so removing site-by-site negotiations between councils and developers other than for affordable housing and some minor infrastructure.
But the review group found only 130 councils had implemented CIL, with many others fearing the charge would damage the viability of desired developments.
Consequently, the amount raised by CIL “has been much less than anticipated”, the report said.
The review group said LIT should be pitched at a low rate to avoid the need for exemptions and reliefs that have complicated CIL.
Another problem found was that CIL is collected as developments progress and so does not provide councils with money upfront for infrastructure, while they were barred from securing this by borrowing against future CIL receipts.
South Norfolk Council leader John Fuller (Con), who sat on the review group, said: “CIL has not had the take up that was expected and there is a hotchpotch of different systems around the country. It is clearly broken and needs a fresh approach.
“Under our recommendations every development will pay a low tariff - say 2% of a project’s value.
“There would then be a rigorous section 106 process, and by ‘rigorous’ I mean that it would apply to specific infrastructure, not cumulative infrastructure.”
Andrew Whitaker, planning director of the Home Builders Federation, who was also a part of the review group, said: “CIL came in dribs and drabs and so did not raise money as intended to put in infrastructure upfront, which is what developments need. We [the HBF] are happy with the universal charge if set at a low level.”
The review reported to ministers last October but its conclusions were published only with this month’s housing white paper. A government response is expected in next month’s budget.