The proposed relief

At its most simple, where a scheme provides at least 20% affordable housing, the measure will allow a 50% borough CIL relief to apply to residential floorspace in developments, or phases of developments, that commence after the relief comes into effect and before 31 March 2030.

The proposed relief is subject to a number of exclusions, qualifying criteria, and procedure. The latest proposal from the government is summarised below:

• at least 60% of all affordable homes – up to a total provision of 35% – need to be Social Rent (with the tenure of any affordable housing above 35% being flexible)
• the first 10% of all homes delivered are provided as affordable housing, without grant
• for Build to Rent accommodation, at least 30% of the affordable housing needs to be provided at, or below, London Living Rent levels or Key Worker Living Rent, with the remaining affordable housing provided at a range of genuinely affordable rents
• for public sector and industrial land (where industrial floorspace capacity has not been re-provided) a minimum of 35% affordable housing is required
• schemes providing 20%-35% affordable housing can access more relief on a linear scale – up to a maximum relief of 80% (excluding public sector and industrial land where industrial floorspace capacity has not been re-provided)
• not applicable to student and co-living accommodation
• generally not applicable to development on designated Green Belt, Metropolitan Open Land, parks, recreations grounds, allotments, golf courses, or local open space
• not applicable to planning permissions which have lawfully commenced before the relief is in force (with exceptions to phased planning permissions)
• only applicable to planning applications validated by 31 March 2028.
• requires borough CIL residential liability to be at least £500,000
• accessing any relief requires an application to be made with an associated fee of £25,000
• any application requires the submission of a summary residual valuation demonstrating that the scheme is unviable, supported by a statutory declaration confirming that the inputs and assumptions are fair and reasonable, undertaken by a suitably qualified practitioner
• a clawback mechanism tied to build-out (amongst other elements)

Excluded land

Where a development is partially located on excluded land (e.g. designated Metropolitan Open Land), the government proposes allowing such developments to be included within the scope of relief. The exact minimum level is yet to be determined with options ranging from 10%-25% of a proposed development being located on excluded land.

Student and co-living accommodation

Student and co-living accommodation are still excluded from the relief. The government’s position is that the relief is aimed at developments which will directly contribute to meeting long-term housing need in London. This seems at odds with the government’s emerging National Planning Policy Framework (NPPF) which makes specific provision for both types of accommodation in addressing specialist housing need. In mixed-use schemes, the inclusion of non-qualifying uses (such as student and co-living) does not mean that the development as a whole is excluded from the relief, rather only the floorspace associated with the qualifying residential uses can potentially benefit.

Small and medium-sized developers

With a proposed borough CIL residential liability threshold of £500,000, many have questioned whether this goes far enough in supporting small and medium-sized (SME) developers. The government is of the view that this threshold will capture an appropriate range of sites and will avoid large volumes of small claims. The threshold will apply based on the liability of a scheme as a whole, rather than the liability of individual phases. For phased developments, the approach will allow estimates of residential CIL liability of later phases to determine whether the threshold is met as a whole.

Viability evidence

The government has revised the viability evidence that will be required. Applications will need to be supported by a summary residual valuation demonstrating that the scheme is unviable. This should factor in any Greater London Authority (GLA) grant received and other reliefs from CIL (e.g. social housing relief). The summary needs to be supported by a statutory declaration confirming that the inputs and assumptions are fair and reasonable at the point of application, undertaken by a suitably qualified practitioner based on the information available to them at that time. The government is clear that the viability information must be accepted by the relevant borough with no need or expectation to request additional information (hence the requirement for a statutory declaration).

Commencement deadline

The government is proposing to amend the commencement deadline (i.e. when planning permission, or a phase of development, must have been implemented) from 31 December 2028 to 31 March 2030. This is a positive change but will only be effective if the amending regulations come into effect promptly, to allow qualifying schemes to start benefiting from the relief. This is particularly true for future planning applications which need to be validated by the local authority by 31 March 2028 to qualify for the relief.

Clawback

The government is of the view that a clawback mechanism is required to ensure that the relief is targeted at schemes which will deliver new homes. One element of the clawback is to be tied to build-out, with a default expectation of five years from commencement to completion, but with an allowance to deviate from this on a case-by-case basis through agreement with the local authority. Other elements of the clawback include the provision of materially incorrect or misleading information at the point of the application, and disqualifying events (e.g. a subsequent change to a non-qualifying tenure).

Amendments to the CIL regulations

The government has stated that it intends to consult on the draft CIL amending regulations ‘as soon as possible in the spring.’ Such consultations typically range from six to 12 weeks. If the intention is for the relief to take effect from this summer, the government needs to act quickly. This would create an approximate 3.5-year window for potential relief, prior to the commencement deadline closing on 31 March 2030.

Summary

At face value, the emerging time-limited additional relief from CIL appears to be a positive measure to support development viability and the delivery of new homes in London.

Notwithstanding this, with a large number of exclusions and qualifying criteria, coupled with what could end up being a cumbersome and costly application process, there are concerns around whether this will have the desired impact versus potential unintended outcomes.

With a blanket liability threshold across London, there is a risk that we see a variation in uptake depending on higher and lower value areas, and/or areas with differential CIL rates. We may see local authorities trying to offset reduced CIL receipts through enhanced s106 contributions.

As with the current CIL regulations, the effectiveness of this additional relief will come down to the exact wording of the amending regulations, the consultation for which we eagerly await.

Further information

Contact Oliver Milne or Catherine Bruce