Closed consultation

Technical consultation on the Infrastructure Levy

Published 17 March 2023

Applies to England

Topic of this consultation

This consultation seeks views on technical aspects of the design of the Infrastructure Levy. Responses will inform the preparation and content of regulations, which will themselves be consulted on, should Parliament grant the necessary powers set out in the Levelling Up and Regeneration Bill.

The Bill also introduces the power for the government to pilot Community Land Auctions (CLAs) to explore another avenue to more efficiently capture land value. While CLAs are not subject to this technical consultation, local authorities interested in finding out more should contact the Department for Levelling Up Housing and Communities (DLUHC) Infrastructure Levy team at InfrastructureLevyConsultation@levellingup.gov.uk.

DLUHC’s Infrastructure Levy team welcomes the opportunity to engage with a range of stakeholders from across the development and affordable housing sector, as well as with representative organisations and local government.

Geographical scope

These proposals will apply to England only.

Impact assessment

The government is required under section 149 of the Equality Act 2010 (“the Public Sector Equality Duty”) to have regard to the actual or potential impact/s (if any) of any new policy proposals on ‘equality’. This means in summary, addressing three needs: eliminating discrimination, promoting equality of opportunity and fostering good relations between different groups. This applies in relation to protected characteristics; sex, race, disability, age, etc. We will refer to this broadly as the ‘equality’ impacts. In each part of the consultation we invite any views on any perceived equality impacts. We are also seeking views on the potential impacts of the package as a whole on equality. We need to understand who this policy may affect and how it may affect them.

A regulatory impact assessment has been published for the Levelling Up and Regeneration Bill. Impact assessments are required for all UK government interventions of a regulatory nature that affect the private sector and/or public services. The impact assessment is reviewed and rated by the Regulatory and Policy Committee prior to publication. DLUHC received a ‘Green’ rating^{[footnote 1]} from the RRPC on 1 July 2022 meaning the impact assessment is fit for purpose.

Duration

This consultation will last for 12 weeks from 17 March to 9 June 2023.

Following the closure of this consultation, the government will assess responses. In doing so, a response will be issued that summarises the themes that emerged, before issuing a final consultation on the draft regulations after the Levelling Up and Regeneration Bill achieves Royal Assent.

Enquiries

Any queries about this consultation should be directed to:

InfrastructureLevyConsultation@levellingup.gov.uk.

How to respond

We strongly recommend that responses are submitted through Citizen Space.

Citizen Space is an easy-to-use, digital tool that will significantly aid the process of analysing responses, and respondents are encouraged to use this avenue to send responses.

Please use this link to access the consultation via Citizen Space.

Alternatively, you can email your response to:

InfrastructureLevyConsultation@levellingup.gov.uk.

Responses sent to this email address should make it clear which questions you are responding to.

Written responses should be sent to:

Infrastructure Levy Technical Consultation
Planning Directorate
3rd Floor
Fry Building
2 Marsham Street
London, SW1P 4DF

When you reply, please specify whether you are replying as an individual or submitting an official response on behalf of an organisation and include:

• your name
• your organisation (if applicable)
• an address (including post-code)
• include ‘Infrastructure Levy Consultation response’ in your correspondence
• an email address, and
• a contact telephone number.

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Executive summary

The government wants to make sure that local authorities receive a fairer contribution of the money that typically accrues to landowners and developers. This will support funding for the infrastructure – affordable housing, schools, GP surgeries, green spaces and transport infrastructure to support connectivity that local communities expect to come with new development.

To do this, the Levelling Up and Regeneration Bill (‘the Bill’) seeks to replace the current system of developer contributions with a mandatory, more streamlined, and locally determined Infrastructure Levy. The Bill provides the framework for the new Levy, with the detailed design to be delivered through regulations.

The Levy will be charged on the value of the property at completion per square metre and applied above a minimum threshold. Levy rates and minimum thresholds will be set and collected locally, and local authorities will be able to set different rates within their area.

This will allow developers to price the value of contributions into the value of the land and for Levy liabilities to reflect market conditions. It will also remove the need for planning obligations to be renegotiated if the gross development value (GDV) is lower than expected; while allowing local authorities to share in the uplift if GDVs are higher than anticipated.

The Infrastructure Levy will be a more efficient system, largely sweeping away the sometimes-protracted negotiation of Section 106 planning obligations (“s106”) (Section 106 of the Town and Country Planning Act 1990). It will be more transparent, as Levy charging schedules will make the expected value of a contribution clear up-front. It will also make it clear to existing and new residents what new infrastructure will accompany development and to developers what infrastructure will be required to make development acceptable. This will ultimately create a more consistent system, which removes unnecessary delay and provides additional funds to local communities.

To strengthen infrastructure delivery, the Bill requires local authorities to prepare Infrastructure Delivery Strategies. These will set out a strategy for delivering local infrastructure and spending Levy proceeds. The Bill will also enable local authorities to require the assistance of infrastructure providers, the local community, and other bodies in devising these strategies and their development plans.

The government is committed to the Levy securing at least as much affordable housing as developer contributions do now. A new ‘right to require’ will enable local authorities to set out what proportion of the Levy they want delivered as affordable homes and what proportion they want delivered as cash. As the developer will be obliged to deliver these apportionments, the ‘right to require’ will afford greater protection to policy compliant levels of affordable housing. That is because, under the existing system, levels of affordable housing are often negotiated downward on viability grounds, resulting in fewer units being delivered than a local authority initially sought. The non-negotiable nature of the Levy provides an opportunity to address this. The ‘right to require’ means that where local authorities set out how much of the Levy they want as affordable housing, that amount will be delivered without the risk of a downward negotiation.

The proposal for the Levy set out in this document has been informed by responses to the Planning for the Future White Paper and by direct engagement with key stakeholders.

Consultation outline

• Primary legislation in Part 4 and Schedule 11 of the Bill provides the overarching framework for the Infrastructure Levy. Schedule 11 inserts new Part 10A into the Planning Act 2008, comprising of new sections 204A to 204Z1. It is based on the existing Planning Act 2008, Part 11 provisions, which provide for the CIL framework. As with CIL, the detailed design of the new Levy will be set out in regulations. The Bill introduces the following components of the Levy:
  • The Levy will be a mandatory charge.
  • Levy rates are to be set by charging authorities (generally the local authority), and when setting rates, they must take into account certain factors. This includes the viability of development in the area and the desirability that rates can deliver affordable housing at a level equalling or exceeding what developers deliver now in that area.
  • There is a process of examination in public of Infrastructure Levy charging schedules, in order for rates to be adopted.
  • The Secretary of State for DLUHC can intervene in the preparation of charging schedules in certain circumstances.
  • Charging authorities must publish an Infrastructure Delivery Strategy.
• Once the Bill reaches Royal Assent, these elements of the Infrastructure Levy will feature in primary legislation. Therefore, the government is not seeking views on these aspects of the Levy.
• This technical consultation seeks responses on those elements of design that will be delivered through regulations, made under the framework set out in primary. A summary of the lead proposals for the Levy, and corresponding chapters in the consultation document, can be found below.

Chapter 1: Fundamental design choices: proposals

• Scope of the Levy. The Levy will apply to all types of development, aside from where exemptions apply. Changes of use through permitted development rights will also fall within scope in a manner that ensures such schemes remain viable.
• Types of infrastructure under the Levy. Infrastructure ‘integral’ to the successful functioning of a site, such as on-site play areas, site access and internal highway network or draining systems, will be delivered by developers and secured through planning conditions. Where this is not possible, ‘integral’ infrastructure will be delivered through targeted planning obligations known as ‘Delivery Agreements’. All other forms of infrastructure – ‘Levy funded’ infrastructure – will be paid for through Levy revenues. Questions 2 and 3 seek views on the definitions of ‘integral’ and ‘Levy funded’ infrastructure. Questions 4-6 seek views on spending the Levy on matters typically considered non-infrastructure items.
• Use of Section 106. S106 will be retained in the new system but for restricted purposes. Sites will come forward through three different ‘routeways’ depending on their character. In each routeway, s106 will play a role.
• The routeways seek to strike a balance between reducing negotiation and delay and allowing local authorities to secure the infrastructure and affordable housing they need. Questions 7 and 8 seek views from respondents on these routeways.
  • The core routeway. The majority of schemes will be subject to this routeway. The Levy will function as a cash-based system where rates and thresholds apply. S106 agreements will retain a restricted function, limited to securing matters that cannot be conditioned for.
  • The infrastructure in-kind routeway. On the largest and most complex sites, often with unique infrastructure requirements, s106 agreements can be used to deliver infrastructure as an in-kind payment of the Levy. The value of this agreement must equal or exceed what would have been secured in cash through a calculation of Levy liabilities.
  • The s106-only routeway. Sites where Gross Development Value (GDV) per m² cannot be calculated, or where buildings are not the main focus of development, such as minerals or waste sites, will not be subject to the Levy. Planning obligations will apply as now.

Chapter 2: Levy rates and minimum thresholds

• Rate setting. Levy rates and minimum thresholds (below which no Levy is charged) will be set by the local authority. Rates and thresholds can be varied by the type of development (including brownfield and greenfield) and local authorities can create different charging zones. Levy charging schedules will be subject to consultation and public examination. Questions 11 seeks views on instances where some brownfield sites should qualify for offsets from final Levy liabilities, where the nature of a fixed-rate Levy could unduly effect scheme viability.

Chapter 3: Charging and paying the Levy

• Charging the Levy. Levy liabilities will be based on GDV at the point of site sale or completion. The consultation seeks views on where circumstances may warrant payment of the Levy at an earlier stage of development.

• Payment of the Levy. Basing the Levy on GDV requires a novel proposal around Levy payments. Indicative liabilities will be calculated using Levy charging schedules. These will set out expectations of Levy liabilities that reflect assumed values of a site. A provisional payment of the Levy will be made close to scheme completion. A final adjustment payment can be used on completion incorporating final values to ensure correct liabilities are discharged. Views are sought on this process in response to Questions 14 and 15, and alternative proposals are welcomed.

Chapter 4: Delivering Infrastructure

• Forward funding infrastructure. Borrowing against future Levy proceeds will be permitted, including from the Public Works Loan Board, to facilitate the forward funding of infrastructure. Cash reserves can also be built up across sites. Questions 18-20 ask respondents to consider the mechanics behind infrastructure delivery under the Levy.
• The Infrastructure Delivery Strategy. Through a new Infrastructure Delivery Strategy, local authorities will be able to take a more strategic and unified approach to infrastructure planning and delivery. That includes how they expect to spend Levy proceeds to accommodate the needs of the community such as through the provision of GP surgeries and schools. The Infrastructure Delivery Strategy will be subject to examination, and the consultation seeks views on what should form the content of the document, including the process of input from infrastructure providers and local residents. Questions 24-29 seek views on the Infrastructure Delivery Strategy.

Chapter 5: Affordable housing

• Affordable Housing. The government is committed to delivering at least as much – if not more – on-site affordable housing as developer contributions do now. On-site affordable housing can be delivered as an in-kind payment of the Levy through a new ‘right to require’ which will enable local authorities to secure affordable homes as a proportion of levy liabilities. The consultation seeks views on the ‘right to require’ and in what circumstances exemptions from the Levy for register provider-led schemes could be appropriate.

Chapter 6: Other areas

• The neighbourhood and administrative share. Imitating provisions under the existing Community Infrastructure Levy legislation, both a neighbourhood share, and administrative share of the new Levy will be able to be retained to support funding of local community priorities and Levy administration respectively.
• Exemptions and reduced rates. The Levy will replicate some existing exemptions from CIL. The consultation seeks views on the case for other suitable exemptions or reduced rates, including a proposal to apply exemptions to qualifying small sites and publicly funded infrastructure. The consultation also seeks views on enforcement mechanisms.

Chapter 7: Introducing the Levy

• Test and learn. A reform of this scale represents a substantial change for housebuilders, local authorities, registered providers of affordable housing and other parts of the sector. That is why the Infrastructure Levy will be introduced through a phased ‘test and learn’ process over several years, which will support the effective implementation of the Levy, and provide local authorities and industry time to prepare and adapt to the change. Prior to national roll-out, the government will monitor, evaluate, and improve the operation of the Levy. Local authorities that are interested in becoming a ‘test and learn’ authority are invited to express their interest.
• Transition to the new system. Sites permitted before the introduction of the new Levy will continue to be subject to their CIL and s106 requirements. We are considering whether further transitional provisions are needed to account for sites which are delivered over longer time periods. However, these sites will not be moved into the new Levy system. The consultation seeks views on whether the proposed approach will ensure effective transition and implementation of the new system.

Introduction

What is the Infrastructure Levy?

The Infrastructure Levy will be a locally-set, mandatory charge levied on the final value of completed development to replace the existing system of developer contributions. By charging the Levy on the value of completed development, the amount collected will increase as development prices increase, or reduce as prices drop, making the Levy more responsive to market conditions.

The aim of the Levy is to create a swifter, simpler, more transparent system, and one that will raise at least as much revenue as at present, if not more, for local authorities to provide the infrastructure and affordable housing that communities need. A summary of the new Levy and how it compares to the existing system of developer contributions is shown in Table 1, at the end of this section.

Why does the existing system need to be reformed?

New - development creates demand for infrastructure. To create sustainable development and successful places, it is important that this demand is addressed and appropriately planned for. Contributions from developers, which are secured by capturing a proportion of the uplift in the value of land generated by the granting of planning permission, are a key tool in mitigating the impacts of new development, alongside wider government funding for infrastructure and affordable housing.

Under the current system, there are 2 broad routes for local authorities to secure developer contributions. Planning obligations, through Section 106 (i.e. “s106” of the Town and Country Planning Act 1990) agreements, are negotiated with developers, and the Community Infrastructure Levy (CIL) (enacted by SI 2010/948) which is a fixed charge levied on the floorspace of a new development.

Developer contributions estimated to be worth around £7 billion were agreed in 2018/19, of which £4.7 billion was in the form of affordable housing contributions. However, planning obligations are uncertain and opaque. That they are subject to negotiation (and can be subject to subsequent renegotiation), can create uncertainty for communities over the level of infrastructure and affordable housing that will be delivered, as well as leading to substantial delays in the granting of planning permission.

CIL is more transparent and predictable. However, it is inflexible in changing market conditions and unable to efficiently capture value where increases in value occur after rates have been set. The Neighbourhood Share of CIL enables a proportion of total CIL receipts to be spent in the location of a scheme, in agreement of the local community. The Infrastructure Levy will maintain a Neighbourhood Share, for the same purpose. This is explained further in Chapter 6.

The government believes that it should address the issues with the existing system and reconsider how value is captured from new development and to create a simpler, non-negotiable, and streamlined system that can capture more value and provide better outcomes for communities.

On what basis will the Levy be charged?

The Levy will be charged to the GDV per m² of completed development. This means that development will be charged on a basis that is consistent, transparent, and fair. It will be sensitive to the differing values of one development compared to another and to changing market conditions. Should a development prove more valuable than anticipated, the Levy will capture a fair share of the additional value for local authorities and communities; where development is worth less than expected, developers will contribute less, but without the need to renegotiate their obligations.

The final GDV will be reflected in the sales price of the development, or a valuation of the market price if the development is not sold. Some additional estimates of the final liability will be required earlier in the process of developing a site, providing developers and local authorities with a clear indication of how much respectively they are likely to pay and receive.

The government recognises that charging a Levy on GDV is a significant change from the current system. It also recognises that valuations will be needed in some circumstances to determine liabilities, and that this creates potential areas of dispute and additional administration. We intend for the ‘test and learn’ rollout to help manage and optimise this process, ultimately resulting in a system that reduces negotiation and creates opportunity for local authorities to capture greater value for communities.

Will the Levy raise more revenue?

The Levy is designed to be able capture more revenue. Independent research commissioned by the department (See Annex A) suggests that there is scope to capture more value, with the greatest scope on greenfield sites with higher development values, and that local authorities will have flexibility to set rates on such sites to capture more value. How much more value might be captured will vary from one development to another and depend on multiple factors, including how effectively rates and minimum thresholds are set. When setting rates, local authorities will need to balance their aim to capture land value with the importance of ensuring that land continues to come forward for development. This will be a local judgement and will be informed by the amount of value captured for specific development typologies under the existing system in their area.

Will the Infrastructure Levy be more complicated than the existing system?

Once in operation across England, the new, single system of developer contributions will remove a substantial element of negotiation, which is often responsible for slowing build-out and can result in outcomes unfavourable to local authorities. Charging schedules will set out Levy rates up front, which will add certainty for both developers and local authorities, and ultimately make for a system that is easier to navigate, more straightforward, and transparent.

Where planning obligations are retained in the new Levy system, such as on the largest and most complicated sites, an element of negotiation will remain. However, the value of any agreement will need to equal or exceed the Levy liability had the site been subject to the core Levy routeway (see Chapter 1).

The aim of the Infrastructure Levy is to create a fairer and simpler system of developer contributions, which will ultimately capture more value for local authorities and local communities.

How will the Levy work?

There are three main elements to operating the Levy, which will build on the approaches taken to setting and collecting CIL: (i) setting the Levy; (ii) charging and collecting the Levy; and (iii) spending the Levy. Local authorities will be responsible for setting Levy rates, charging, collecting, and spending the Levy, enabling the Levy to reflect local circumstances and priorities.

(i) Setting the Levy

Local authorities will set a minimum threshold (on a £ per m² basis), below which the Levy will not be charged. This is to account for the costs of development in an area, and the value of the land in its existing use, broadly meaning that the Levy is charged on the increase in land value created by a development. Rates will be set as a percentage figure of the final GDV above the minimum threshold.

Hence, for solely illustrative purposes, if a local authority were to set a minimum threshold of £1,500 per m², and the GDV of a completed development was £2,500 per m², then the Levy will be charged only on the £1,000 per m² that is above the threshold.

Local authorities will be able to set different rates and/or thresholds for different development uses and land typologies in their local area. The Levy will apply to most types of development, but certain types may be exempt or subject to reduced rates.

The charging schedule that sets out Levy rates and thresholds will remove in most instances the time-consuming negotiation of s106 agreements and provide considerably more certainty for local authorities and developers. In setting rates, local authorities will have to consider various factors (to be provided for expressly in the regulations), which will include a requirement that rates are set with regard to the desirability of maintaining or exceeding the levels of affordable housing that are currently secured through developer contributions in their area.

We will also set out a mechanism that enables rates to be set at a lower level initially, and then to be stepped up over time. This will allow local authorities to set rates with a larger viability buffer to begin with, but which captures more value over time. Where local authorities are setting rates under the Levy, they should be taking as their starting point how much they actually receive through the existing system, including the amount of affordable housing received. They will need to balance the aim of capturing land value with ensuring that land continues to come forward, meaning that rates set will be a local judgement based on local evidence.

(ii) Charging and collecting the Levy

The Levy will be charged by local authorities, based on the GDV of a development upon its completion. What is meant by ‘completion’ in this context will be a matter for regulations. This approach allows developers to price in the amount of their contributions into the value of the land, based on the projected GDV and the amount charged, to be responsive to market conditions. This removes the need for planning obligations to be renegotiated if the GDV is lower than expected and allows local authorities to share in the value uplift if GDVs are higher than anticipated.

By allowing the Levy to be charged on most types of development, local authorities will be able to capture value where there is scope to do so from development types for which little or no contributions are collected at present. That could also include some types of development under permitted development rights, if rates are set in a manner that keeps such schemes viable. Such development types could be subject to reduced Levy rates to ensure they are accommodated in the Levy without challenge to their viability.

As designed, the Levy will require valuations of GDV during build-out of a development. The government is seeking views as to how this could function in practice (Question 20) as well options for the timings of payments (Questions 18 and 19) and the routeways by which the Levy might be charged (Questions 7 and 8).

(iii) Spending the Levy

The delivery of the right infrastructure ahead of or alongside development is a priority for the government. This will help support new development with the services it needs. For residential development, this includes important infrastructure that a community needs and will mitigate the impact of a new scheme like schools, health facilities such as GP surgeries, the provision of sustainable transport infrastructure and connectivity, including active travel, or new public green spaces or other types of green infrastructure.

For commercial development, this could include improving public transport connections to increase accessibility and enable active travel. The Levy will be an important source of funding for local authorities to deliver infrastructure priorities for their area to support planned development.

Should the Levy generate more revenue than is collected under the present system, proceeds could be focused on providing more of the infrastructure that communities need. The Levy could also be used to deliver support for the local community in ways that do not typically meet the definition of ‘infrastructure’. This is explored further in Chapter 1 and we seek views on when this could be appropriate at Questions 4-6.

We propose to delineate between different types of infrastructure under the Levy. ‘Integral’ infrastructure, which is needed for a site to function, will be delivered by developers primarily through the use of planning conditions. ‘Levy-funded infrastructure’ refers to infrastructure that is supported by Levy receipts and mitigates the cumulative impact of new development on the local area. This consultation seeks views on these concepts and how they can be defined most effectively (Questions 2 and 3)

To identify and plan for infrastructure priorities, local authorities will be required to prepare a new document, called an Infrastructure Delivery Strategy. This document will set out the local authority’s strategic plans for infrastructure delivery to support growth and how they intend to spend the Levy to address infrastructure and affordable housing need. The Infrastructure Delivery Strategy will provide communities with an opportunity to engage with how the Levy may be spent, and a clear view of how local authorities will use Levy receipts on their behalf. Chapter 4 expands on the Infrastructure Delivery Strategy and seeks views on its possible content (Questions 24-29).

The government is also committed to the Infrastructure Levy being able to deliver at least as much affordable housing as developer contributions do now, and the Levy has been designed to meet that goal. On-site affordable housing on residential schemes will be delivered predominantly as an in-kind payment of the Levy through a new ‘right to require’.

The ‘right to require’ will see a percentage of the Levy value delivered in-kind by developers as on-site affordable housing, in a manner that protects it from the pressure of other spending priorities. Developers will be obliged to provide the in-kind contribution, rebalancing how and what is delivered and removing time-consuming negotiations from the process. Views are sought on the approach to affordable housing in Chapter 5, including how to ensure that registered provider-led schemes receive appropriate treatment under the Levy, as per Question 31.

How will the Levy be implemented?

Prior attempts to improve land value capture have sometimes encountered challenges, which in part have arisen from the quick implementation of substantive reforms. We understand that the Levy will be a big change to the planning system and that local authorities will require support upon its introduction. This is why we are consulting on aspects of design now and intend to take a phased ‘test and learn’ approach to implementation.

We want to ensure the Levy is implemented in a way that navigates these hurdles, so that it can achieve the aim of capturing more land value uplift and deliver at least as much affordable housing. The ‘test and learn’ approach will see the Levy introduced in selected local authorities in the first instance, before full roll-out across England. During the ‘test and learn’ period, the government will work closely with local authorities, developers, affordable housing providers, and other stakeholders operating the Levy to monitor, evaluate, and improve its operation. Should other local authorities wish to adopt the new system ahead of its full introduction, they will be able to do so.

Following the passage of the Levelling Up and Regeneration Bill, this consultation will help to inform the drafting of regulations, which themselves will be subject to consultation. Once regulations are introduced, we expect ‘test and learn’ authorities to introduce charging schedules from late 2024/25, and operating the Levy from 2025/26. National rollout will occur over the course of a decade and the current system will remain in place in areas which have not adopted the Levy. More detail on the prospective timeline can be found in Chapter 7 of this document.

Means of developer contributions	Current system: Section 106 (as applied currently)	Current system: Community infrastructure Levy	The proposed new Infrastructure Levy
Statutory basis	Town & Country Planning Act 1990	Planning Act 2008	Levelling Up & Regeneration Bill
Type of contribution	Negotiated planning obligation	Tax-like charge	Tax-like charge
Scope	Most development, but in practice obligations do not accompany a significant proportion of cases	Most development but significant exemptions apply	Most development, applied more widely than at present but with some exemptions
Mandatory or voluntary for local planning authorities?	Voluntary, subject to negotiation	Voluntary; There are currently 162 charging authorities	Mandatory
Basis of charge	Local policy sets expectations, actual contributions are negotiated on viability grounds	Gross internal floor area of a development	Gross value of a development
Charging schedule	None	Requirement to consult followed by an examination in public	Requirement to consult followed by an examination in public
Responsive to market conditions	Yes But only subjectively and by time-consuming negotiation	No Because liability is based on floorspace and is fixed when permission is granted	Yes Because liability is based on final gross development value
Can be used to secure affordable housing?	Yes Secured at levels subject to negotiation	No Unable to secure affordable housing	Yes Secured as a non-negotiable, in-kind proportion of the liability
Can be used to deliver infrastructure?	Yes Delivered by developers directly or by local authorities via a cash payment, subject to negotiation; directly related to the development and necessary to make the development acceptable in planning terms	Yes Delivered via cash receipts (although some scope for in-kind contributions, not commonly used)	Yes Delivered by developers directly and/or via cash receipts; value is non-negotiable.
Includes a neighbourhood share?	No	Yes Can be passed on to other bodies to spend on neighbourhood priorities	Yes Can be passed on to other bodies to spend on neighbourhood priorities
Is there a mandatory spending plan	Not mandatory Local authorities can set out priorities in an infrastructure delivery plan/Infrastructure Funding Statement, and report on spending as part of an Infrastructure Funding Statement	Not mandatory CIL charging authorities may have a CIL spending plan or set out priorities in an infrastructure delivery plan/Infrastructure Funding Statement	Yes Requirement for an Infrastructure Delivery Strategy

Chapter 1: Fundamental design choices

Key parts of the Bill that this Chapter relates to include Part 4, clauses 124, 125, and 126 and 122, and the following sections of new Part 10A of the Planning Act 2008 (inserted by Schedule 11, Part 1 of the Bill):

• 204A: The Levy
• 204B: The Charge
• 204D: Liability
• 204E: Liability: interpretation of key terms
• 204F: Charities
• 204G: Amount
• 204Z: Regulations: general

Scope of the Levy

1.1 Under the current system of developer contributions, all local authorities can use discretionary s106 planning obligations to secure mitigations for development. In addition, all local authorities can charge CIL and around half of them do. Under the new system, introduced by the Bill, it will be mandatory for local authorities in England to charge the Infrastructure Levy in their area when it is implemented there.

1.2 The Levy will increase the scope of developer contributions in several ways:

• More development overall will be subject to a mandatory regime. CIL, which is non-negotiable for developers when charged, is widely acknowledged to increase developer contributions, with 60% of CIL charging authorities reporting increases in land value capture following its introduction, and 38% of non-CIL charging authorities believing it will enhance value capture. The mandatory nature of the Infrastructure Levy, and the coverage across all of England, will mean that development that currently escapes making significant contributions will be brought into the regime, and will be required to contribute.

• The non-negotiable nature of the Levy will mean that developers must take full account of the Levy payments they will make when agreeing a price for land. They will not be able to overpay for land and then negotiate their contributions downwards through the use or misuse of viability assessments. Case studies developed by the University of Liverpool show that there is scope for additional land value capture in a number of cases, particularly relating to greenfield developments. A more certain, non-negotiable Levy will give local authorities scope to seek an increase in value capture over time.

• The types of development which are subject to the Infrastructure Levy can also be expanded from the existing system of developer contributions. For instance, many types of change of use are de facto exempt from existing developer contributions. These can be brought into the new Levy with appropriate, lower rates charged to ensure such types of development remain viable. This is covered in Chapter 2.

Definition of development under the Levy

1.3 The Bill defines development for the purposes of the Infrastructure Levy at new section 204E(1) in Schedule 11 of the Bill. The definition is broad, covering the creation of new buildings and changes of use in existing buildings, but allows for regulations to set out in more detail what is and is not to be treated as development for the purposes of the Levy. Section 204G(8)(f) sets out that regulations may be used to provide, permit or require differential rates including nil rates, while section 204Z(1) makes clear that levy regulations may make provision that applies generally or only to specified cases, circumstances or areas.

1.4 We anticipate that most development types will be subject to the Levy, including residential, commercial, and industrial development. Local authorities can continue to set different rates for different types of development, as they do under CIL currently.

1.5 We will define the parameters of ‘development’ for the purposes of the Levy in regulations. This definition broadly means that structures that are buildings, and used by people, will qualify as ‘development’. A straightforward approach will be to maintain the definitions from CIL, which define what does not constitute development, including:

• Development of less than 100 square metres, unless this consists of one or more dwellings.
• Buildings into which people do not normally go.
• Buildings into which people go only intermittently for the purpose of inspecting or maintaining fixed plant or machinery.
• Structures which are not buildings, such as pylons and wind turbines

1.6 We are interested, as per Question 1, in whether stakeholders consider that the 100 square metre threshold remains appropriate, in terms of the scale of development that is exempt, and whether this should be a full exemption or a reduced rate. New Section 204E(1)(c)makes an addition to existing definitions of ‘development’. Namely, by adding “any change in the use of an existing building or part of a building”, this expands what kinds of development can be subject to the Levy. This is explored further in Chapter 2.

1.7 In addition to what is and is not defined as development, CIL has a series of exemptions, including for residential extensions and affordable housing. Further details about exemptions to the Levy are given in Chapters 5 (as they relate to affordable housing) and 6 (as they relate to other areas).

Question 1: Do you agree that the existing CIL definition of ‘development’ should be maintained under the Infrastructure Levy, with the following excluded from the definition:

- developments of less than 100 square metres (unless this consists of one or more dwellings and does not meet the self-build criteria) – Yes/No/Unsure
- Buildings which people do not normally go into - Yes/No/Unsure
- Buildings into which peoples go only intermittently for the purpose of inspecting or maintaining fixed plant or machinery - Yes/No/Unsure
- Structures which are not buildings, such as pylons and wind turbines. Yes/No/Unsure

Please provide a free text response to explain your answer where necessary.

The types of infrastructure that can be funded by the Levy

1.8 The delivery of the right infrastructure at the right time is a priority for the Government. The Levy will be an important source of funding for local authorities to deliver infrastructure that supports planned development. It will replace CIL in England as a means of funding infrastructure and will largely replace the negotiated Section 106 regime. Whilst there will remain a role for s106 agreements in limited circumstances (see later in this chapter), affordable housing and contributions to infrastructure required as a result of cumulative development will be secured through the Levy on the majority of sites.

1.9 For most schemes, payment of the Levy will require a certain percentage of the liability to be delivered in-kind as affordable housing (see Chapter 5). The Levy is non-negotiable, and so this approach removes the need for contributions towards this type of infrastructure to be negotiated on a site-by-site basis. This will decrease the delays currently experienced in the planning system from s106 negotiations that can derive from agreeing affordable housing contributions.

1.10 When a new scheme is built out, some on-site infrastructure will be required to make sure that the site itself can function successfully. It makes practical sense that infrastructure which is ‘integral’ to how the site is designed and how it operates should be integrated into the build cost of a scheme and delivered by the developer. Other forms of infrastructure, which are not needed for a particular site to function but are needed to address the cumulative impact of development, will be delivered using the cash raised by the Levy.

1.11 This creates two categories of infrastructure, which are (1) infrastructure needed for a scheme to function, which is ‘integral’ to the site and will be delivered by developers (or through an appropriate sub-contractor) outside of the Levy charge and (2) ‘Levy-funded’ infrastructure delivered by the local authority using cash receipts from the Levy.

1.12 It is important that the distinction between the two categories is clear, so developers know what they are expected to deliver as part of their build costs, and that local authorities can consider those costs effectively when setting charging schedules. The dividing line between ‘integral’ and ‘Levy-funded’ infrastructure is subject to this consultation, and will be set through regulations, policy, and guidance.

Integral infrastructure

1.13 Where on-site infrastructure is needed to make a site liveable, it is practical that the developer delivers that infrastructure alongside the development. This will aid site operation and ensure that critical, site-specific infrastructure is delivered in a timely fashion.

1.14 The approach to integral infrastructure does not constitute a significant departure from what happens in the current planning system. On-site mitigation is often required to meet planning policy requirements, is often incorporated into build costs, and is secured through planning conditions and s106 agreements.

1.15 On that basis, it is anticipated that developers will cost in ‘integral’ infrastructure as part of the build cost for a scheme and for it to be delivered in addition to payments of the Levy. This will broadly ensure that Levy revenues are not used to fund infrastructure that would normally be part of the costs of development. Some examples of what ‘integral infrastructure’ might include are:

• Cycle parking areas
• Electric vehicle charging points
• Inclusion of sustainable urban drainage systems and flood and site-specific coastal erosion risk mitigation
• Carbon reduction design measures to meet building regulations
• Biodiversity enhancements and net gain
• Private amenity space
• Street trees and on-site green infrastructure
• On-site play areas and open space for residents
• The creation of safe, high quality, adoptable internal road layouts, that prioritise pedestrian movements and sustainable transport modes as well as, where appropriate, well designed agreed levels of multi-modal parking, including for disabled users, car clubs and electric vehicles
• Any requirements of a Section 278 or Section 38 agreement (of the Highways Act 1980) – New or improved movement infrastructure to either become, or continue to be maintainable at the public expense within or directly adjacent to the site, including but not limited to:
  • footways;
  • bus stops and shelters;
  • segregated cycle routes;
  • crossings;
  • traffic calming;
  • Carriageways, including shared space;
  • Public on-street car parking and
  • Any other form of traffic management including traffic signals

1.16 These examples of ‘integral’ infrastructure are site-specific and embedded into the design of the site and relate to its functionality and or accessibility. What is considered as ‘integral’ infrastructure may vary, however, and depend on the size of the development and its on-site needs.

1.17 That said, creating certainty for developers, through clear parameters of what should be considered ‘integral’ will be essential for this kind of infrastructure to be effectively costed into scheme delivery. Equally, LPAs will need to consider the costs of ‘integral’ infrastructure when preparing their charging schedules.

1.18 That said, creating certainty for developers, through clear parameters of what should be considered ‘integral’ will be essential for this kind of infrastructure to be effectively costed into scheme delivery. Equally, local authorities will need to consider the costs of ‘integral’ infrastructure when preparing their charging schedules. Where the government sets requirements for additional contributions to be collected separately to the Levy, such as the Biodiversity Net Gain, these will be considered as integral infrastructure, and local authorities will be expected to account for these costs when setting Levy rates.

1.19 Where possible, planning conditions will be the primary means of securing ‘integral’ infrastructure, though planning conditions cannot cover all scenarios where this kind of infrastructure will be required. To ensure ‘integral’ infrastructure is successfully secured, we are proposing to retain a constrained, narrowly targeted use of s106 agreements, known as ‘Delivery Agreements’. These will be used to plug gaps in what planning conditions cannot secure.

1.20 In terms of delivering ‘integral’ infrastructure, a Delivery Agreement will be used to ensure that a scheme complies with policy or design codes and delivers all infrastructure deemed to be ‘integral’. That means a Delivery Agreement will have wider usage than securing on-site infrastructure, in order to cover all purposes of planning obligations and to support the proper mitigation of the effects of development on a site, where this would not be covered by the Levy. The role of Delivery Agreements is explained further in this chapter. In certain circumstances, where contributions are required to deliver a site, delivery agreements could be used to ensure that a contribution is made, for instance for suitable alternative natural green spaces.

Levy-funded infrastructure

1.21 New section 204N will require regulations to apply the Levy to supporting the development of an area by funding the provision, improvement, replacement, operation or maintenance of infrastructure. It includes a non-exhaustive list of what infrastructure could mean in this context, which can broadly be defined as infrastructure required as a result of the cumulative growth in the local area.

1.22 Unlike ‘integral’ infrastructure, ‘Levy-funded’ infrastructure is not dependent on the functionality or physical location of a scheme. Levy receipts will be used to deliver infrastructure that is required because of planned growth that will have a cumulative impact on an area and creates the need for new infrastructure to mitigate its impact. Examples of ‘Levy-funded’ infrastructure could include:

• Expansion or improvements to local healthcare infrastructure such as GP surgeries or the provision of new facilities
• Expansion or improvements to schools and other educational facilities, including the provision of childcare facilities
• Flood risk infrastructure
• Improvements to road and highway infrastructure
• Improvements to local emergency services infrastructure
• Improvements to water and wastewater infrastructure networks
• Additions to local bus services
• Provision of play equipment and other street furniture outside of the site boundary
• Strategic green infrastructure and tree planting/maintenance
• Enhancements to local play pitches or sports facilities
• The delivery of strategic multi-modal movement infrastructure, for example:
  • A new or enhanced movement corridor
  • A strategic walking, wheeling or cycling route
  • Enhancements to public transport routes
  • An area wide intervention such as a liveable neighbourhood or controlled parking zone

1.23 Levy receipts can also be passed to third parties such as county councils, highways authorities, and water and sewerage undertakers, if they are best placed to deliver the infrastructure. We are also exploring the possibility for developers to pay elements of the Levy through land payments if an area of the development, for instance, is to be used for building a school.

1.24 Local authorities will also be able to use cash secured through the Levy to buy land if that is necessary to deliver infrastructure. However, there may be times when this approach will lead to less-than-optimal outcomes, leading to infrastructure which is inconveniently located in relation to its users.

1.25 To address this, local authorities may indicate in their Infrastructure Delivery Strategy (see Chapter 4) that on sites over a certain size they expect a certain proportion of land to be set aside for ‘Levy-funded’ infrastructure. These requirements should be taken into account when assessing the GDV of these sites, in order to set Levy rates. In line with our approach to affordable housing, it will also be possible to require that a certain amount of floorspace should be given over to local infrastructure priorities, and for this to be offset from the Levy accordingly.

Distinguishing effectively between ‘integral’ and ‘Levy-funded infrastructure’

1.26 The lists of what might be considered ‘integral’ and ‘Levy-funded’ infrastructure are not comprehensive. Through regulations, policy, and guidance, and following further consultation and engagement, the demarcation will be made clear and distinct. We recognise that any approach to ‘integral’ and ‘Levy-funded’ infrastructure, which does not provide clarity may lead to inappropriate Levy rates being set, as the costs to developers of providing ‘integral’ infrastructure are not properly accounted for, or it could create uncertainty for developers and local communities as to what integral infrastructure will be provided alongside development.

1.27 It will also be important to identify circumstances where drawing a clear line between ‘integral’ and ‘Levy-funded’ infrastructure will be challenging. For example, we envisage that the majority of developments will make a contribution to local schools and healthcare facilities like GP surgeries in paying the Levy, meaning these would be considered as ‘Levy-funded’ infrastructure. However, a site may sometimes require a GP surgery or school on-site, and it could be argued that an on-site matter could fit into either category of infrastructure. It is important that there is a clear and consistent approach on these situations. We also appreciate that LPAs will have local circumstances to consider.

1.28 There are several possible tools we can use to create an appropriate distinction. One of, or a combination of the approaches outlined below could be adopted.

a) A set of principles established in regulations or policy. For infrastructure to be considered ‘integral’, it may be that a combination of principles must be met, which could include:

i. Design: the mitigation relates to how the site is designed or interacts physically with the wider area

ii. Liveability: the mitigation relates to the quality of the development itself

iii. Beneficiaries: the mitigation is primarily for the benefit of those who inhabit the development or are directly impacted by the development

iv. Predictability: it is clear to the developer that they will be required to make this kind of contribution

v. Individuality: it is required to mitigate an individual development, rather than the pooled impacts of multiple developments

b) A nationally set list of types of infrastructure that are either ‘integral’ or ‘Levy-funded’ set out in regulations or policy. Such typologies can never be exhaustive but can deal with many common types of infrastructure. For instance, on-site green spaces and play areas and certain environmental mitigations might be set at a national level as integral infrastructure, which developers are expected to contribute.

c) Principles and typologies are set locally. With reference to national policies and guidance, local authorities will be able to set out any specific items that they will be seeking as integral contributions, through their infrastructure delivery strategy (see Chapter 4).

Question 2: Do you agree that developers should continue to provide certain kinds of infrastructure, including infrastructure that is incorporated into the design of the site, outside of the Infrastructure Levy? [Yes/No/Unsure]. Please provide a free text response to explain your answer where necessary.

Question 3: What should be the approach for setting the distinction between integral and Levy-funded infrastructure? [ see para 1.28 for options a), b), or c) or a combination of these]. Please provide a free text response to explain your answer, using case study examples if possible.

Using the Levy to fund other local needs

1.29 Under the existing system of developer contributions, local authorities may sometimes provide small amounts of revenue funding where this is considered necessary in planning terms. The Levy also allows for funding to go towards the operation and maintenance of infrastructure – for example, funding for the upkeep of a green space for a set period of time. Local authorities have considerable flexibility under the existing system to negotiate s106 agreements, as long as they are necessary in planning terms, directly related to the development, and fair in terms of scope and scale. National policy sets a broad framework for local authority decision making in how they direct their funds towards particular priorities, but it is the local authority that decides how it wishes to prioritise the purposes to which it puts developer contributions.

1.30 Under new section 204N(5), and via regulations, we will be able to allow local authorities funding for non-infrastructure matters, such as revenue funding for services.

1.31 It should be noted that the Levy is, in essence, a one-off payment made in relation to a development, whereas revenue funding of services is an ongoing obligation. This means that the ongoing delivery of a service cannot be funded in the long-term by levy revenues from a specific development. Services are also funded from other sources, including central and local government funding.

1.32 Nonetheless, local authorities may wish to have flexibility to provide contributions towards service funding for local priorities. This will ultimately be a matter for local authorities to decide and consider when developing their Infrastructure Delivery Strategy subject to regulations (see Chapter 4). It is possible that this may occur once a local authority has met its requirements for affordable housing and infrastructure needs, the latter of which will be essential to making new development acceptable. This approach will also help ensure that as much affordable housing is delivered as under the current system and that development is well supported by infrastructure that the community needs.

1.33 However, the Bill provides a flexible framework whereby regulations could allow local authorities the flexibility to direct an element of their levy funding towards non-infrastructure matters, like social care, subsidised or free childcare schemes, or improving local services including service provision. The detail of this will be set out in regulations, but we are seeking views (question 5) on whether those regulations should require that the local authority prioritise affordable housing and physical infrastructure.

Question 4: Do you agree that local authorities should have the flexibility to use some of their levy funding for non-infrastructure items such as service provision? [Yes/No/Unsure] Please provide a free text response to explain your answer where necessary.

Question 5: Should local authorities be expected to prioritise infrastructure and affordable housing needs before using the Levy to pay for non-infrastructure items such as local services? [Yes/No/Unsure]. Should expectations be set through regulations or policy? Please provide a free text response to explain your answer where necessary.

Question 6: Are there other non-infrastructure items not mentioned in this document that this element of the Levy funds could be spent on? [Yes/No/Unsure] Please provide a free text response to explain your answer where necessary.

The role of Section 106 agreements - the proposed Levy routeways

1.34 The Levy aims to create a simpler and more consistent system than the current system of CIL and s106. However, paying the Levy may not always be enough to fully mitigate the impact of a development and make it acceptable in planning terms. Indeed, there are some situations where sites have very complex infrastructure needs, which necessitates retaining a negotiated approach to developer contributions. That is why we do not propose to remove s106 agreements altogether.

1.35 New Section 204Z1 of the Bill sets out that regulations can provide for how s106 of the Town and Country Planning Act may or may not be used. This power enables s106 planning obligations to be crafted in the new system, to support how infrastructure will be delivered under the Levy. To create a clear distinction over how s106 agreements should be used in different circumstances, we propose creating three distinct routeways for securing developer contributions. How infrastructure is secured and how s106 agreements operate in each routeway will vary, and this will reflect the size and type of site being brought forward.

1.36 The 3 routeways are as follows:

1. The core Levy routeway

2. Infrastructure in-kind routeway

3. S106-only routeway

1.37 An overarching framework for these ‘routeways’ will be set out in regulations, following further consultation. Based on this framework, the routeway which will apply to a particular kind of site will be set out in the Local Plan.

The core Levy routeway

1.38 The majority of new development will be subject to the core Levy routeway. Here, the Levy will be paid in cash by developers, with liabilities based on final GDV above a minimum threshold. The distinction between ‘integral’ and ‘Levy-funded’ infrastructure will apply with Levy receipts used to fund the latter. We see the role for s106 agreements in this routeway as a new product – ‘Delivery Agreements’ – that will be used to secure ‘integral’ infrastructure in circumstances where conditions cannot be used. In limited circumstances, Delivery Agreements could also be used to request additional money outside of Levy liabilities.

1.39 This might include facilitating additional payments where a development does not meet planning policy requirements, securing a covenant on land in perpetuity, or maintaining in perpetuity rural exception sites. Under the core Levy routeway, delivery agreements could also be used to secure a timely minimum payment towards off-site mitigation that is needed to make the development acceptable, such as to ensure that any requirements of the Conservation of Habitats and Species Regulations can be met. Infrastructure Levy receipts could be used to fund this, but we want to ensure confidence when mitigation will be delivered and in situations where the Levy may not raise sufficient funds to do so, setting out a minimum amount the developer will need to pay to mitigate the impact of the development, (in the event that the Levy charge does not raise sufficient funds), ensures that it can still be taken forward.

1.40 Any obligations contained in a Delivery Agreement will be subject to existing CIL Regulations (regulation 122) restrictions, and additional regulatory restrictions on use. Local authorities will continue to be able to use section 278 and section 38 agreements in relation to highways matters. However, Delivery Agreements will not be a means to request additional contributions from developers towards ‘Levy-funded’ infrastructure.

1.41 Under the core Levy routeway, affordable housing can be secured as an in-kind contribution of Levy liabilities. This means that the value of affordable housing secured can be offset against the total amount of Levy owed. How this mechanism will operate, and how affordable housing can be secured under the Levy, is explained in further detail in Chapter 5.

The infrastructure in-kind routeway

1.42 We propose retaining negotiated s106 planning obligations for large and complex sites. On these sites, highly bespoke infrastructure needs often arise, which can have a transformative effect on an area, and can sometimes take 15 to 20 years to deliver. These sites also require specialised infrastructure to be delivered at specific times throughout the development period. For qualifying schemes, s106 obligations will be used as a tool to secure infrastructure and affordable housing as an in-kind contribution of the Levy.

1.43 This is a practical approach to the largest sites, as it will reduce situations where developers pay the Infrastructure Levy, for that cash to then be passed back to them to deliver infrastructure. On a large scheme, this more flexible approach will help accommodate the transformative impact such a scheme will have on an area, and ensure a wide-ranging agreement can be in place to aid the efficiency that infrastructure projects, and the scheme itself, can be delivered.

1.44 There are, however, key differences from how s106 agreements will function under the Levy than they do in the existing system. First, the value of any contributions towards infrastructure will have to equal or exceed the value of what otherwise would be secured through a calculation of the Infrastructure Levy. This means that the value of that agreement cannot, through the process of negotiation, go below a certain monetary value. This will be known as a ‘Levy backstop amount’. Our preferred approach is that any shortfall in the value of the infrastructure provided on site, or contributed to, will be made up through a cash payment to the local authority. This approach not only provides a baseline for negotiations but ensures fairness between the two routeways.

1.45 Second, the infrastructure in-kind routeway will only apply to qualifying sites that fall over a certain threshold based on site size, limiting the use of s106 across the system.

1.46 Where the threshold for this routeway is set will have significant implications for the final design of the Levy. If the threshold for the infrastructure in-kind routeway is low, more sites will qualify, which means there is greater the scope for developers to deliver infrastructure as an in-kind contribution. If it is set high, and fewer schemes qualify, then, through the local plan, clear expectations may need to be set about how the land is to be used. For example, if a site requires a new school or GP surgery to mitigate the direct impacts of the site, rather than the cumulative impacts of population growth, this will need to be made clear in the local plan so that the development cost can be taken account of in the setting of rates.

1.47 Where the threshold for this routeway is set will have significant implications for the final design of the Levy. If the threshold for the infrastructure in-kind routeway is low, more sites will qualify, which means there is greater the scope for developers to deliver infrastructure as an in-kind contribution. If it is set high, and fewer schemes qualify, then, through the local plan, clear expectations may need to be set about how the land is to be used. For example, if a site requires a new school or GP surgery to mitigate the direct impacts of the site, rather than the cumulative impacts of population growth, this will need to be made clear in the local plan so that the development cost can be taken account of in the setting of rates.

1.48 There are several options:

a) A high threshold. A threshold could be set so only the very largest and most complex sites are suitable for the ‘infrastructure in-kind’ routeway. This could include new settlements of 10,000 homes and above, or complex urban regeneration sites with large scale redevelopment of existing buildings. Given the benefits of a tax-like system provided by the Levy, this is our preferred option. It will mean that the greatest number of sites possible are subject to the core Levy routeway.

b) A medium threshold. A threshold could be set that is somewhat lower to cover urban extensions. This could be somewhere between 2,000 and 4,000 units for example.

c) A low threshold. A threshold could be set that is far lower, such as for sites over 500 units. That lower number of units is for illustrative purposes only and we wish to test the principle of a lower threshold. We are not currently in favour of setting a low threshold, given the associated levels of negotiation this will entail, which the Infrastructure Levy seeks to reduce.

d) Local authority discretion. An alternative approach could be that local authorities set their own qualifying threshold for this routeway, which they could set out in their Infrastructure Delivery Strategy (see Chapter 4). Guidance will set parameters for how local authorities should take this decision. For the Infrastructure in-kind routeway, the role of s106 agreements will also be defined through consultation and regulations.

Question 7: Do you have a favoured approach for setting the ‘infrastructure in-kind’ threshold? [high threshold/medium threshold/low threshold/local authority discretion/none of the above]. Please provide a free text response to explain your answer, using case study examples if possible.

The S106-only routeway

1.49 A minority of developments, such as those which do not meet the definition of development set out in 204E of the Bill (such as mineral and waste sites), will not be charged to the Levy and remain subject to s106 planning obligations as now. S106 will operate subject to the restrictions about the use of s106 currently set out in CIL regulation 122, which sets out the circumstances in which s106 obligations can be a reason for granting planning permission.

Table 2: The restricted role of S106 under the Levy in the three Infrastructure Levy routeways

Policy approach/routeway	Integral Infrastructure	Levy-funded Infrastructure	Delivery of Affordable Homes
1. Core Levy routeway	Planning conditions and Delivery Agreements	Cash payment of Levy liabilities	In-kind payment of Levy liabilities (where residential development is proposed)
2. Infrastructure In-Kind routeway	Planning conditions or s106 agreements where needed	In-kind payment of Levy liabilities secured through s106 agreements	In-kind payment of Levy liabilities (where residential development is proposed)
3. S106-only routeway	The distinction between integral and Levy-funded infrastructure does not apply. s106 agreements used as now	The distinction between integral and Levy-funded infrastructure does not apply. s106 agreements used as now	No affordable housing sought

Question 8: Is there anything else you feel the government should consider in defining the use of s106 within the three routeways, including the role of delivery agreements to secure matters that cannot be secured via a planning condition? Please provide a free text response to explain your answer.

Chapter 2: Levy rates and minimum thresholds

Key parts of the Bill that this Chapter relates to include the following sections of new Part 10A of the Planning Act 2008 (inserted by Schedule 11, Part 1 of the Bill):

• 204E: Liability: interpretation of key terms
• 204G: Amount
• 204H: Charging schedule: consultation and evidence
• 204I: Charging schedule: examination
• 204J: Charging schedule: examiner’s recommendations
• 204K: Charging schedule: approval
• 204X: Secretary of State: power to permit alteration of IL rates and thresholds
• 204Y: Secretary of State: power to require review of charging schedules

Setting rates and minimum thresholds

2.1 A key trade-off in designing the Levy concerns managing complexity and maximising land value capture. Seeking to maximise value capture by charging a bespoke Levy per development, for example, could capture more value but introduces significant uncertainty and operational complexity. A highly simplified Levy where national or regional rates are applied will be easier to navigate but is unlikely to be sufficiently flexible to ensure it can capture at least as much value as the current system. The government is seeking to strike an appropriate balance to manage this tension by allowing local authorities to set their own rates and minimum thresholds (a threshold for liability below which the Levy will not be charged).

2.2 To capture more value than the current system, local authorities will need to be able to maximise Levy revenues whilst maintaining the viability of development in their area. Localised rate and threshold setting will enable local authorities to reflect local land values and circumstances in how they prepare a Levy charging schedule. Doing so also provides the flexibility to bring development into scope of developer contributions which is typically out of scope in the current system.

2.3 The existing CIL framework serves as a foundation for how Levy rates and minimum thresholds will be set. A Levy charging schedule, which must be issued in accordance with new section 204G, will set out Levy rates and minimum thresholds. Having these rates set up front will remove, in most instances, the time-consuming negotiation of s106 agreements and provide considerably more certainty for local authorities and developers alike.

2.4 In determining their charging schedules, the Bill stipulates that local authorities must have regard to various factors. These include the degrees to which revenues and levels of affordable housing generated by developer contributions will compare to those at present, the viability of development, and an Infrastructure Delivery Strategy (to outline how local authorities intend to spend Levy receipts, including the proportion to be put towards affordable housing). Local authorities will use appropriate available evidence to inform how they prepare their charging schedules, and the schedule will then be subject to public examination.

2.5 As per new section 204G, local authorities will be able to set different rates and/or minimum thresholds for different development uses and land typologies in their local area. This approach will also allow the Levy to be aligned to the National Planning Policy Framework (NPPF). The NPPF prescribes substantial weight to the value of using suitable brownfield land and the Levy will need to facilitate these policy intentions. This may result in local authorities taking the decision to set a lower rate for brownfield development and higher rates being applied to greenfield development, where appropriate. This would reflect the higher existing use values and construction costs typically associated with brownfield sites.

2.6 A local authority may take such a choice as brownfield land tends to have a higher existing use value and may be subject to costly remediation. Such an approach might be delivered through the use of different charging zones (as with CIL now). It may also be appropriate for local authorities to apply different Levy rates and minimum thresholds to residential and commercial development respectively, to reflect the differences in build costs and development values. In each instance, rates must be prepared in a way that allows different kinds of development in an area to remain viable.

Make-up of minimum thresholds

2.7 New section 204G, enables regulations to permit charging schedules to operate by reference to several elements related to development, including floorspace. This will allow local authorities to set a minimum threshold for Levy liability (on a £ per m² basis), below which the Levy will not be charged. A minimum threshold will account for the costs of development in an area, and the value of the land in its existing use, broadly ensuring that the Levy is charged only on the additional value of a development.

Make-up of Levy rates

2.8 New section 204G(8)(b) provides that regulations may permit charging schedules to operate by reference to any measurement of the amount or nature of development. The Levy will be applied as a percentage figure charged on the GDV of a scheme above the minimum threshold. Levy rates will be charged to the internal area (m²) of a development as a percentage of the final GDV (£ per m²) above this minimum threshold. In simple cases, such as housing development sold on the open market, the final GDV will be the sales value of the housing.

2.9 Basing the charge on final sale GDV means liabilities will track price changes in the development market. In the event of a fall in house prices, for example, Levy liabilities will automatically reduce and, where prices rise faster than expected, the Levy will make sure the community benefit from that increase in value. By automatically reflecting changes in market prices, the Levy removes one of the key drivers behind negotiation in the existing system.

Setting ‘stepped’ levy rates

2.10 With the existing system, local authorities need to balance the infrastructure needed to support new schemes with viability. Some local authorities may set high requirements for affordable housing contributions, with the expectation these will be reduced on marginally viable sites. CIL-charging authorities may also account for viability by setting rates cautiously. Local authorities will also be able to create a ‘buffer’ to maintain viability in how they set the Levy.

2.11 The Bill, at new section 204G(6)(f), will allow provision to be made in the regulations for Levy charging authorities to set ‘stepped’ rates which increase at specified future points. That will enable rates to be set with a greater buffer initially, but which can be stepped up over time. Stepped rates will serve as a useful tool when implementing the Levy, reducing the risks of both overly ambitious rate setting (which may lead to landowners withholding land) and overly cautious rate setting (which could see a reduction in value captured).

Dealing with the variability of sites

2.12 Levy rates and minimum thresholds should be set at levels appropriate to be charged to sites that are typical of a typology of development which is in a local authority’s area. In doing so, they will balance the need to capture land value uplift with the need to ensure that development remains viable. A core part of this judgement will be the premium that is allowed for landowners above existing use value, in order to incentivise a landowner to bring their site forward for development. Local authorities will need to balance allowing a sufficient incentive, with the ambition to capture more value.

2.13 Other factors that will need to be taken into account when setting rates and minimum thresholds include the value per square metre of the site in its existing use, the density of any building in its existing use, demolition and remediation costs, build costs including ‘integral’ infrastructure, the extent of mitigation required to make the site acceptable, and the allowable density of the final development.

2.14 Our proposed approach to balancing viability and land value capture across variable sites is as follows:

• The application of a minimum threshold. The threshold means that broadly only value generated above the average costs of purchasing and developing a site is subject to developer contributions. This does mean that if the GDV of the site only just exceeds the minimum threshold, the total Levy liability will be low, and that if it substantially exceeds the minimum threshold, the total liability will be higher.
• Assessing the ‘window’ of possible rates and minimum thresholds. Local authorities should assess where rates and thresholds can be set, what a maximum rate could be, what they capture now, and how rates and thresholds account for construction costs and sale values within the local area.
• Local authorities should include a ‘buffer’ when setting rates and minimum thresholds. Rather than seeking a revenue maximising rate, applying a buffer will allow for circumstances such as higher than modelled existing use values, and higher than anticipated build costs to be incorporated into the price a developer will pay the landowner, and still leave a reasonable premium for the landowner. Local authorities may also set stepped rates (see above), to reduce this buffer over time, and to set long-term expectations for the level of the landowners’ premium.
• Local authorities should assess the present value of developer contributions they secure. Where local authorities are setting rates under the Levy, they should be taking as their starting point how much they actually receive through the existing system, including the amount of affordable housing received.
• Assessments of build costs when setting rates should include policy requirements. Policy requirements could include the delivery of electric car charging points, as well as matters considered ‘integral’ infrastructure, which are expected to be secured through planning conditions or delivery agreements.
• Local authorities should assess where it is appropriate to set different rates geographically. That could include, for instance, in greenfield and brownfield areas – and by typology – such as residential and commercial rates. On brownfield sites, separate rates should be set for the regeneration or replacement of existing floorspace (see below).
• See paragraph 2.30 for discussion of whether further measures are needed.

Treatment of existing floorspace under the Infrastructure Levy

2.15 Under the existing system, floorspace that is re-used or demolished is offset from CIL liabilities, and the vacant building credit means that existing floorspace should not be subject to contributions towards affordable housing through s106.

2.16 Under the Levy, in circumstances where existing floorspace is subject to a change of use or demolished and replaced, it may be possible for some developer contributions to be sought, while recognising that the value to be captured may be substantially lower than for development on vacant land. The Levy would need to be charged accordingly such that it ensures viability across these types of development.

2.17 Where an existing building is subject to a change of use or is demolished and replaced, any uplift in land value is, in most cases, much lower relatively on a per metre basis than for development on vacant land. This means that what scope there is for developer contributions might be more constrained, as demonstrated by the University of Liverpool case studies.

2.18 To charge the Levy in such circumstances, therefore, we propose that separate Levy rates and thresholds are charged to existing floorspace that is subject to change of use, and to floorspace that is demolished and replaced. These rates will be substantially lower than the rates and threshold that are applied to new floorspace, and could be set at zero, providing a partial or full offset for existing floorspace that undergoes a change of use or is replaced.

2.19 Where development comprises a mix of subject to change of use, replacement, and/or brand new floorspace, the relative proportions of each have a substantial effect on the total amount of value generated. The higher the proportion of new floorspace to existing floorspace, the more value is generated. Hence, charging the Levy to reflect this proportion (i.e., applying different Levy rates and thresholds to the floorspace in a development that is either new, subject to change of use, or replacing that which is demolished) will mean that Levy rates are able to accurately reflect and be charged upon the aggregate value uplift arising from different kinds of development, without making those types of development unviable.

2.20 In so doing, whilst not precluding the ability to set different rates or thresholds for different zones or typologies, we envisage that it will reduce the need to do so and help maintain viability across the full range of different development that can occur across an area.

Proposed charging framework for the Levy

2.21 Based on the above, a Levy setting framework might look like the below. A worked example of how the Levy could be charged in this way is provided in Annex B.

Rates	Application
Main rate	A rate (or set of rates) that are applied to most development
Regeneration rate	A specific rate applied to the conversion or repurposing of existing floorspace, including under PDR, which likely would be set at a low level to uphold viability.
Replacement rate	A specific rate applied when floorspace is demolished and replaced, which could be set at zero.

Minimum Thresholds	Application
Main threshold	The main minimum threshold applied to most development. This could be set low, or high, and anchored to a variety of factors such as the existing use value of land, build costs, or others.
Existing use threshold	Higher than the main threshold. This would be paired with the re-use and demolish rates.

Permitted development rights

2.22 Permitted development rights are a national grant of planning permission which allow certain building works and changes of use to be carried out without having to make a full planning application. Permitted development rights are set out in the Town and Country Planning (General Permitted Development) (England) Order 2015, as amended. Some permitted development rights allow for the creation of new homes, for example through the change of use or upward extension of certain existing buildings.

2.23 Permitted development rights which create additional floorspace can be subject to developer contributions currently. However, most permitted development rights relate to small householder development or do not create additional floorspace so may not fall within the scope of developer contributions. The Bill has been designed to accommodate capturing permitted development rights subject to provision that is made in regulations.

2.24 There are several approaches that can be taken to capture value from these sites while preserving their viability. For instance, it could be that permitted development is exempt from the Levy entirely, though this would not increase the scope of developer contributions. Similarly, local authorities could be allowed to set their own tailored Levy rates on such schemes, though this may result in various different approaches being taken across different areas.

2.25 Expanding the chargeable scope of developer contributions through the Levy to include these schemes will need to consider the balance between collecting more value and maintaining viability, especially given these conversions constitute brownfield development, the development of which will remain a priority for Government.

2.26 That is why the government’s lead proposal seeks to strike an appropriate balance. It is proposed that the Levy will only be charged on the revenues that the developer receives from a development brought forward under permitted development rights when the value of the square footage of the scheme is over a certain threshold. That minimum threshold could be set through regulations, at £x per square metre of development, with local authorities able to set higher minimum thresholds where appropriate. In that way, permitted development schemes that do not create significant uplift in land value would come forward without a charge to the Levy, but those more likely to have a transformative effect on the area will be in scope of the Levy.

2.27 To make sure that this approach is uniform, that value threshold would be set nationally in Levy regulations. The government also proposes that a maximum Levy charge would be set for permitted development schemes to protect viability. Local authorities will then retain the ability to charge the Levy at that maximum amount, or at a lower rate, if they choose to do so.

2.28 By setting a floor for the minimum threshold, and a maximum percentage rate for permitted development, local authorities would be more constrained in how they could charge the Levy for this type of development. This will help to ensure that appropriate rates are set, and that the Levy does not make permitted development unviable where it is charged.

2.29 We welcome respondents’ views on a suitable value threshold for qualifying permitted development, and the percentage of the ceiling for a Levy charge. The Government will set both with the objective of preserving viability of these brownfield development schemes. Upon reviewing responses to this lead proposal, the government will consider the best approach to take forward in the regulations.

Question 9: Do you agree that the Levy should capture value uplift associated with permitted development rights that create new dwellings? [Yes/No/Unsure]. Are there some types of permitted development where no Levy should be charged? [Yes/No/Unsure]. Please provide a free text response to explain your answer where necessary.

Question 10: Do you have views on the proposal to bring schemes brought forward through permitted development rights within scope of the Levy? Do you have views on an appropriate value threshold for qualifying permitted development? Do you have views on an appropriate Levy rate ‘ceiling’ for such sites, and how that might be decided?

Addressing the variability of Brownfield Land

2.30 The principles outlined above should deal with variability in many areas. Local authorities will be able to set different rates for different areas and typologies of development, and offset existing floorspace, and the Levy will expand the type of development upon which contributions are sought. This should allow local authorities to deal with substantial amounts of variability between types of development, support the Levy in capturing more than the existing system, while providing local authorities with flexibility and tools to preserve development viability on a variety of different sites.

2.31 Some stakeholders, however, have suggested that this approach will not be able to preserve viability and capture more value in areas with significant levels of brownfield land with highly variable existing use values. Research by the University of Liverpool (see Annex A) concluded that for brownfield sites studied, there was narrower scope for local authorities to set variable rates whilst preserving viability. It should be noted that this conclusion is equally true of the existing system, in that the scope for developer contributions to be exacted on residential brownfield development is constrained to higher value settings.

2.32 Nevertheless, understanding more about such areas will be valuable, as per Question 11. Views are sought as to whether there are circumstances where our proposed approach to localised rate setting, and the charging of different rates for existing/demolished floorspace, may still present challenges to site viability and whether further mitigations are required.

2.33 Mitigations might include allowing local authorities to provide additional offsets from the Levy if specific circumstances are met. Those could include where there is substantial variation between the existing use value used to set rates, and the existing use value of a particular site. We are interested in exploring how such an offset may operate and, whether there is an evidence base which will support taking further steps.

Question 11: Is there is a case for additional offsets from the Levy, beyond those identified in the paragraphs above to facilitate marginal brownfield development coming forward? [Yes/No/Unsure]. Please provide a free text response to explain your answer where necessary, using case studies if possible.

Infrastructure Levy charging schedules

2.34 New sections 204H to 204L provide for the rate and threshold setting process for the new Levy to be like the existing one for CIL, in that Infrastructure Levy charging schedules will subject to consultation and public examination.

2.35 As per new section 204G, in setting rates, local authorities will have to consider various factors, including a requirement (to be detailed in the regulations) that rates are set with regard to the desirability of maintaining or exceeding the levels of affordable housing that are currently secured through developer contributions in their area.

2.36 The examiner will be able to determine whether the charging schedule and plans for spending the Levy (see the Infrastructure Delivery Strategy, in Chapter 4) are able to deliver sufficient affordable housing (including, as a minimum, maintaining existing rates of delivery) and infrastructure to offset the impact of development, while sufficiently protecting viability.

Examination of charging schedules

2.37 As with the examination of CIL charging schedules, the local authority will be responsible for appointing the examiner. The Bill sets out the framework for the examination process at new sections 204H-204K.

2.38 In practice, it is expected that a charging authority will prepare its evidence base to draft Levy rates and thresholds in collaboration with key stakeholders, including neighbouring and overlapping authorities. A draft schedule will then be published for consultation, in response to which representations are sought. Those representations, as with CIL schedules, must be considered prior to submission for examination. The consultation process will provide an opportunity for interested parties to submit evidence that challenges the local authority’s assumptions underpinning rates or minimum values. This could be site-specific, or across the local authority area.

2.39 An independent person – the examiner – will examine that schedule in public before their recommendations are published. Where the examiner recommends that a schedule is rejected, a charging authority cannot approve the schedule. Where charging authorities receive recommendations for changes, they must set out how they have adopted them in a revised schedule and given regard to the examiner’s recommendations, before approving the schedule.

Ensuring rates and thresholds are appropriate in changing circumstances

2.40 Build costs may change over time. If the minimum threshold did not also change in response, this could impact on the viability of development. That is why it is intended for the minimum threshold to be indexed to a measure of inflation, to account for variations in build costs. New section 204G(8)(d) will be able to facilitate this.

2.41 It could also be possible that rapid changes to the economy make development unviable. In such circumstances, section 204X of the Bill, gives the Secretary of State power to permit a local authority, a selection of local authorities, or all local authorities, to lower Levy rates or increase minimum thresholds for a time-limited period, without the need to conduct a full review of their charging schedule.

2.42 Section 204Y of the Bill allows the Secretary of State to direct a local authority to review its charging schedule. In this instance, the local authority will decide whether to revise or replace its charging schedule – if so, it will go through the standard approach of setting rates, consulting on a draft schedule, and subjecting it to examination in public. However, if a local authority fails to carry out a review when directed, the Secretary of State may appoint a person to undertake the review process on its behalf.

2.43 While the Secretary of State could allow the local authority to make changes in this way, local authorities will still retain ultimate control on setting their rates and the authority cannot be directed to adopt a specific rate following any intervention.

Question 12: The government wants the Infrastructure Levy to collect more than the existing system, whilst minimising the impact on viability. How strongly do you agree that the following components of Levy design will help achieve these aims?

- Charging the Levy on final sale GDV of a scheme [Strongly Agree/Agree/Neutral/Disagree/Strongly Disagree/Unsure]
- The use of different Levy rates and minimum thresholds on different development uses and typologies [Strongly Agree/Agree/Neutral/Disagree/Strongly Disagree/Unsure]
- Ability for local authorities to set ‘stepped’ Levy rates [Strongly Agree/Agree/Neutral/Disagree/Strongly Disagree/Unsure]
- Separate Levy rates for thresholds for existing floorspace that is subject to change of use, and floorspace that is demolished and replaced [Strongly Agree/Agree/Neutral/Disagree/Strongly Disagree/Unsure]

Question 13: Please provide a free text response to explain your answers above where necessary.

Standardising the rate-setting process for local authorities

2.44 Under the Infrastructure Levy, site specific viability negotiations will not be undertaken. The Infrastructure Levy will also capture more value than is currently captured under CIL – as it will secure under a single mechanism the value that is currently captured across both CIL and s106. A number of stakeholders have raised concerns that this will lead to Infrastructure Levy charging schedule examinations becoming much more challenging than existing CIL examinations, and that disputes which currently occur in the s106 viability system will be imported into the Levy.

2.45 We recognise this risk and will seek to design the process of examination to balance the ability for landowners/developers to challenge inaccurate assumptions, while also providing local authorities confidence that proposed rates will not be argued down to ‘lowest common denominator’ rates. We will also consider what areas we wish to focus examination challenges on: for instance, whether the development typologies to which rates are applied are appropriate.

2.46 As part of this, we are considering what elements of the rate setting process can be standardised. local authorities will need to gather bespoke local information to prepare charging schedules. There will be benefits if preparation is based on a standardised approach incorporating uniform inputs, through the use of standard rate setting models, with inputs being varied on a local basis. We will work with local authorities through responses to this consultation and through the ‘test and learn’ process to make sure these tools provide sufficient support.

Chapter 3: Charging and paying the Levy

Key parts of the Bill that this Chapter relates to include the following sections of new Part 10A of the Planning Act 2008 (as inserted by Schedule 11, Part 1 of the Bill):

• 204D: Liability
• 204E: Liability: interpretation of key terms
• 204R: Collection
• 204S: Enforcement
• 204V: Appeals

3.1 CIL liabilities are set at the point planning permission is granted, which provides CIL-charging authorities with payment broadly alongside commencement, though does not reflect changes in the market that occur throughout scheme delivery.

3.2 In contrast to CIL, final Infrastructure Levy liabilities will be based on GDV at completion, which will be responsive to market conditions. The final GDV will be reflected in the sales price of the development, or a valuation of the market price if the development is not sold. This removes the need for obligations to be renegotiated if the GDV is lower than expected and allows local authorities to share in the uplift if GDVs are higher than anticipated.

3.3 The basis of the Levy liability on final GDV does mean, however, that some additional estimates of the final liability will be required earlier in the process of developing a site. This will provide both developers and local authorities an indication of the amounts they are likely to pay and receive respectively, but also enable the registering of that liability against the site as a land charge.

3.4 It is envisaged that the calculation and payment of the Levy will be achieved through a three-step process. The calculation of an indicative liability, the calculation and payment of a provisional liability, and the calculation and discharge of a final adjustment payment.

3.5 These are outlined in Table 3 below, which sets out the government’s lead option for charging and paying the Levy. The powers in the Bill at new sections 204D and 204E mean that the methodology for this payment process can be introduced through regulations. We are seeking views on the process proposed below.

Table 3: Proposed process for calculating and paying the levy

Payment Process: Indicative liability calculation

Planning Stage: Submitted with the planning application.

Detail: Charging schedules will include assumed values, such as average GDV per m² for a site in an area/typology, as well as Levy rates and thresholds.

Based on this data, an indicative Levy liability is calculated; a developer will only need to know the floorspace of the potential site, meaning indicative liabilities can be calculated prior to planning permission being sought. Once planning permission is granted, a developer or other party must assume liability to commence development, and the Levy liability will be registered against the development site as a local land charge. A valuation will not be required at this stage (although we are interested in whether there should be scope to allow a developer to provide a valuation in certain circumstances – for instance, where they anticipate that the GDV will be well below what is assumed in the standardised calculation).

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Payment Process: Provisional liability calculation and payment

Planning Stage: Post-decision, before the development is occupied.

Detail: Post-commencement but prior to first occupation of the scheme (or of a phase of the scheme) payment of the provisional Levy liability can be initiated by a developer.

An independent valuation of anticipated GDV per m² of the scheme may be required to calculate the provisional Levy liability. The need for a valuation may be set within tolerances e.g. if developer/local authority believe the value is a specific percentage lower or higher than that set out in the indicative calculation, although a valuation will always be needed if the development is not going to be sold.

The price that a registered provider will pay for affordable homes that will be built on-site will also be required.

Payment of the provisional liability allows the local land charge and any occupation restriction linked to the Levy to be removed from the development (or phase of development).

The land charge and occupation restrictions will provide the local authority with strong controls to ensure payment of the provisional liability, which will make up the bulk of the payment, prior to the development being sold.

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Payment Process: Final adjustment payment

Planning Stage: Post-completion or once the development is sold.

Detail: Either party can require a final adjustment payment, in which adjustments to the provisional liability payment are made to reflect the actual market value of the development. Sales price will be a key factor here, with appropriate assurances that it represents the actual market value.

The final adjustment payment makes sure that the correct Levy liability is discharged at the point of site completion. It may result in the developer making a further payment to the local authority, or the local authority returning an overpayment to the developer. Where a development isn’t sold, a valuation will be undertaken to determine what the final GDV of the site will be, had it been sold on the open market.

Local authorities will be able to charge penalty fees for late payment of the final adjustment payment. Regulations will set out detail on the process for making sure any overpayment is returned to developers.

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The timing of Levy payments

3.6 Some stakeholders have expressed concerns about the timing of Levy payments, occurring near completion of a scheme, and the associated implications for infrastructure delivery (see Chapter 4) and local authority cashflows. Enabling local authorities to borrow against Levy proceeds should mitigate this concern, as this will allow for the forward funding of infrastructure. The provision of ‘integral’ infrastructure by a developer will also mean that infrastructure crucial to the operation of a site will come forward alongside its construction.

3.7 Should payment of the Levy be made up front, before commencement of a scheme, this will impact the likelihood of sites coming forward and impact viability. Charging the Levy on final value of development will enable local authorities to capture more value than they would if developers paid at the start of the process. This is because development values are not known when planning permission is first granted and frequently rise over time.

3.8 We are seeking views on how process outlined above will work in practice. Given concerns over payment upon completion, we are also interested exploring whether there are circumstances where a local authority should be able to request and receive payment of the Levy at a time of their choosing. Question 15 below invites respondents to put forward counter proposals. We also welcome views on how early payment can be achieved in responses to questions below.

Question 14: Do you agree that the process outlined in Table 3 is an effective way of calculating and paying the levy? [Yes/No/Unsure] Please provide a free text response to explain your answer where necessary.

Question 15: Is there an alternative payment mechanism that would be more suitable for the Infrastructure Levy? [Yes/No/Unsure] Please provide a free text response to explain your answer where necessary.

Imposition of a local land charge

3.9 Once planning permission is granted, a developer or other party must assume liability to commence development. At this point, the Levy liability will be registered against the development site as a local land charge. The local land charge and any occupation restriction linked to the Levy will be removed from the development once payment to meet the provisional Levy liability has been made.

3.10 Some stakeholders have suggested that the removal of the local land charge should not occur when the provisional Levy liability is paid, but instead remain attached until the final adjustment payment is made, and a scheme is complete. It has been argued that this is required, or else liable persons may be able to escape payment of the final adjustment amount. While this approach will help make sure liable persons pay the full Levy amount owed, it will also inhibit the sale of new homes before completion, reduce the incentive for the provisional liability to be paid prior to completion, and potentially risks that liability for the land charge is passed on to residents.

3.11 That is why the lead proposal is for the land charge to be linked to the discharge of a provisional payment. To protect against any failed payments due at the final adjustment payment stage, Section 204S(10) of the Bill allows for a penalty fine to be charged for unfulfilled IL liabilities. The minimum value for that penalty is higher than the equivalent provision under CIL to deter developers from seeking to avoid paying total liabilities owed.

Question 16: Do you agree with the proposed application of a land charge at commencement of development and removal of a local land charge once the provisional levy payment is made? [Yes/No/Unsure] Please provide a free text response to explain your answer where necessary

Question 17: Will removal of the local land charge at the point the provisional Levy liability is paid prevent avoidance of Infrastructure Levy payments? [Strongly Agree/Agree/Neutral/Disagree/ Strongly Disagree/Unsure] Please provide a free text response to explain your answer where necessary.

Possibility for payment on account

3.12 As the Levy is charged on the final development value, this shifts the payment points towards completion of development or a phase of development. This means the Levy can respond to market conditions, capturing increases in value while keeping developments viable.

3.13 Developer cashflow is best supported by payment of the Levy close to completion of a phase. Later payment also supports higher Levy rates, and greater land value capture by the local authority. However, it could place an increased burden on local authorities for the timely delivery of infrastructure, which can be mitigated by allowing local authorities to borrow against anticipated Levy receipts to aid the cashflow of the delivery of infrastructure.

3.14 Any approach to rate setting will need to appropriately account for the timing of payments expected from developers.

3.15 In Table 3, we propose that the provisional Levy liability will be paid prior to a scheme or phase of a scheme being completed. It is envisioned that this will occur at the discretion of the developer. Some stakeholders have suggested that local authorities should be able to require the payment of a provisional liability at a certain time. Section 204R will enable provision to be made in IL regulations, to set out circumstances and criteria for where such action may be justified. We are interested in the stakeholder views as to when this will be appropriate and/or beneficial.

Question 18: To what extent do you agree that a local authority should be able to require that payment of the Levy (or a proportion of the Levy liability) is made prior to site completion? [Strongly Agree/Agree/Neutral/Disagree/Strongly Disagree/Unsure]. Please explain your answer.

Question 19: Are there circumstances when a local authority should be able to require an early payment of the Levy or a proportion of the Levy? Please provide a free text response to explain your where necessary.

Valuations of anticipated and actual scheme GDV

3.16 The process set out in Table 3 will mean that Levy liabilities will be consistently based on anticipated and then final sale values. This will support the capitalisation of the Levy into land values and allow local authorities to benefit from any uplift. For efficient calculations of the Levy to be undertaken, valuations of the GDV may be required at the following stages:

• Calculation of the provisional liability
• Calculation of the adjustment payment (if required by either party)
• Where a development is not sold
• Where an appeal is made regarding the calculation of the Levy liability

3.17 The final adjustment calculation safeguards that the correct amounts are paid upon completion of a scheme or phase of scheme. It also accounts for Section 73 (of the Town and Country Planning Act) related changes to planning permission, as these will be reflected in the final GDV. This resolves an issue in the current regime, where application of CIL to Section 73 amendments can become onerous and a source of delay.

3.18 As each valuation will only be assessing the GDV, this should be less time-consuming than the viability assessments that form the basis of affordable housing contributions in the current planning system. The government therefore views valuations as a necessary and proportionate component of the process to deliver the objectives of the Levy.

3.19 It should also be noted that valuations will not always be required. For instance, should all parties agree, anticipated GDV could be based on the assumptions used to inform indicative liabilities. That amount could be discharged as a provisional liability payment. The final adjustment calculation would be able to account for actual values if a scheme or phase of a scheme is subject to sale. In such a scenario, no valuations would be required for payments to be made.

3.20 We expect that local authorities will be able to secure their own valuation or require that developer provides an independent valuation. This is not dissimilar from the existing system, whereby both parties may conduct viability assessments to determine local policies and viability of development in response to those policies respectively.

Valuations for the purposes of provisional Levy liability payments

3.21 Sales data, which is already the basis for Stamp Duty Land Tax, will reduce the emphasis that the provisional Levy liability valuation needs to bear in the payment process, and subsequently the potential for dispute. While it will be necessary to ensure that the sales data represents the open market price, this will frequently be an important data point that reduces scope for dispute. The aim of the provisional Levy payment is not for the local authority to receive the exact amount of Levy liable to pay by the developer, but to ensure they receive a sizeable cash proportion of the Levy liability in advance to reduce the risk of the developer defaulting, leaving the local authority with no cash revenue from development.

3.22 In these circumstances, wider tolerances may be acceptable at this stage of the Levy payment process, and it may be reasonable to limit the use of valuations to circumstances where GDV is anticipated to vary widely from the assumptions set out in the indicative calculation, for development that is going to be sold. The final adjustment payment stage will resolve these issues shortly thereafter once actual sales data is available.

Valuations for the purposes of development which are not sold

3.23 For these types of developments, the valuation will need to bear the whole weight of the Levy liability calculation. We will explore how flexible we can be in approaching such developments. For example, valuations could be agreed earlier in the process (and potentially indexed to a measure of inflation) to reduce the risk of major disputes at the payment stage.

Appeals

3.24 Section 204V in Schedule 11 of the Bill makes provision for the introduction of an appeals process for the new Levy. The existing CIL architecture serves as the basis for the Infrastructure Levy appeals process but will include a right to appeal against a decision on the value of a completed development. Resolution procedures will be designed for each phase requiring valuation. The government is engaging with relevant bodies, including the Valuation Office Agency, to understand how best to design the appeals process for the Levy that is effective and fair.

3.25 Where a developer is required to provide a valuation, it is expected that the developer will meet the cost of providing it.

3.26 Supported by RICS, the government will consider further making sure that valuation is effective in the new system. This will include exploring where further work may be needed on valuation standards for the Levy (for instance, on build to rent homes), the approach to valuing in-kind contributions of infrastructure (which we propose should be valued on a cost of construction basis), and any circumstances or development typologies for which valuation is likely to be particularly challenging, and approaches to dealing with this.

Question 20: Do you agree that the proposed role for valuations of GDV is proportionate and necessary in the context of creating a Levy that is responsive to market conditions [Yes/No/Unsure]. Please provide a free text response to explain your answer where necessary.

Chapter 4: Delivering infrastructure

Key parts of the Bill that this Chapter relates to include the following sections of Schedule 11, Part 1:

• 204N: Application
• 204O: Duty to pass receipts to other persons
• 204P: Use of IL in an area to which S204O(1) duty does not relate
• 204Q: Infrastructure Delivery Strategy

4.1 Planning effectively for infrastructure, and delivering it in a timely way, is a priority for the government. The delivery of infrastructure at the right time is key to supporting sustainable growth, with new development supported by the infrastructure necessary to create successful places. The Bill provides a flexible framework to allow local authorities to determine what their priorities are for spending the Levy including on affordable housing, infrastructure and other services.

4.2 Local authorities will be required to prepare a new document, called an Infrastructure Delivery Strategy. This will support consideration of infrastructure requirements arising from planned development in the area and will set out how Levy receipts will be directed to the affordable housing and infrastructure needed to support it. In that manner, it will be a tool for local authorities to set out their spending priorities and for local people to understand what infrastructure, such as GP surgeries, sustainable transport or schools, will be delivered to accommodate the new needs of the community.

4.3 The Infrastructure Delivery Strategy underpins an opportunity for local authorities to take a more strategic approach to how infrastructure is planned for and funded, and to work more closely than at present with their infrastructure partners. This can build on examples of existing good practice to ensure all areas see the benefits of such collaboration.

4.4 Currently, significant variation in practice exists between local authorities, which the Infrastructure Delivery Strategy can address. For instance, the negotiated nature of s106 obligations can mean that developer contributions and the local infrastructure they fund are determined on a case-by-case basis. The delivery of infrastructure can be ad hoc, as infrastructure providers may make requests of individual planning applications without significant prior engagement, because mitigation of specific aspects of individual developments are bespoke, or because a given development is the tipping point at which the cumulative need for the infrastructure in the area is reached. This is particularly apparent in cases where there is more cumulative, small-scale development than was planned for in the local plan, or where large, unallocated sites come forward.

4.5 The requirement for local authorities to publish a new Infrastructure Delivery Strategy will address these issues. It is intended to ensure infrastructure is better planned for and delivered when and where it is needed to mitigate the impacts of all development across an area, and that it is delivered ahead of when the need for it becomes too acute.

4.6 While the Infrastructure Delivery Strategy will set out a framework for infrastructure delivery, local authorities will be able to avail of several means to fund and secure infrastructure. First, local authorities will be able to view the developer contributions they receive as an on-going revenue stream to support the strategic delivery of infrastructure. Second, local authorities will be able to borrow against this revenue stream, where appropriate, to help ensure timely delivery alongside development. We will expect local authorities to pass borrowed funds to infrastructure providers where necessary, subject to agreement between both parties on the use of such funding. And lastly, the ongoing requirement for developers to deliver ‘integral’ infrastructure will ensure that site specific mitigations can be secured when they are fundamentally necessary to the site, outside of the Levy. It is expected that the Infrastructure Delivery Strategy will outline how local authorities intend to deliver infrastructure under the Levy, via the means set out above.

4.7 Moreover, ‘integral’ infrastructure will be delivered by developers, with Delivery Agreements used to specify timing of delivery in the ‘core Levy routeway’. In the ‘infrastructure in-kind’ routeway, s106 agreements will also be utilised to specify the timing of infrastructure on sites where that infrastructure is most needed given the transformative impact of a large development.

4.8 Taken together, this approach will allow local authorities to make use of Levy funding so they can meet their infrastructure needs, seek wide input from infrastructure providers and bodies, and do so without unduly impacting development viability.

4.9 A more radical approach to delivering infrastructure under the Levy could include requiring that commencement of a scheme cannot occur until all accompanying infrastructure is completed. However, this would significantly impact developer cashflow, to the extent that sites would be deemed unviable and not come forward at all. Such an approach would also restrict local authority flexibility in how they spend Levy proceeds and risk overdevelopment whereby infrastructure is completed even in circumstances where a scheme fails or is delayed. The government instead considers the methodology set out in this chapter to be a more appropriate approach.

Borrowing against Levy proceeds

4.10 The Levy will be an important source of funding for local authorities to deliver infrastructure priorities for their area to support planned development. Section 204N(8) provides various powers to make provision about funding in the regulations. Unlike in the existing CIL system where borrowing is restricted, we will allow borrowing in the Levy system. Enabling local authorities to borrow against future Levy receipts will be important to supporting an infrastructure-first approach to development. This is a change from the current CIL framework, as local authorities are not currently permitted to borrow against CIL revenues. The only exception to this is the Mayor of London (see regulation 60 of the CIL regulations)

4.11 The more strategic approach to delivering infrastructure by means of the Infrastructure Delivery Strategy, means that local authorities will be able to view their Levy receipts as a source of income against which they can borrow. When the infrastructure is to be provided by a third party, such as the county council in a two-tier area, borrowed funds may be transferred to the infrastructure provider, subject to agreement on the use of such funding.

4.12 Some stakeholders have shared concerns that borrowing against anticipated Levy receipts will expose local authorities to increased risk. As expressed above, this is one of the reasons why we are seeking views on how an early payment mechanism of the Levy could operate at Questions 21-23, to provide local authorities with earlier access to capital.

4.13 It is also why, in borrowing against Levy proceeds, local authorities will be able to make use of the Public Works Loan Board (PWLB) facility. local authorities are free to borrow, but legislation requires they only borrow where they can afford to do so. Therefore, the normal rules for borrowing from the PWLB will apply, whereby the facility can support local authority capital spending provided that capital spending has a policy objective (in other words, is not for the purpose of generating a monetary return), and that it is within the Prudential Framework. There can be risk where authorities are reliant on forecast revenues streams to afford debt if those revenue streams do not materialise or are less than forecast.

4.14 Moreover, local authorities must service the interest cost and make minimum revenue provision (a charge to revenue) with respect to debt. As the Levy will ultimately serve as an ongoing revenue stream which local authorities will be able to draw from, it is appropriate for borrowing to occur against that stream, given the PWLB lends to support a local authority’s s whole capital plan, rather than providing project by project financing. It is also possible that some authorities may not have the scope to borrow further if they are experiencing difficulties with current levels of debt.

Other mechanisms to facilitate the delivery of infrastructure

4.15 There are some circumstances where local authorities may want additional certainty that a contribution to be secured through the Infrastructure Levy will be provided. There are approaches that we could develop to allow this, although these also come with trade-offs that will need to be carefully explored.

4.16 One approach, for instance, could be to allow a financial contribution to be secured through a Delivery Agreement, with the amount being offset against the total Levy liability owed. It may be that a portion of likely Levy receipts could be paid to fund a specific piece of infrastructure. The government is aware that a prescriptive up-front payment of a portion of the Levy will have impacts on developer cashflow. It will also reduce the responsiveness of the Levy to downturns and reductions in prices, and therefore the use of such an approach will need to be limited to a proportion of expected receipts. We are interested in the views of stakeholders as to whether such a proposal would work effectively.

Question 21: To what extent do you agree that the borrowing against Infrastructure Levy proceeds will be sufficient to ensure the timely delivery of infrastructure? [Strongly Agree/Agree/Neutral/ Disagree/Strongly Disagree/Unsure]. Please provide a fre text response to explain your answer where necessary.

Question 22: To what extent do you agree that the government should look to go further, and enable specified upfront payments for items of infrastructure to be a condition for the granting of planning permission? [Strongly Agree/Agree/Neutral/Disagree/Strongly Disagree/Unsure] Please provide a free text response to explain your answer where necessary.

Question 23: Are there other mechanisms for ensuring infrastructure is delivered in a timely fashion that the government should consider for the new Infrastructure Levy? [Yes/No/Unsure] Please provide free text response to explain your answer where necessary.

Managing how the Levy is spent – the Infrastructure Delivery Strategy

4.17 The Infrastructure Delivery Strategy will be a new document, providing local communities and developers greater clarity over how Levy receipts will be spent. Our aim is that this document will provide more certainty and clarity to infrastructure providers and developers regarding a local authority’s priorities for infrastructure and what is needed to support the development proposed in the local plan, as well as the feasibility of securing the necessary funding for schemes.

Proposed content of the Infrastructure Delivery Strategy

4.18 The Secretary of State is enabled in section 204Q of the Bill to set out when and how an Infrastructure Delivery Strategy is produced. This consultation seeks views on the potential contents of an Infrastructure Delivery Strategy (Questions 24-29), to inform future regulations. Further engagement with stakeholders on the Infrastructure Delivery Strategy will proceed whilst this consultation is open.

4.19 It is currently envisaged that the Infrastructure Delivery Strategy should contain the local authority’s approach to the following:

• Part 1: The baseline of infrastructure provision in their area, how this will be impacted by anticipated growth and what infrastructure will be required to support it.
• Part 2: The approach to funding infrastructure through the Levy as well as other funding sources such as existing s106 and CIL receipts.

4.20 Parts 1 and 2 will allow local authorities to plan for the infrastructure that is required to support growth and the deliverability of the local plan. We intend this information in the Infrastructure Delivery Strategy to build upon and replace Infrastructure Delivery Plans that currently support the production of a local plan. It should also draw upon key documents like the Local Transport Plan or Local Cycling and Walking Infrastructure Plan, education infrastructure plans and pupil planning documents, the estate planning strategies of Integrated Care Boards or other relevant strategies.

4.21 We will work with local authorities and infrastructure providers to understand how we can support the preparation of this information and assessment. In summary, Parts 1 and 2 are envisaged to set out the infrastructure that is needed to fund development and the funding sources that exist to deliver it. Infrastructure bodies and providers will be required to engage with the local authority in preparing the baseline and approach as explained below in ‘Drafting Requirements’.

• Part 3: Once this evidence has been gathered, part 3 of the Infrastructure Delivery Strategy will set out the strategic Levy spending plan, setting out the local infrastructure priorities that will be funded by the Levy. The spending plan in the Infrastructure Delivery Strategy will reflect the prioritisation choices of the local authority, but the priorities are not binding on a local authority as there will need to be the flexibility to apply the Levy differently in response to the specifics of a development. However, if the overall approach to prioritisation changes, the Infrastructure Delivery Strategy will need to be updated.

4.22 The strategic spending plan will have an important role in setting out how several of the technical aspects of infrastructure and affordable housing delivery will occur. The government will work closely with local authorities and the wider sector to make the design and the content of the Infrastructure Delivery Strategy as clear and streamlined as possible. It is currently envisioned that the spending plan should contain a local authority’s approach to the non-exhaustive list below:

• ‘Integral’ infrastructure. We anticipate that an Infrastructure Delivery Strategy may include what the local authority considers to be ‘integral’ to a site, and therefore delivered by a developer or appropriate sub-contractor. This might include drainage, flood and coastal erosion risk management, internal highways requirements or an internal play area among other things. The Levy cannot be used to fund this sort of infrastructure, so including this within the Infrastructure Delivery Strategy will make it clear exactly what the developer is expected to provide as part of its build costs, and what will be funded via the Levy. This will also be influenced by decisions the government takes in relation to Questions 2 and 3 of this consultation.
• Prioritisation of ‘Levy-funded’ infrastructure. This will set out the charging authority’s approach to prioritisation and the anticipated breakdown by infrastructure type. This relates to infrastructure matters funded entirely through the Levy, intended to mitigate the cumulative impact of development and accommodate the needs of the community – like GP surgeries, schools, connectivity and transport infrastructure etc. This element of the Infrastructure Delivery Strategy could also include references to individual strategic schemes. It should also include any assumptions around land to be provided for ‘Levy-funded’ infrastructure.
• Affordable housing (see Chapter 5). The proportion of the Levy that a local authority intends to secure on affordable housing through the ‘right to require’ as a standard approach, including the tenure mix of these homes, as well as whether that authority intends to take a ‘grant pot’ approach to securing affordable homes. This should align with the requirements for affordable housing set out in the local plan and its evidence base. This will be subject to further policy development to minimise risk of duplication.
• The proportion of Levy proceeds for a neighbourhood share (see Chapter 6). Reflecting nationally set requirements, a local authority will set out in their Infrastructure Delivery Strategy the percentage of proceeds to allocate to neighbourhoods.
• The proportion of the Levy for administration (see Chapter 6). As under the existing CIL regime, authorities should set out what proportion of IL revenues will be recycled to support administration of the Levy, within any nationally set constraints.
• Levy spending can be opened up through regulations to allow for spending on non-infrastructure items, if this is a priority for the local authority. Any non-infrastructure spend will also need to be set out in the Infrastructure Delivery Strategy. Such non-infrastructure items could include funding for important local services, like social care or childcare. These can also be funded through other revenue sources.
• Borrowing (see below), and the extent to which the local authority intends to use borrowing to deliver the right infrastructure at the right time.

4.23 Infrastructure Delivery Strategies will support both local plans and Infrastructure Levy charging schedules. In the longer term, we anticipate that these processes will be aligned - however, through the test and learn phase it may be the case that the development of new local plans and the introduction of the Infrastructure Levy are not fully aligned. In those circumstances, we anticipate that Parts 1 and 2 will be particularly relevant to the development of local plans, and Part 3 will be particularly relevant to the development of charging schedules.

Drafting requirements

4.24 The drafting of an Infrastructure Delivery Strategy will be a consultative and iterative process between, for example, local authorities, infrastructure providers, including transport providers and operators, highways and transport authorities (including sub-regional transport bodies), utilities such as water companies, neighbouring authorities, Integrated Care Systems, and local education authorities (county councils in two-tier areas).

4.25 This will help to ensure that the numerous parties who currently receive or who may need contributions from developers can engage with the charging authority, that infrastructure needs are planned for and understood holistically across the period of a local plan and aligned where possible, and that providers have a better understanding of future need in an area.

4.26 It will be important that the local community is appropriately engaged in the drafting of the Infrastructure Delivery Strategy. This will ensure that the needs for the area are identified by local voices and inform how local authorities take decisions in how Levy funds are spent. There are opportunities to encourage this engagement through digital tools and through other means that local authorities might deem suitable. We welcome views from respondents on how best to facilitate community engagement on the Infrastructure Delivery Strategy in a manner that minimises new administrative burdens as part of Question 26.

4.27 However, the local authority will be the ultimate decision maker regarding where infrastructure priorities lie for their area, to support the strategic ambitions of a local plan or for a particular development. We recognise that the prioritisation of funding will be challenging, given that there could be many demands on a funding pot which is limited by the viability of proposed development. It is important that the local authority, as the democratically accountable body responsible for planning decisions, is able to prioritise mitigation that is required, albeit in the context that will be set through regulations and government guidance.

4.28 Clause 93 in the Bill requires prescribed public bodies to assist the authority in relation to the preparation or revision of the relevant plan, which includes the elements of the plan which support the Infrastructure Delivery Strategy. It will be necessary for local authorities to have input from these bodies to determine what a community requires for development to be sufficiently mitigated and for developing strategies for the delivery of infrastructure. Exactly how these bodies will be engaged will be subject to further policy development, but we welcome views on how the government can encourage this engagement as part of Question 28.

4.29 The Bill will also enable local authorities to require the assistance of infrastructure providers and other bodies in devising these strategies, and their development plans. It is in the interest of bodies to engage with the local authority during preparation of the Infrastructure Delivery Strategy. Inputting into the drafting of this document will be essential should these bodies seek to give themselves an opportunity for their views and input to be reflected in how Levy proceeds are expected to be spent.

Examination

4.30 New section 204Q(6) requires regulations to make provision for independent examination of the Infrastructure Delivery Strategy, and 204Q(7) requires that this must be combined with either the examination of a charging schedule or a Local Plan. The examination of the Infrastructure Delivery Strategy will ensure that the local authority has had due regard to its obligation to consult and take account of consultation responses, and to any national policy or guidance around the development and contents of Infrastructure Delivery Strategies and the application of Levy revenues. That includes, but is not limited to, providers of education, healthcare, emergency services, and transport infrastructure.

4.31 It will enable a local authority to provide clarity on how it will use the Levy to deliver infrastructure (such as education, healthcare, emergency services and transport infrastructure) and affordable housing needs. We anticipate that only the spending part of the Infrastructure Delivery Strategy will be required to be submitted for examination, although the wider document can be used as evidence to inform the Local Plan, to streamline the process and reduce the burdens on local authorities.

4.32 The Infrastructure Delivery Strategy could also provide a common repository of evidence useful in other plans and strategies, such as local transport plans and education infrastructure plans. It is anticipated that the Infrastructure Delivery Strategy will be an iterative document that can reflect changing circumstances as developments come forward. We will set out a process that allows for updates without further examination, and the engagement that should be undertaken alongside this. We will also set out a process for the circumstances under which a full re-examination is required.

Reporting

4.33 In the current system, local authorities are required to set out how s106 and CIL receipts have been spent as part of an Infrastructure Funding Statement (IFS). Section 204N(9) of the Bill allows regulations to require a charging authority to account for Levy receipts received or due. The government will consider the role for reporting how the Levy is spent as part of the development of regulations.

Questions on the Infrastructure Delivery Strategy

4.34 Ultimately, the Infrastructure Delivery Strategy seeks to set out an understanding of the infrastructure that is required to support the development proposed by the local plan, how this will be funded and the local authority’s approach to prioritising Levy funds. The aim is to improve transparency over how developer contributions are spent to support the local area, and to provide relevant bodies with a significant say on the distribution of Levy receipts. We intend for this transparency to extend to affordable housing, making it clear what proportion of the Levy value local authorities will require as in-kind affordable housing, through the ‘right to require’ (see Chapter 5).

4.35 In this way, the Infrastructure Delivery Strategy could play an important role in achieving the overall aim of delivering at least as much affordable housing as the current system. If setting the ‘right to require’ locally through the Infrastructure Delivery Strategy does not deliver on this aim, the government will consider alternative mechanisms to achieving this. The government wants to hear from stakeholders as to how an effective Infrastructure Delivery Strategy should operate.

Question 24: To what extent do you agree that the strategic spending plan included in the Infrastructure Delivery Strategy will provide transparency and certainty on how the Levy will be spent? [Strongly Agree/Agree/Neutral/Disagree/Strongly Disagree] Please provide a free text response to explain your answer where necessary.

Question 25: In the context of a streamlined document, what information do you consider is required for a local authority to identify infrastructure needs?

Question 26: Do you agree that views of the local community should be integrated into the drafting of an Infrastructure Delivery Strategy? [Yes/No/Unsure] Please provide a free text response to explain your answer where necessary.

Question 27: Do you agree that a spending plan in the Infrastructure Delivery Strategy should include:

- Identification of general integral infrastructure requirements
- Identification of infrastructure/types of infrastructure that are to be funded by the Levy- Prioritisation of infrastructure and how the Levy will be spent
- Approach to affordable housing including right to require proportion and tenure mix
- Approach to any discretionary elements for the neighbourhood share
- Proportion for administration
- The anticipated borrowing that will be required to deliver infrastructure
- Other – please explain your answer
- All of the above

Question 28: How can we make sure that infrastructure providers such as county councils can effectively influence the identification of Levy priorities?
- Guidance to local authorities on which infrastructure providers need to be consulted, how to engage and when
- Support to county councils on working collaboratively with the local authority as to what can be funded through the Levy
- Use of other evidence documents when preparing the Infrastructure Delivery Strategy, such as Local Transport Plans and Local Education Strategies
- Guidance to local authorities on prioritisation of funding
- Implementation of statutory timescales for infrastructure providers to respond to local authority requests
- Other – please explain your answer

Question 29: To what extent do you agree that it is possible to identify infrastructure requirements at the local plan stage? [Strongly Agree/Agree/Neutral/Disagree/Strongly Disagree/Unsure] Please provide a free text response to explain your answer where necessary.

Chapter 5: Delivering affordable housing

Key parts of the Bill that this chapter relates to include the following sections of Schedule 11, Part 1:

• 204G: Amount
• 204N: Application
• 204R: Collection

5.1 The government is committed to the Infrastructure Levy delivering at least as much – if not more – on-site affordable housing as developer contributions do now, and the Levy has been designed to meet that goal. On-site affordable housing will be delivered predominantly as an in-kind payment of the Levy through a new ‘right to require’. This will see a percentage of the Levy value delivered in-kind by developers as on-site affordable housing, protecting it from the pressure of other spending priorities. The ‘right to require’ will operate on residential development.

5.2 Affordable housing means social housing within the meaning of Part 2 of the Housing and Regeneration Act 2008, or any other description of housing that IL regulations may specify, under section 204A(4) (in Schedule 11 of the Bill). That means the ‘right to require’ and Levy receipts, can be used to secure affordable tenures such as Social Rent homes, Affordable Rent homes, Shared Ownership homes, and First Homes. The Levy has been designed to be adaptable to any potential policy changes around affordable housing tenure types in the future.

Legislative requirements for charging schedules

5.3 Section 204G of the Bill sets out what the Infrastructure Levy charging authority must have regard to, (to the extent, and in the manner specified by, the Levy regulations) when setting rates. This includes having regard to the desirability of ensuring that the amount and value of affordable housing previously delivered through developer contributions is maintained or exceeded, going forwards.

5.4 In other words, local authorities will need to evidence whether the rates they set will be able to keep affordable housing at levels that equal or exceed the level of affordable housing provided through developer contributions during a previous time-period (which will be specified in regulations). This will be tested through examination.

The ‘right to require’ work in practice

5.5 Currently, a local plan will typically set out the proportion of units on-site which should be affordable and the tenure type that should be provided. These policies are often negotiated downward on viability grounds, resulting in less than policy compliant levels of affordable housing.

5.6 Under the ‘right to require’ the local authority will set out the proportion of the Levy that must be delivered in-kind, on-site affordable housing and developers will be obliged to provide that in-kind contribution as set out by the ‘right to require’. This will strip negotiation - a major source of uncertainty and delay - from the system and strengthen the ability of local authorities to secure affordable housing. local authorities will express the ‘right to require’ as a percentage, to set an expectation as to what proportion of the Levy they will seek in cash, and what proportion as in-kind onsite affordable homes.

5.7 The proportion of the Levy liability required as in-kind affordable housing will be equal to a monetary amount. For instance, should an anticipated Levy liability be £800,000, and a local authority set their ‘right to require’ at 60%, then £480,000 of that amount will be delivered in-kind as affordable housing. Whether the ‘right to require’ is set higher or lower than this percentage, the overall liability remains the same.

5.8 The monetary value of the ‘right to require’ – in this example £480,000 - is represented by the cumulative discount of the affordable tenures on that scheme. To calculate this, it will be necessary to look to the value of the discount of an affordable tenure from the open market. For example, it would be possible for ten affordable tenures to be built onsite if each was purchased at a discount from their market price worth £48,000 (10 x £48,000 = £480,000). There are other elements to how this mechanism will function in practice – including how the floorspace of a site and a local authority’s preferred tenure mix are incorporated into a ‘right to require’ calculation. Annex C provides greater detail.

5.9 The key principle underpinning this design is that under the ‘right to require’ there will be limited scope or incentive for developers to provide less affordable housing on viability grounds, or to provide affordable housing of one tenure type over another. That is because, as the Levy liability is fixed, the full amount will have to be discharged whether the Levy liability is met via cash or through a combination of cash and an in-kind contribution of affordable homes.

5.10 The effect of the ‘right to require’, therefore, is to prevent the apportionments of onsite affordable housing from being subject to negotiation between local authorities and developers on viability grounds, which often sees those apportionments reduced. As liabilities are linked to final GDV, if the overall liability of a scheme falls, the Levy owed reduces in turn. Where this occurs, it also means that the value of the discount of the affordable homes reduces from their price on the open market. In responding to the market in this way, the ‘right to require’ can preserve the same proportion and type of affordable housing onsite delivered by developers. If GDV is higher than anticipated, the apportionment of affordable homes through the ‘right to require’ also stays fixed, with greater amounts of cash secured in line with GDV.

5.11 In order for this mechanism to function effectively, local authorities will need to engage early and work closely with affordable housing providers and developers to deliver affordable housing that best meets local need. On mixed-use development, where a portion is used for commercial purposes and another for residential, the ‘right to require’ will only apply to the residential portion of the site. Developers will not be required to provide affordable housing on elements of development that are not residential.

5.12 However, local authorities will also retain flexibility, and not be obliged to seek their full entitlement of on-site affordable housing, as set out under their ‘right to require’. This will enable them to redirect Levy resources towards other infrastructure priorities when necessary, balancing this appropriately with the affordable housing needs of their area.

5.13 Protecting this cash portion could be left to local discretion or the government could, through regulations, introduce a national cap to determine an upper limit of where the ‘right to require’ could be set. This will prevent, for instance, the ‘right to require’ being set at 100% of Levy liabilities, such that no cash will be collected from the Levy. We are aware, however, that in some rural areas it is not uncommon for affordable housing to constitute the entirety of contributions from developers, and that such a cap could therefore impact delivery of affordable tenures and be an inappropriate approach for such areas.

5.14 The practicalities of the ‘right to require’ are summarised below.

Figure 1: The operation of the ‘right to require’

1. Local authorities will produce charging schedules. These will set out Levy rates and minimum thresholds.

2. LPAs will also produce an IDS. Included will be what proportion of value secured by the Levy will be required in-kind as affordable housing - the ‘right to require’.

3. The local authority will also set out their preferred affordable housing tenure mix.

4. Based on Levy rates and anticipated GDV of a new scheme, the floorspace, the LPAs preferred tenure mix, and where the ‘right to require’ is set, a fixed number of on-site affordable homes can be calculated.

5. A developer will be obliged to deliver these on-site affordable homes to the tenure mix preferred by LPAs.

6. This affords protection to policy compliant levels of affordable housing, not present in the existing system.

The affordable housing grant pot model

5.15 The ‘right to require’ will not be the only means for delivering affordable homes under the Levy. Local authorities will be able to secure affordable housing in addition to that provided in-kind through the ‘right to require’ using a ‘grant pot’ model. Here, the local authority can choose to use Levy receipts to top up the price a registered provider is prepared to pay for affordable housing units. This means that the developer will still receive the full market value for these additional homes. Using Levy revenues in this way supports the provision of more affordable homes and can be utilised by local authorities alongside the ‘right to require’.

Question 30: To what extent do you agree that the ‘right to require’ will reduce the risk that affordable housing contributions are negotiated down on viability grounds? [Strongly Agree/Agree/Neutral/Disagree/Strongly Disagree/Unsure] Please provide a free text response to explain your answer where necessary.

Other affordable housing issues

Affordable housing quality

5.16 The government is committed to ensuring that good quality affordable housing is secured through the Levy. We will explore this area further with industry stakeholders, such as the National Housing Federation, to make sure that high-quality affordable homes are provided through the Infrastructure Levy.

Calculating ‘at least as much’ affordable housing

5.17 New section 204G(3) in Schedule 11 of the Bill gives us the power to define , through regulations, how the benchmark of delivering ‘at least as much affordable housing’ as the current system should be set and measured.

5.18 The measure of ‘at least as much’ affordable housing will need to have a degree of flexibility, to reflect that the size and tenure type of affordable units that are secured may change over time. For instance, if affordable housing need changes, and local authorities shift from requiring four-bed affordable homes to one-bed affordable homes, they should be looking to secure more units – and vice versa.

5.19 Therefore, the most appropriate measure may be the value of the cumulative discounts of affordable housing secured. This would allow a local authority to change requirements around tenure type and unit size as circumstances change in their area, while allowing a fair comparison with historic delivery.

5.20 Economic conditions also change. During a downturn, a local authority may get relatively little market or affordable housing built. If the economy is improving after a downturn, a standard of affordable housing delivery based on numbers secured during a downturn is likely to be artificially low. To address this, the average cumulative discount across several years may be the appropriate comparison point.

Treatment of development with a high proportion of affordable housing

5.21 The government’s position is that schemes comprised entirely of affordable housing will not be charged to the Levy. The government is supportive of schemes coming forward with a high proportion of affordable housing and is seeking for the Levy to accommodate them appropriately. This includes schemes with a high proportion of affordable housing with the remaining proportion sold as market housing, which are likely to be led by registered providers.

5.22 On such cross-subsidised schemes, it is possible that the value of the site allocated to affordable housing could exceed the equivalent of the total Levy liability. For instance, it might be that a cross-subsidised development is liable to a Levy charge of £500,000 on the homes to be sold on the open market. However, on the same site, the proportion of units that will be affordable tenures has a cumulative discount of £600,000.

5.23 In these circumstances, there is insufficient value to offset against a total Levy liability. That is because the cumulative discount of the affordable housing will be greater than the entire Levy liability for the market portion of the scheme. Hence our preferred proposal is to exempt the developer (likely a registered provider) from paying the Levy on a cross-subsidised site that meets this criterion. If the market proportion of a scheme does generate a Levy liability greater than the value of the cumulative discount of affordable housing, then it is expected that payment of the Levy will be due. An alternative approach to decide when it might not be appropriate to seek cash liabilities on such sites could be to exempt schemes when a certain percentage of units are affordable. Exemptions are explored further in Chapter 6.

5.24 In any case, if a scheme is exempt from paying the Levy in cash on the basis of the affordable housing it provides onsite, the developer will still be required to deliver ‘integral’ infrastructure. Whilst ‘integral’ infrastructure will mitigate the impact of the development to an extent, it will not contribute to mitigating the cumulative impact of the site in the area.

5.25 This approach to delivering ‘integral’ infrastructure should broadly mirror the existing system. Currently, fewer contributions are sought from registered provider-led and cross subsidised schemes. It may be the case, however, that restricting contributions to ‘integral’ infrastructure could result in some local authorities being reluctant to approve schemes that will receive this treatment under the Levy. We will explore the degree to which this might impact the treatment of the types of schemes mentioned above, and how we can ensure cross subsidised schemes and 100% affordable housing developments come forward. We welcome comments, as per Question 32, on the scale of infrastructure that is delivered alongside register provider-led and cross-subsidised schemes now through planning obligations.

Question 31: To what extent do you agree that local authorities should charge a highly discounted/zero-rated Infrastructure Levy rate on high percentage/100% affordable housing schemes? [Strongly Agree/Agree/Neutral/Disagree/Strongly Disagree/Unsure] Please provide a free text response to explain your answer where necessary

Question 32: How much infrastructure is normally delivered alongside registered provider-led schemes in the existing system? Please provide examples.

Question 33: As per paragraph 5.13, do you think that an upper limit of where the ‘right to require’ could be set should be introduced by the government? [Yes/No/unsure] Alternatively, do you think where the ‘right to require’ is set should be left to the discretion of the local authority? [Yes/No/unsure]. Please provide a free text response to explain your answer where necessary.

Chapter 6: Other areas

Key parts of the Bill that this Chapter relates to include Part 5, clauses 121 and 122, and the following sections of Schedule 11, Part 1:

• 204D: Liability
• 204F: Charities
• 204N: Application
• 204O: Duty to pass receipts to other persons
• 204S: Enforcement

The neighbourhood share

6.1 Section 204O of the Bill allows a proportion of the Levy to be directed towards communities, as a neighbourhood share. This will build on the approach taken in CIL, in which a proportion of funds are passed on to a parish or town council.

6.2 Retaining the Neighbourhood Share will enable local communities to receive a portion of Levy proceeds to spend as they deem appropriate, in a hyper-localised manner, in order to support the needs of the community. The spending of the Neighbourhood Share should be based on evidence showing what neighbourhoods want improve in their area. This can range from typical infrastructure improvements to funding for tackling anti-social behaviour.

6.3 It is envisaged that, under the new Levy, the value collected as Neighbourhood Share should not result in less value being allocated to neighbourhoods than in the existing system. Currently, 25% of total CIL receipts can be allocated to parished areas with a Neighbourhood Plan in place. Under the new Levy, this will be a smaller share in percentage terms than the Neighbourhood Share as it exists under CIL. That is because the Infrastructure Levy will capture value that is currently captured through both CIL and s106.

6.4 In a local authority charging the Infrastructure Levy, local authorities will set out the value of the neighbourhood share in their Infrastructure Delivery Strategy and how they determine and calculate this will be set out through regulations and guidance, reflecting any nationally set minimum proportion. The arrangements for spending the neighbourhood share in unparished areas is an area that the government intends to explore further, and we are interested in views on this.

6.5 The government is also interested whether there is scope to go further. That could include the ambition for the Infrastructure Levy Neighbourhood Share to exceed the level of quantum currently secured by the Neighbourhood Share in CIL charging authorities and equivalent amounts in non-CIL charging authorities. Doing so would mean more revenue is allocated to, for instance, Parish Councils, for spending on hyper-local needs. This approach would, however, reduce Levy receipts available to local authorities in order to support the area as a whole.

Question 34: Are you content that the Neighbourhood Share should be retained under the Infrastructure Levy? [Yes/No/Unsure?]

Question 35: In calculating the value of the Neighbourhood Share, do you think this should A) reflect the amount secured under CIL in parished areas (noting this will be a smaller proportion of total revenues), B) be higher than this equivalent amount C) be lower than this equivalent amount D) Other (please specify) or E) unsure. Please provide a free text response to explain your answer where necessary

Question 36: The government is interested in views on arrangements for spending the neighbourhood share in unparished areas. What other bodies do you think could be in receipt of a Neighbourhood Share such areas?

The administrative portion

6.6 Under s106, local authorities can charge monitoring fees and within the CIL regime, 5% of total receipts can be used by CIL charging authorities to handle the administration of the charge.

6.7 Local authorities will encounter significant expenses in shifting to a new Levy system and using the Levy to fund these costs will be important. New section 204N(8)(c) in Schedule 11 of the Bill will enable administrative expenses to also be met under the Infrastructure Levy.

6.8 It is envisioned that this should be an equivalent in value to what local authorities presently secure for administration and monitoring under CIL and S106. This could be uncapped in early years, reflecting that it will take time for revenues to accrue. The best approach to preserving the administrative portion is an area we intend to explore in further detail with ‘test and learn’ authorities.

Question 37: Should the administrative portion for the new Levy A) reflect the 5% level which exists under CIL B) be higher than this equivalent amount, C) be lower than this equivalent amount, D) Other, (please specify), or E) unsure. Please provide a free text response to explain your answer where necessary.

Exemptions and reduced rates

6.9 There are several existing exemptions to CIL. We have replicated the existing CIL charitable relief exemption (contained in section 210 of the Planning Act 2008), at section 204F in the Bill; and new sections 204D(5)(h) and 204G also provides powers for further exemptions or reduced rates to be set out in regulations. The government could therefore, via regulations, set out other national exemptions or reduced rates for the Levy.

6.10 We intend to maintain exemptions for residential annexes and extensions and self-build housing. That is because residential annexes and extensions do not generally result in new pressure on infrastructure and can enhance existing housing stock, and self-build exemptions support the diversification of the house-building industry. Therefore, we propose maintaining these exemptions under the Levy, while allowing for direct mitigations of ‘integral’ infrastructure to be sought through planning conditions or Delivery agreements.

6.11 Exemptions for affordable housing^{[footnote 2]} may operate differently. In effect, the cumulative discount across all on-site affordable housing units will be offset from the whole site’s Levy liability as part of the calculation, rather than exempt from the calculation, but the effect is to lower the site’s cash liability in proportion with the amount of affordable housing delivered. As raised in Chapter 5, in order to ease site calculations and the application of exemptions, it may be appropriate to introduce a broad rule of thumb that says, for example, if over a certain percentage of units on a site are affordable tenures, then the entire scheme is exempt from the Levy.

6.12 We also will explore whether it will be appropriate to introduce nationally set offsets from the Levy. For instance, it might be that new buildings that go beyond national or local environmental policy could have the value of sustainable technologies offset against Levy liabilities.

Question 38: Applicants can apply for mandatory or discretionary relief for social housing under CIL. Question 31 seeks views on exempting affordable housing from the Levy. This question seeks views on retaining other countrywide exemptions. How strongly do you agree the following should be retained:

- residential annexes and extensions; [Strongly Agree/Agree/Disagree/Strongly Disagree]
- self-build housing; [Strongly Agree/Agree/Disagree/Strongly Disagree]
If you strongly agree/agree, should there be any further criteria that are applied to these exemptions, for example in relation to the size of the development?

Question 39: Do you consider there are other circumstances where relief from the Levy or reduced Levy rates should apply, such as for the provision of sustainable technologies? [Yes/No/Unsure]. Please provide a free text response to explain your answer where necessary.

Approach to small sites

6.13 At present, planning obligations apply to small sites, as does CIL where it is charged. A small sites threshold is set out in policy, below which s106 contributions specifically for affordable housing should not be sought. This helps maintain the incentive for SMEs to develop such sites, whilst making sure CIL contributions can still be sought on these sites and keeping them viable.

6.14 To reflect the existing position, we propose requiring reduced Levy rates to be charged on small sites. In practice this will mean that where a scheme meets this threshold - typically fewer than ten units - a reduced Levy rate will be set, and a local authority will not be able to require that a proportion of receipts are paid in the value of affordable homes.

6.15 In designated rural areas, current policy sets out that local authorities can set lower thresholds. This means smaller sites in these areas may still be asked to provide affordable housing, including in-kind affordable housing. Under the Levy, we will seek to maintain the approach that local authorities can seek permanent in-kind affordable housing on smaller sites.

Question 40: To what extent do you agree with our proposed approach to small sites? [Strongly Agree/Agree/Neutral/Disagree/Strongly Disagree/Unsure] Please provide a free text response to explain your answer where necessary.

Question 41: What risks will this approach pose, if any, to SME housebuilders, or to the delivery of affordable housing in rural areas? Please provide a free text response using case study examples where appropriate.

Treatment of publicly funded infrastructure

6.16 Under the existing system, publicly funded infrastructure can be subject to developer contributions where appropriate. That said, it is important that any system of developer contributions should support government funded infrastructure and should not place undue burdens on its delivery.

6.17 The Bill enables government, through regulations to determine types of development that should be exempt from the Levy and also allows local authorities to set differential rates, including nil rates, for particular types of development.

6.18 It is the government’s position that government or publicly funded infrastructure be exempt from the Levy through regulations, to create a consistent approach across local authorities, given these types of projects can often be cross-boundary. The exemption through regulations would include development such as all phases of High Speed Rail 2, schemes undertaken by Network Rail, the Northern Powerhouse Rail, publicly funded schools, hospitals, and other medical facilities, or infrastructure to deliver renewable energy should be exempt from the Levy through regulations. Section 106 agreements may need to continue to be used alongside the exemption to ensure site specific mitigation is provided.

Question 42: Are there any other forms of infrastructure that should be exempted from the Levy through regulations?

Enforcement

6.19 Many stakeholders have suggested that the ability for local authorities to effectively enforce payment of the Levy will be crucial. As set out in Chapter 3, the Levy will be listed as a local land charge. The local land charge will help to make sure that Levy payments are made as it will not be removed until the provisional Levy liability is discharged. Equally, the imposition of a local land charge may not in all cases be sufficient to prevent or deter sale and incentivise payment of the Levy.

6.20 That is why issuance of Stop Notices will be permitted to prevent development commencing when no assumption of Infrastructure Levy liability is in place. We will also impose restrictions on occupation unless and until the provisional Levy liability is paid for a development or phase of development.

6.21 Failure to pay Infrastructure Levy liabilities will be met with financial penalties. While such penalties can be issued under existing CIL procedure, the value of those penalties will be greatly increased for the purposes of the Levy as per new section 204S of the Bill. The specific circumstances in which the issuing of penalties or surcharges are to apply will be a matter for IL regulations.

Question 43: Do you agree that these enforcement mechanisms will be sufficient to secure Levy payments? [Strongly Agree/Agree/Neutral/Disagree/Strongly Disagree/Unsure] Please provide a free text response to explain your answer where necessary.

Mayoral Infrastructure Levy in London

6.22 In London, Mayoral CIL (MCIL) is set and collected by the Mayor. The Bill is drafted such that the Mayor will be able to maintain the application and collection of MCIL alongside the introduction of the new Infrastructure Levy. While this will entail London Boroughs operating the new Infrastructure Levy alongside MCIL, the government believes this is appropriate, given it reduces the burden on London Boroughs of having to adopt a new Mayoral version of the Infrastructure Levy, and that this approach continues to facilitate the financing of Crossrail.

6.23 We are aware that introducing Infrastructure Levy charging schedules alongside existing MCIL schedules will present administrative challenges to London Boroughs, and as such the government is keen to work with Boroughs to make sure the system works effectively.

Opportunities to deliver these changes through digital transformation

6.24 Through use of digital tools, we aim to manage the use of local rates and minimum thresholds, for instance through the use of Levy calculators We are exploring how to formulise Levy calculations, including through the provision of clear inputs that local authorities will need to design Levy charging schedules.

6.25 This should enable local authorities and developers to establish indicative Levy liabilities quickly, aid the calculation of provisional liabilities when the latest valuation data becomes available, and help determine efficiently the number of affordable housing units that can be delivered on-site, as a proportion of Levy values, under the ‘right to require’.

Chapter 7: Introducing the Levy

Key parts of the Bill that this chapter relates to include the following sections of Schedule 11, Part 1:

• 204Y: Secretary of State: power to require review of charging schedules
• 204Z: Regulations: general

A phased ‘test and learn’ rollout

7.1 The government acknowledges that moving from the current system of developer contributions to the Infrastructure Levy represents a significant change. It also recognises that previous attempts to improve land value capture have sometimes encountered challenges.

7.2 Often those challenges have in part arisen from the quick implementation of substantive reforms, which led to administrative difficulties, and landowners withholding land from sale. We want to minimise this happening under the Levy, whilst also ensuring it can achieve the aim of capturing more land value uplift and deliver at least as much affordable housing.

7.3 While many local authorities have welcomed these principal objectives of the Levy, there are others that have also voiced concerns as to the how the new Levy will be administered and operated, citing constraints on their resourcing and perceived complexity of the new system.

7.4 Given this combination of factors, the government will introduce the Levy over an extended period through a ‘test and learn’ approach. This will see the Levy introduced in a representative minority of local authorities in the first instance, prior to a nationwide rollout to all English authorities. In the intervening period, the government will work closely with local authorities operating the Levy to monitor, evaluate, and improve its operation. Our lead policy option is that ‘test and learn’ encompasses a range of local authority settings across England and captures as much of the full variety of planning and development settings as it reasonably can.

7.5 We are of the view that this approach will provide the best possible opportunity for the Levy to meet its stated objectives – principally to capture a greater amount of land value uplift than the existing system and ultimately increase certainty for developers and local authorities. Authorities that wish to introduce the Levy before it is mandatory will also be able to adopt the new system, should they wish to do so.

7.6 Should local authority respondents be interested in becoming a ‘test and learn’ authority for the new Levy, they should contact officials at: InfrastructureLevyConsultation@levellingup.gov.uk.

Transition into the new system

7.7 Given that the Levy will be introduced at different times across certain authorities it will be important to ensure existing permissions are treated in a uniform manner. Where sites have been permitted before the introduction of the new Levy, they will continue to be subject to their CIL and s106 requirements. We are considering whether further transitional provisions are needed to account for sites which are delivered over longer time periods. However, these sites will not be moved into the new Levy system.

7.8 Once the Levy is introduced nationally, we expect that the design of a charging schedule and plan-making will align. However, upon first introduction, an Infrastructure Levy charging schedule and Infrastructure Delivery Strategy will need to be introduced together – local authorities will not be required to undertake a Local Plan review for the Levy to be adopted.

7.9 The introduction of new Levy legislation will mean CIL charging schedules do not apply to new sites from the deadline date (although CIL will still be charged on existing development which was granted planning permission before the deadline date). We will provide for this via appropriate transitional provisions so that there is a seamless move into the new Levy system. New section 204M(3) of the Bill also gives the Secretary of State the power to appoint a person to prepare and issue a Levy charging schedule on behalf of a charging authority. Use of this power will be a useful mechanism to ensure that local authorities all have Levy schedules in place in accordance with national rollout, once the ‘test and learn’ period is over.

Question 44: Do you agree that the proposed ‘test and learn’ approach to transitioning to the new Infrastructure Levy will help deliver an effective system? [Strongly Agree/Agree/ Neutral/Disagree/Strongly Disagree/Unsure] Please provide a free text response to explain your answer where necessary

Equalities impacts

7.10 Developer contributions play a vital role in ensuring that communities can benefit from new development in their area, including those with protected characteristics. A higher percentage of some groups that share protected characteristics live in the social rented sector when compared to the percentage for other tenures in England. This means that changes to the system could have a disproportionate impact on people with protected characteristics. It is important that any changes to the system take account of these and other potential impacts.

Question 45: Do you have any views on the potential impact of the proposals raised in this consultation on people with protected characteristics as defined in section 149 of the Equality Act 2010? [Yes/No/Unsure]. Please provide a free text response to explain your answer where necessary.

Prospective Timeline

7.11 The introduction of the Levy will be undertaken over the course of a decade. This means current economic circumstances are unlikely to be a decisive factor at the point the point the Levy is introduced in any particular local authority. An illustrative implementation timeline is below.

Legislation

• Bill receives royal assent
• Regulations developed and consulted on
• 2nd tranche of regulations
• Potential revisions made to regulations to address any operational issues revealed by test and learn

Early test and learn

• Test and learn LPAs begin rate setting
• First permissions granted under the Levy
• Permissions begin build-out
• Gradual ramp up of Levy revenues, as developments complete

Expanded test and learn

• Gradual expansion of test and learn authorities building on operational learning.
• Authorities can come forward and choose to operate the Levy
• Ramp up of Levy revenues as developments complete

Full roll-out

• Expansion to national roll-out, with all LPAs setting rates through charging schedules.

Annexes

Annex A: The University of Liverpool report, a summary

The government commissioned independent research to model the Levy, based broadly on the design set out in this technical consultation. A team led by The University of Liverpool (UoL) produced a comprehensive report, ‘Exploring the potential effects of the proposed Infrastructure Levy’, which can be found on .gov alongside this consultation. UoL conducted six local authority-specific case studies to help direct the government’s thinking and to develop a deeper understanding of how the Levy might function in these areas. The report incorporated existing values of land and the latest house price data to illustrate the maximum value that could be captured by the Infrastructure Levy, compared to the existing system, based on hypothetical schemes across different English authorities. In evaluating the conclusions reached in that report, and in devising this consultation, the government is seeking to address several of the challenges highlighted.

The report found that there is significant potential to capture greater value from development, most notably on greenfield land, through the Levy. In many of those cases, there are substantial amounts of uncaptured value that the Infrastructure Levy could capture, exceeding what is secured currently, although as the report states, it is unknown what proportion of schemes are represented by these types of development. Balancing this, the report concludes that local policy makers will be more constrained in how they determine appropriate Levy rates and thresholds on brownfield land, especially in settings where existing use value and/or costs are high relative to the value of development. This conclusion reflects both the reality that there is significantly more uncaptured value on greenfield sites than on brownfield, and that a tighter margin of viability exists on brownfield sites – a challenge which any system seeking to capture the uplift in land will encounter.

The report goes further on this point, stating that on some brownfield sites the Levy may not necessarily outperform the current system. For example, where real estate values are relatively low and costs are relatively high, the Levy might not be a means of exacting more developer contributions than the existing system. This does not preclude exacting at least similar levels of contributions, nor the benefits of efficiency and transparency that the Levy might provide, in these kinds of settings.

However, as is noted in the report, the models estimate the amount of value captured through the existing system on the basis of policy compliant development. This assumes that on all sites modelled, schemes have come forward with the full policy compliant contribution, including of affordable housing. The report then compares such sites to what could be captured under the Infrastructure Levy. As the report also notes, in reality, s106 obligations are currently negotiated on the basis of viability and the output of these negotiations may result in a contribution that is substantially below policy compliance.

Therefore, it is likely that the value of the contribution made by a developer will be below the level of policies set out by a local authority. Subsequently in these instances, the in-reality baseline of contributions secured under the existing system, as portrayed in the report, may in fact perform more closely to what the Levy could secure in comparison. Where local authorities are setting rates under the Levy, they should be taking as their starting point how much they actually receive through the existing system, including the amount of affordable housing received. Therefore, rates that meet the criteria of capturing at least as much value as the existing system may be significantly lower than the hypothetical lower bounds for Levy rates that are provided as examples in the report.

As such, rates featuring in the report should not be regarded as indicative of the likely rates that will be set for any particular area. In all cases, rates and minimum thresholds will need to be set in a manner that balances the aim of land value capture, securing at least as much as the existing system, and maintaining the viability of development in the area.

Nevertheless, the government is committed to making sure that brownfield areas can be prioritised for development, and takes the risk highlighted by the report seriously. Further policy work will focus on how the Levy applies to marginal brownfield sites, such that it maximises potential for land value capture across all types of sites while supporting development viability. Chapter 2 addresses this issue and explores the potential for offsets.

Where the report has highlighted risks, the government has sought to address them through the design of the Levy, as set out in the consultation. For instance, integral infrastructure will help maintain the connection between a specific site and the mitigations it requires. Questions about the timing of payments, and the use of delivery agreements, will help inform the balance of risks between developers and local authorities. Consultation and a test and learn approach will help to ensure that reform of this scale is effectively delivered.

The report features recommendations that the government views as sensible, and intends to pursue, including the need for guidance to support the rate and minimum threshold setting process. The government accepts that this will be a labour-intensive process for local authorities and will explore through the ‘test and learn’ approach what support may be necessary. Such support will be especially important for non-CIL charging authorities who will yet to have conducted viability studies pursuant to rate setting.

Annex B: An illustrative example of how the Levy might be charged

B.1 The amount of land value uplift available to be captured as developer contributions varies with development type. The process of how the Levy might be charged in a way that optimises the amount available for capture for different types of development is explained below.

B.2 The UoL report set out that for greenfield sites with high development value, high rates were possible, assuming a return to landowner of 10 times agricultural use value. On some brownfield sites, much lower rates were possible, with some being of marginal viability, and with little value uplift available to capture. We expect local authorities to set different rates to reflect local circumstances, including an assessment of a reasonable return for a landowner that will keep sites coming forward in their area. In these examples, we use an illustrative main rate of 33%, to make it easier to intuitively follow the calculations.

B.3 Please note that the figures used are hypothetical and are not intended to indicate likely Levy rates or minimum thresholds. These will be determined by local authorities and will depend on local circumstances. In reality, rates and minimum thresholds may be lower or higher than the illustration in this Annex and will depend on various factors.

B.4 This example aims to demonstrate how the Levy might be charged against different kinds of floorspace in a development, each of which are associated with different degrees of land value uplift. It will show how the Levy could be charged for development comprising one type of use, or to a mix of different uses.

B.5 It is envisaged that local authorities will be able to apply their Levy rates and minimum thresholds and a simple set of descriptive inputs for any given development, such as the type and area of floorspace to be developed and the type and location of development, to a calculator that straightforwardly establishes what the Levy charge will be in each case.

Setting a charging schedule

B.6 In the first instance, a local authority will have to prepare their charging schedule. It is envisaged that a similar approach to viability assessment currently used to set CIL rates across a local authority’s area will be used. This will require information on local build costs, associated costs such as professional fees, the existing use value of land likely to come forward for development, and anticipated development values. This will enable values to be set for the minimum threshold below which the Levy isn’t charged, and the Levy charge rate about this threshold. Different thresholds and Levy rates could apply across a local authority’s area according to development type, location and previous uses (e.g. greenfield agricultural land or brownfield former industrial land).

B.7 The Levy will be charged against the sales value of the development. The minimum threshold, below which no Levy will be charged, will account (on a £ per m² basis) for the typical costs of development (e.g. base built costs, professional fees and an allowance for contingencies) and the value of the land in its existing use. This is intended to ensure that the Levy is charged only against the additional value of the new development.

B.8 The Levy should be set at a rate(s) such that the development remains viable including ensuring there are sufficient sums available to purchase the land and for the developer to make an acceptable profit. The rate will be set as a percentage of the sale value above the minimum threshold and will be charged against the internal area (£ per m²).

Hence, in its simplest from, a Levy liability would be calculated as follows:

liability = internal area x (GDV - minimum threshold) x Levy rate

B.9 The following example involves a single rate and minimum threshold. A local authority may choose to set more than one of each, to be applied to different development types or land use typologies. However, accounting for different types of floorspace in the manner described below may limit the degree to which they need to do so as they seek to balance maximising revenues and maintaining viability of development. To maintain viability in cases where there is redevelopment, change of use or the demolition of existing buildings, it might be appropriate to set different rates and or minimum thresholds to account for potentially higher development costs.

Tables A1 and A2 show an example charging schedule

Rates	Application	Example rate
Main rate	A rate (or set of rates) that are applied to most development	33%
Change of use rate	A rate applied to the conversion or repurposing of existing floorspace	5%
Regeneration rate	A rate applied when floorspace is demolished and replaced	0%

Minimum thresholds	Application	Example threshold
Main threshold	The threshold that is paired with the main rate and is applied to most development	£1,500 / m2
Existing use threshold	The threshold that is paired with the regeneration and replacement rates	£2,500 / m2

Applying the Levy to development on vacant land

B.10 Most development occurs on vacant land, whether that be greenfield, or brownfield sites that have been developed previously but are no longer in use. The University of Liverpool report indicates that much of the development on vacant land generates substantially more value uplift that is captured currently. This is especially true where development values are high relative to the build costs and the existing use value of the land, perhaps less so where values are lower. Hence, greenfield development may have the greatest potential for the capture of more land value uplift, whereas there may be less potential with much brownfield development.

B.11 Local authorities may therefore choose to avoid these issues by setting different Levy rates and/or minimum thresholds based on development type, land use typology, or location, depending on the make-up of land and development in their area and what they consider to be the best means of balancing maximising their revenues from the Levy and ensuring development remains viable in their area. In each case, however, all new (additional) floorspace (which will be all floorspace built on vacant land), the relevant main Levy rate and minimum threshold will apply. How the example charging schedule referred to above will apply to, for instance, three residential developments of different sizes and development values is illustrated in Table A3.

Table A3 shows how the example charging schedule would apply to three developments of different floorspace area (m²) and GDV (£/m²).

Site	Area (m2)	GDV (£/m2)	Liability (£) A x (GDV - MT) x R
A	10,000	£3,000	£4,950,000
B	10,000	£4,500	£9,900,000
C	5,000	£4,500	£4,950,000

Applying the Levy to development that is subject to change of use, existing floorspace, such as an office-to-residential conversion

B.12 Changing the material use of existing floorspace can also generate some land value uplift, but the University of Liverpool report highlights how this is likely to be much lower than when new floorspace is created.

B.13 Currently, most instances of changing the use of floorspace is, in effect, exempt from developer contributions. Existing in-use floorspace is offset from being charged CIL, and the vacant building credit means that affordable housing is not usually sought by means of s106.

B.14 The Levy could be applied to cases where existing floorspace is subject to change of use in this manner, but a lower Levy rate and higher minimum threshold will be needed for such development to remain viable. How the regeneration Levy rate and its threshold in the example charging schedule will apply to, for instance, an office-to-residential conversion is illustrated in Table A4.

Table A4 shows how the example charging schedule would apply to an illustrative office-to-residential conversion.

Scheme	Area (m2)	GDV (£/m2)	Liability (£) A x (GDV - MT) x R
Office-to-residential regeneration	10,000	£6,000	£1,750,000

Applying the Levy where existing floorspace is demolished and replaced

B.15 Where existing floorspace is demolished and replaced, the replacement floorspace may create some land value uplift but this likely to be outweighed by the costs associated with demolition. Currently, existing in-use floorspace that is demolished is offset or exempt from developer contributions.

B.16 The Levy could be applied to cases where existing floorspace is demolished and replaced, but as with subject to change of use floorspace, the Levy rate will need to be much lower and the minimum threshold higher. In fact, we envisage that it is likely that a zero Levy rate will be appropriate in most such circumstances. An example of this is illustrated in Table A5.

Table A5 shows how the example charging schedule will apply to an illustrative case where office floorspace is demolished and replaced an equivalent area of residential floorspace. Note, in this instance a zero Levy rate will apply, and no liability will be generated.

Scheme	Area (m2)	GDV (£/m2)	Liability (£) A x (GDV - MT) x R
Office is demolished and replaced by new residential building	10,000	£6,000	£0

Applying the Levy to development with a mix of new and existing floorspace

B.17 Where a development comprises the change of use or conversion of existing floorspace, it is often accompanied by additional floorspace. Similarly, where existing floorspace is demolished, the new development that take its place usually has a greater internal area than the building it replaces. In such instances, most if not all the associated land value uplift comes from the additional floorspace that is generated.

B.18 In both cases, the main Levy rate and minimum threshold will apply to the new floorspace, whereas the much lower ‘change of use’ (Table A6) and/or ‘replacement’ (Table A7) Levy rates and their minimum threshold will apply to the existing floorspace.

Table A6 shows how the example charging schedule could apply to an illustrative office-to-residential conversion that is also extended

Scheme	Existing area (m2)	Additional area (m2)	New scheme area (m2)	GDV (£/m2)	Liability (£) A x (GDV - MT) x R
Office-to-residential regeneration, plus extension	10,000	5,000	15,000	£6,000	£1,750,000 (for the existing floorspace) + £7,425,000 (for the new floorspace) = £9,175,000

Table A7 shows how the example charging schedule could apply to an illustrative case where an office is demolished and replaced with a residential scheme of a greater area.

Scheme	Existing area (m2)	Demolished area (m2)	New scheme area (m2)	GDV (£/m2)	Liability (£) A x (GDV - MT) x R
Office is demolished and replaced by a new, larger residential scheme	10,000	10,000	15,000	£6,000	£0 (for the existing floorspace) + £7,425,000 (for the new floorspace) = £7,425,000

B.19 In effect, the Levy will be applied proportionally to the relative amounts of new and subject to change of use floorspace, thereby reflecting the aggregate land value uplift for the whole development.

B.20 Of course, where a development comprises new, subject to change of use and replacement floorspace, the relevant Levy rates and minimum thresholds could be applied proportionally in the same way, as illustrated in Table A8.

Table A8 shows how the example charging schedule could apply to an illustrative case where an office is partially demolished and replaced with a residential scheme of a greater area.

Scheme	Existing area (m2)	Demolished area (m2)	New scheme area (m2)	GDV (£/m2)	Liability (£) A x (GDV - MT) x R
Office is partially demolished, partially regenerated, and extended	10,000	5,000	15,000	£6,000	£875,000 (for the existing floorspace that is regenerated) + £0 (for the existing floorspace that is demolished and replaced) + £7,425,000 (for the new floorspace) = £8,300,000

Annex C: How the illustrative worked example would provide on-site affordable housing via ‘right-to-require’

C.1 In the cases shown in Annex B where new floorspace is created, a local authority has a right to require that part of the Levy liability is paid in-kind by provision of affordable housing of a type and proportion determined by the local authority.

C.2 Please note again that the figures used are hypothetical and are not intended to indicate likely Levy rates, minimum thresholds, or ‘right to require’ levels. These will be determined by local authorities and will depend on local circumstances.

C.3 This example aims to demonstrate how a Levy liability, as charged by the example charging schedule in Annex B, will be met in part by the in-kind provision of affordable housing.

Setting a right-to-require

C.4 In the first instance, a local authority will have to set the proportion of the total Levy liability that will be spent on affordable housing (the ‘right to require percentage). We envisage that local authorities will set out the proportion or amount of the Levy intended to be spent on on-site affordable housing in a spending plan which will form part of their Infrastructure Delivery Strategy.

C.5 This rate will be set by the local authorities having regard to the desirability of ensuring that affordable housing is delivered at levels that are no lower than, or exceed, those prior to the introduction of the Levy, and the Levy rates and minimum thresholds that they set in their charging schedules.

C.6 Local authorities will also outline the expected tenure mix of their ‘right to require’, and the average discount for each tenure type in their mix.

Table A9 shows an example right-to-require

Right-to-require (proportion of Levy liability to be met as in-kind delivery of onsite affordable homes)	50%
Tenure mix
Social rent	50%
Affordable rent	25%
First Homes	25%
Assumed discount for each tenure
Social rent	50%
Affordable rent	35%
First Homes	30%
Cumulative assumed discount for all tenures	(50% x 50%) + (25% x 35%) + (25% x 30%) = 41.25%

C.7 We will have choices about whether the right to require will apply only to newly created floorspace, (whether that is development on vacant land, the extension of an existing building that creates new dwellings, or any additional floorspace generated when a building is demolished and replaced) or whether to apply it to floorspace that replaces or re-uses existing development.

C.8 Under the first option, this would mean not only that the total Levy liability varies depending on what kinds of floorspace a development comprises, but also the proportion of that liability which will be provided in-kind as affordable housing.

C.9 To illustrate this, the application of the example right to require of 50% (Table A9) to each of the example developments shown in Annex B (Tables A3 - A8) is shown in Table A10. In each case, the proportions of the Levy liability that will be provided in-kind as affordable housing and paid in cash at completion of the scheme are shown.

Table A10 shows how the example right-to-require of 50% would apply to each of the example developments shown in Tables A3 – A8.

Scheme	Existing area (m2)	New scheme area (m2)	GDV (£/m2)	Levy liability (£)	In-kind value of affordable housing (£)	Levy cash liability (£)
Newly built residences on vacant land	0	10,000	£3,000	£4,950,000	£2,475,000	£2,475,000
Newly built residences on vacant land	0	20,000	£3,000	£9,900,000	£4,950,000	£4,950,000
Office-to-residential regeneration	10,000	10,000	£6,000	£1,750,000	£0	£1,750,000
Office-to-residential regeneration, plus extension	10,000	15,000	£6,000	£9,175,000	£3,712,500	£5,462,500
Office is demolished and replaced by new residential building	10,000	10,000	£6,000	£0	£0	£0
Office is demolished and replaced by new, larger residential building	10,000	15,000	£6,000	£7,425,000	£3,712,500	£3,712,500
Office is partially demolished, partially regenerated, and extended	10,000	15,000	£6,000	£8,300,000	£3,712,500	£4,587,500

C.10 We will test the choices around how the right to require should operate in these circumstances. You can also provide feedback as part of question 32.

Securing the affordable units

C.11 Because the Levy is charged based on the final GDV of a development, the final liability may not be known until the development is complete and has been sold. The in-kind provision of affordable homes via right to require, however, will be delivered ahead of completion, before the final liability is determined. The process for how such an in-kind payment of the Levy will be made is outlined here.

C.12 In this worked example, the charging schedule is as illustrated in Tables A1 and A2, and the right to require is as shown in Table A9. The example development is as per the top line of Table A10, that is a 10,000 m2 residential scheme built on vacant land with an expected GDV of £3,000 / m2 and a total Levy liability of £4,950,000, of which £2,475,000 is required in-kind as affordable homes.

C.13 The first step, pre-commencement and at the indicative Levy stage, is to convert the value of the ‘right to require’ proportion of the Levy liability into a proportion of the development’s floorspace that should be allocated for affordable homes. For our example development, this is shown below:

Floorspace required as affordable housing (m²) =

Levy liability as right-to require (£) / (assumed GDV (£/m²) x cumulative affordable housing discount (%))

£3,750,000 / £3,000 x 41.25% =

3,030 m² affordable housing

C.14 Second, for any given development, the number of units per tenure can be calculated based on the total floorspace allocated for affordable homes, the local authority’s preferred tenure mix, and the average size of each tenure (Table A11). For our example development, these are shown below:

Tenure type	% of tenure mix	Average floorspace (m2)
Social rent	50%	70 m2
Affordable rent	25%	80 m2
First Homes	25%	120 m2

Number of social rent homes =

(Affordable housing floorspace (m²) x Proportion of tenure mix) / Average size of social rent home =

2000 m² x 50% / 70 m² =

14.3 social rent homes

Number of affordable rent homes =

(Affordable housing floorspace (m²) x Proportion of tenure mix) / Average size of social rent home =

2000 m² x 25% / 80 m² =

6.3 affordable rent homes

Number of First Homes =

(Affordable housing floorspace (m²) x Proportion of tenure mix) / Average size of social rent home =

2000 m² x 25% / 120 m² =

4.2 First Homes

C.15 In this example, the 10,000 m² development will be expected, at the indicative stage, to deliver 14.3 social rent homes, 6.3 affordable rent homes, and 4.2 First Homes. How these figures will be rounded to whole numbers of homes of each tenure type is a matter that we intend to discuss further with stakeholders.

C.16 Next, but still pre-commencement, the figures can be updated to reflect the actual specifications and prices paid by a registered provider. If an agreement between a developer and a registered provider to purchase and manage the on-site affordable homes is in place already, then the figures underpinning this agreement can be used in the first instance. Alternatively, if the right to require has been exercised, a developer will seek a registered provider to manage the affordable units and the figures updated based on their agreement.

C.17 It may be that the price per m2 that a registered provider is willing to pay for affordable homes differs from that assumed in the first instance. Or it may be that the size of the homes of any given tenure type to be delivered on-site differs from that supposed initially.

C.18 Key though, is that however these assumptions may change, the total value of the on-site affordable homes to be delivered will remain equal to the in-kind proportion of the Levy liability that the right to require demands. That is, in this example, on-site affordable homes must be provided to a value of £2,475,000.

C.19 Also crucial is that, still at this pre-commencement stage, the number of on-site affordable housing units secured as an in-kind contribution of the Levy is fixed.

C.20 The total Levy liability, and the proportion of that liability represented by the value of the in-kind contribution of affordable homes, may change at various stages after this, if the GDV figure is updated from that assumed based on a subsequent valuation and/or sales data.

C.21 Should this happen though, it will be the residual cash amount to be paid to the local authority that will change, not the number, type, or specification of on-site affordable housing units secured already as an in-kind contribution of the Levy. In this way, the affordable homes to be provided on-site as part of any given scheme will be secure and predictable at the point a development commences.

Annex D: list of Infrastructure Levy technical consultation questions

Chapter 1 – Fundamental design choices

Question 1: Do you agree that the existing CIL definition of ‘development’ should be maintained under the Infrastructure Levy, with the following excluded from the definition:

• developments of less than 100 square metres (unless this consists of one or more dwellings and does not meet the self-build criteria) – Yes/No/Unsure
• Buildings which people do not normally go into - Yes/No/Unsure
• Buildings into which peoples go only intermittently for the purpose of inspecting or maintaining fixed plant or machinery - Yes/No/Unsure
• Structures which are not buildings, such as pylons and wind turbines. Yes/No/Unsure

Please provide a free text response to explain your answer where necessary.

Question 2: Do you agree that developers should continue to provide certain kinds of infrastructure, including infrastructure that is incorporated into the design of the site, outside of the Infrastructure Levy? [Yes/No/Unsure]. Please provide a free text response to explain your answer where necessary.

Question 3: What should be the approach for setting the distinction between ‘integral’ and ‘Levy-funded’ infrastructure? [see para 1.28 for options a), b), or c) or a combination of these]. Please provide a free text response to explain your answer, using case study examples if possible.

Question 4: Do you agree that local authorities should have the flexibility to use some of their Levy funding for non-infrastructure items such as service provision? [Yes/No/Unsure] Please provide a free text response to explain your answer where necessary.

Question 5: Should local authorities be expected to prioritise infrastructure and affordable housing needs before using the Levy to pay for non-infrastructure items such as local services? [Yes/No/Unsure]. Should expectations be set through regulations or policy? Please provide a free text response to explain your answer where necessary.

Question 6: Are there other non-infrastructure items not mentioned in this document that this element of the Levy funds could be spent on? [Yes/No/Unsure] Please provide a free text response to explain your answer where necessary.

Question 7: Do you have a favoured approach for setting the ‘infrastructure in-kind’ threshold? [high threshold/medium threshold/low threshold/local authority discretion/none of the above]. Please provide a free text response to explain your answer, using case study examples if possible.

Question 8: Is there anything else you feel the government should consider in defining the use of s106 within the three routeways, including the role of delivery agreements to secure matters that cannot be secured via a planning condition? Please provide a free text response to explain your answer.

Chapter 2: Levy rates and minimum thresholds

Question 9: Do you agree that the Levy should capture value uplift associated with permitted development rights that create new dwellings? [Yes/No/Unsure]. Are there some types of permitted development where no Levy should be charged? [Yes/No/Unsure]. Please provide a free text response to explain your answer where necessary.

Question 10: Do you have views on the proposal to bring schemes brought forward through permitted development rights within scope of the Levy? Do you have views on an appropriate value threshold for qualifying permitted development? Do you have views on an appropriate Levy rate ‘ceiling’ for such sites, and how that might be decided?

Question 11: Is there is a case for additional offsets from the Levy, beyond those identified in the paragraphs above to facilitate marginal brownfield development coming forward? [Yes/No/Unsure]. Please provide a free text response to explain your answer where necessary, using case studies if possible.

Question 12: The government wants the Infrastructure Levy to collect more than the existing system, whilst minimising the impact on viability. How strongly do you agree that the following components of Levy design will help achieve these aims?

• Charging the Levy on final sale GDV of a scheme [Strongly Agree/Agree/Neutral/Disagree/Strongly Disagree/Unsure]
• The use of different Levy rates and minimum thresholds on different development uses and typologies [Strongly Agree/Agree/Neutral/Disagree/Strongly Disagree/Unsure]
• Ability for local authorities to set ‘stepped’ Levy rates [Strongly Agree/Agree/Neutral/Disagree/Strongly Disagree/Unsure]
• Separate Levy rates for thresholds for existing floorspace that is subject to change of use, and floorspace that is demolished and replaced [Strongly Agree/Agree/Neutral/Disagree/Strongly Disagree/Unsure]

Question 13: Please provide a free text response to explain your answers above where necessary.

Chapter 3 – Charging and paying the Levy

Question 14: Do you agree that the process outlined in Table 3 is an effective way of calculating and paying the Levy? [Yes/No/Unsure] Please provide a free text response to explain your answer where necessary.

Question 15: Is there an alternative payment mechanism that would be more suitable for the Infrastructure Levy? [Yes/No/Unsure] Please provide a free text response to explain your answer where necessary.

Question 16: Do you agree with the proposed application of a land charge at commencement of development and removal of a local land charge once the provisional Levy payment is made? [Yes/No/Unsure] Please provide a free text response to explain your answer where necessary

Question 17: Will removal of the local land charge at the point the provisional Levy liability is paid prevent avoidance of Infrastructure Levy payments? [Strongly Agree/Agree/Neutral/Disagree/ Strongly Disagree/Unsure] Please provide a free text response to explain your answer where necessary.

Question 18: To what extent do you agree that a local authority should be able to require that payment of the Levy (or a proportion of the Levy liability) is made prior to site completion? [Strongly Agree/Agree/Neutral/Disagree/Strongly Disagree/Unsure]. Please explain your answer.

Question 19: Are there circumstances when a local authority should be able to require an early payment of the Levy or a proportion of the Levy? Please provide a free text response to explain your where necessary.

Question 20: Do you agree that the proposed role for valuations of GDV is proportionate and necessary in the context of creating a Levy that is responsive to market conditions [Yes/No/Unsure]. Please provide a free text response to explain your answer where necessary.

Chapter 4 – Delivering infrastructure

Question 21: To what extent do you agree that the borrowing against Infrastructure Levy proceeds will be sufficient to ensure the timely delivery of infrastructure? [Strongly Agree/Agree/Neutral/ Disagree/Strongly Disagree/Unsure]. Please provide a free text response to explain your answer where necessary.

Question 22: To what extent do you agree that the government should look to go further, and enable specified upfront payments for items of infrastructure to be a condition for the granting of planning permission? [Strongly Agree/Agree/Neutral/Disagree/Strongly Disagree/Unsure] Please provide a free text response to explain your answer where necessary.

Question 23: Are there other mechanisms for ensuring infrastructure is delivered in a timely fashion that the government should consider for the new Infrastructure Levy? [Yes/No/Unsure] Please provide free text response to explain your answer where necessary.

Question 24: To what extent do you agree that the strategic spending plan included in the Infrastructure Delivery Strategy will provide transparency and certainty on how the Levy will be spent? [Strongly Agree/Agree/Neutral/Disagree/Strongly Disagree] Please provide a free text response to explain your answer where necessary.

Question 25: In the context of a streamlined document, what information do you consider is required for a local authority to identify infrastructure needs?

Question 26: Do you agree that views of the local community should be integrated into the drafting of an Infrastructure Delivery Strategy? [Yes/No/Unsure] Please provide a free text response to explain your answer where necessary.

Question 27: Do you agree that a spending plan in the Infrastructure Delivery Strategy should include:

• Identification of general ‘integral’ infrastructure requirements
• Identification of infrastructure/types of infrastructure that are to be funded by the Levy
• Prioritisation of infrastructure and how the Levy will be spent
• Approach to affordable housing including right to require proportion and tenure mix
• Approach to any discretionary elements for the neighbourhood share
• Proportion for administration
• The anticipated borrowing that will be required to deliver infrastructure
• Other – please explain your answer
• All of the above

Question 28: How can we make sure that infrastructure providers such as county councils can effectively influence the identification of Levy priorities?

• Guidance to local authorities on which infrastructure providers need to be consulted, how to engage and when
• Support to county councils on working collaboratively with the local authority as to what can be funded through the Levy
• Use of other evidence documents when preparing the Infrastructure Delivery Strategy, such as Local Transport Plans and Local Education Strategies
• Guidance to local authorities on prioritisation of funding
• Implementation of statutory timescales for infrastructure providers to respond to local authority requests
• Other – please explain your answer

Question 29: To what extent do you agree that it is possible to identify infrastructure requirements at the local plan stage? [Strongly Agree/Agree/Neutral/Disagree/Strongly Disagree/Unsure] Please provide a free text response to explain your answer where necessary.

Chapter 5 – Delivering affordable housing

Question 30: To what extent do you agree that the ‘right to require’ will reduce the risk that affordable housing contributions are negotiated down on viability grounds? [Strongly Agree/Agree/Neutral/Disagree/Strongly Disagree/Unsure] Please provide a free text response to explain your answer where necessary.

Question 31: To what extent do you agree that local authorities should charge a highly discounted/zero-rated Infrastructure Levy rate on high percentage/100% affordable housing schemes? [Strongly Agree/Agree/Neutral/Disagree/Strongly Disagree/Unsure] Please provide a free text response to explain your answer where necessary

Question 32: How much infrastructure is normally delivered alongside registered provider-led schemes in the existing system? Please provide examples.

Question 33: As per paragraph 5.13, do you think that an upper limit of where the ‘right to require’ could be set should be introduced by the government? [Yes/No/unsure] Alternatively, do you think where the ‘right to require’ is set should be left to the discretion of the local authority? [Yes/No/unsure]. Please provide a free text response to explain your answer where necessary.

Chapter 6 – Other areas

Question 34: Are you content that the Neighbourhood Share should be retained under the Infrastructure Levy? [Yes/No/Unsure?]

Question 35: In calculating the value of the Neighbourhood Share, do you think this should A) reflect the amount secured under CIL in parished areas (noting this will be a smaller proportion of total revenues), B) be higher than this equivalent amount C) be lower than this equivalent amount D) Other (please specify) or E) unsure. Please provide a free text response to explain your answer where necessary

Question 36: The government is interested in views on arrangements for spending the neighbourhood share in unparished areas. What other bodies do you think could be in receipt of a Neighbourhood Share in such areas?

Question 37: Should the administrative portion for the new Levy A) reflect the 5% level which exists under CIL B) be higher than this equivalent amount, C) be lower than this equivalent amount D) Other (please specify) or E) unsure. Please provide a free text response to explain your answer where necessary.

Question 38: Applicants can apply for mandatory or discretionary relief for social housing under CIL. Question 31 seeks views on exempting affordable housing from the Levy. This question seeks views on retaining other countrywide exemptions. How strongly do you agree the following should be retained:

• residential annexes and extensions; [Strongly Agree/Agree/ Neutral/Disagree/Strongly Disagree]
• self-build housing; [Strongly Agree/Agree/Neutral/Disagree/Strongly Disagree]

If you strongly agree/agree, should there be any further criteria that are applied to these exemptions, for example in relation to the size of the development?

Question 39: Do you consider there are other circumstances where relief from the Levy or reduced Levy rates should apply, such as for the provision of sustainable technologies? [Yes/No/Unsure]. Please provide a free text response to explain your answer where necessary.

Question 40: To what extent do you agree with our proposed approach to small sites? [Strongly Agree/Agree/Neutral/Disagree/Strongly Disagree/Unsure] Please provide a free text response to explain your answer where necessary.

Question 41: What risks will this approach pose, if any, to SME housebuilders, or to the delivery of affordable housing in rural areas? Please provide a free text response using case study examples where appropriate.

Question 42: Are there any other forms of infrastructure that should be exempted from the Levy through regulations?

Question 43: Do you agree that these enforcement mechanisms will be sufficient to secure Levy payments? [Strongly Agree/Agree/Neutral/Disagree/Strongly Disagree/Unsure] Please provide a free text response to explain your answer where necessary.

Chapter 7 – Introducing the Levy

Question 44: Do you agree that the proposed ‘test and learn’ approach to transitioning to the new Infrastructure Levy will help deliver an effective system? [Strongly Agree/Agree/ Neutral/Disagree/Strongly Disagree/Unsure] Please provide a free text response to explain your answer where necessary

Question 45: Do you have any views on the potential impact of the proposals raised in this consultation on people with protected characteristics as defined in section 149 of the Equality Act 2010? [Yes/No/Unsure]. Please provide a free text response to explain your answer where necessary.

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1. Levelling Up and Regeneration Bill: RPC Opinion ↩

2. To note, payment of the Levy through in-kind affordable housing will be treated separately to the delivery of affordable housing through the Affordable Housing Programme, or from other sources. This is because it must be accounted for as a payment, rather than an exemption. ↩