Mike Kiely, Director of Planning LB Croydon, Chair Planning Officers Society: S106, Developer Contributions & Delivering Infrastructure
1. S106, Developer Contributions
& Delivering Infrastructure
Mike Kiely
Director of Planning LB Croydon
Chair Planning Officers Society
2. S106 Origins
The history of various compensation and betterment laws is not a happy one,
as generally they have not been successful. The main milestones have been:
The Uthwatt Committee into compensation and betterment (1942)
The 1947 Planning Act, introduced a development charge to capture
planning gain – abolished by the 1954 Town and Country Planning Act
Compulsory Purchase Act 1965 introduces compulsory purchase
provisions
Town and Country Planning Act 1971 – introduced S52 agreements (now
S106 of 1990 Act)
Community Land Act 1975 allowed for the taking into public control of
development land
Development Land Tax Act 1976 attempted to tax development value from
land
3. S106 Rules
Statutory tests (Reg 122 of 2010 CIL Regs as amended):
Necessary to make the development acceptable in planning terms
Directly related to the development
Fairly and reasonably related in scale and kind to the development
What they can do:
Mitigating harm (eg highway works or education & health
contributions)
Compensating for loss (eg public open space and play equipment)
Properly controlling the development (eg securing social housing
element or provision of a new bridge within the development)
Relationship with CIL:
Regulation 123 List of infrastructure items
Pooling restrictions (post March 2015 from 2010 )
4. Setting formulae
Works well when there is a close relationship between
development generally and the need for additional
infrastructure
Having formulae makes the negotiation process much easier
You must demonstrate two things:
There is no existing capacity that can serve the development
The development creates the need for that infrastructure
HUDU model in London
The benefits of publishing your approach
5. Negotiation tips
Start negotiations as early as possible
Frontloading contributions reduces the potential
S106 pot
Viability: the three most important things to
remember:
It’s an opinion and not a fact – despite what RICS will have
you think
It’s dynamic – the numbers will change over time
Impacts still have to be mitigated – its not a get-out-of-jail-free
card
6. Getting it drafted & signed
Negotiate the heads of agreement in pre-application stage
Draft the agreement in the application stage so it’s ready to sign once a
decision is taken
Use the Planning Bar proforma for the main body and publish your
obligation proforma on your website
Be firm with your lawyers and if necessary get the applicant to do the
same – they can waste a lot of time arguing about marginal issues
Developers can “take their foot off the metal” once a scheme has been to
planning committee
Having a resolution “That, if by [X date] the legal agreement has not been
completed, the Director of Planning is delegated authority to refuse
planning permission” will focus their attention, provided you stick to it!
7. Collecting the cash
You MUST monitor your S106 agreements so that you know
what you are owed and when
Monitoring also enables you to manage the number of pooled
contributions when CIL is in place
Since putting this in place in Croydon we have recovered circa
£3.5M that was owed to us
A simple set of proforma letters will often work without the
need to get heavy with solicitors, especially when interest and
indexation is attached to the agreement.
8. Spending the money
Bizarrely, this seems to be the hardest bit
It is a whole Council task
Set up a body (Infrastructure Finance Group) that can act as
the place where these discussions take place and ensure
conformity with the S106 agreement and legislation
It’s about delivering your Council’s strategic capital priorities
and the Infrastructure Delivery Plan that supports your Local
Plan
Also involves engagement with third parties who have
responsibility for delivering infrastructure
9. Review & monitoring
Authority’s Monitoring Report
You must report collection and spending of CIL
Reporting (voluntarily) collection and spending of S106 is a
very good discipline
Whilst increased development values may enable you to
increase your CIL rates, being able to negotiate a greater
affordable housing contribution may be a better policy option
What are your plans for S106 post March 2015?
10. S106 & CIL
CIL was introduced as a solution to S106 with provisions in the legislation that
sought to “put a spanner in the works” of S106 (ie the limits on pooling)
CIL and S106 are good at different things:
CIL is an efficient up-front pooling mechanism – brings in more money to
an LPA because nearly everyone pays something, rather than just a few
paying; as little as 7% of developments have S106 …
… however, CIL does have a high set-up cost that can make it uneconomic
for many small local planning authorities to implement.
S106 can be a good, flexible tool to deal with specific issues that are
related to the actual development, rather than development generally …
… however, S106 does have high transaction costs (eg legal fees and
negotiation time) that render it uneconomic for small developments.
11. The challenges
INFRASTRUCTURE OTHER (NON-INFRASTRUCTURE) MITIGATION
Infrastructure that is
necessary because of
development generally
Infrastructure that is
necessary because the
need for it is caused by
a particular
development or group
of developments
Mitigation or
compensation that is
necessary to enable a
development to
proceed
Securing affordable
housing to meet the
housing needs of an
area
12. How might we fix it?
POS believes that any solution should have the following
characteristics:
The intention for CIL to be funded via the land value rather than
through development finance should be clearly stated by government
and become a clear feature of the CIL setting process and
Development Management viability assessments
There should be a basic national levy rate that can be easily adopted
Alternative levy rates should follow the current CIL setting process
Flexibility between levy and agreements should be a standard feature
of the system subject always to the levy amount being the minimum
payable in any circumstances
A new combined system needs a new name to give it a fresh start
13. What would it look like?
INFRASTRUCTURE OTHER (NON-INFRASTRUCTURE) MITIGATION
Development Management Agreement
Infrastructure that is
necessary because of
development generally
Development
Management Levy
Infrastructure that is
necessary because the
need for it is caused by
a particular
development or group
of developments
Mitigation or
compensation that is
necessary to enable a
development to
proceed
Securing affordable
housing to meet the
housing needs of an
area
14. Options for levy LPAs
For non-major development, a compulsory levy would apply for
infrastructure. An agreement could apply to:
Mitigation or compensation that is directly necessary to enable a development to
proceed
Securing affordable housing
For major development, the levy would apply plus an
agreement to secure:
Infrastructure that is necessary because the need for it is caused by a particular
development or group of developments
Mitigation or compensation that is directly necessary to enable a development to
proceed
Securing affordable housing
Plus if the LPA considered it appropriate adjustment could be made in response to
viability issues between the levy and the agreement, subject always to the levy sum
being the minimum payable.
15. Options for non-levy LPAs
For non-major development, neither the levy nor an
agreement would apply for infrastructure. An agreement
could apply to:
Mitigation or compensation that is directly necessary to enable a
development to proceed
Securing affordable housing
For major developments, an agreement to secure:
Infrastructure that is necessary because the need for it is caused by a
particular development or group of developments
Mitigation or compensation that is directly necessary to enable a
development to proceed
Securing affordable housing