Mayor of London warns Infrastructure Levy would hit affordable housing supply

Mayor of London, Sadiq Khan, has urged the government to scrap its proposals for a new Infrastructure Levy in the Levelling Up and Regeneration Bill.

Under the proposals, the amount developers will have to pay to support vital improvements to transport facilities, schools, health centres, open space and play space, as well as affordable housing, will be calculated once a project is complete, instead of at the stage the site is given planning permission as at present.

The Mayor said this would delay or lose such improvements, reducing affordable homes. Councils will also be expected to set their own rates for different types of development such as residential and commercial and for different areas, requiring a highly complex and labour-intensive assessment and charging system.

Following this, the new Levy would replace the current Community Infrastructure Levy (CIL), which is used by local planning authorities in London, and Section 106 agreements, which obligate developers to deliver a range of facilities and services including affordable housing. By the end of 2021/22 the CIL had generated approximately £1.43bn for councils to deliver vital infrastructure and support sustainable growth across the capital.

Researched published by the Mayor’s office suggested the new Levy could have resulted in between 4,500 and 10,000 fewer affordable homes in applications referred to the Mayor over the last three to five years. It could also have made between 10,000 and 30,000 homes of all tenures unviable.

Other concerns with the Levy include that it would:

• Put billions of pounds of investment in community infrastructure at risk. Rather than being delivered alongside new development, these facilities would be delayed or may not come forward at all because payments would be made at the end rather than the beginning of the construction process
• Be based on the value generated by the development which would require a highly complex valuation process, creating greater uncertainty and risk for councils, developers and communities. Councils also believe it would be difficult to enforce the payment of contributions after a development has been completed
• Allow developer contributions to be spent on general council services or other items that are entirely unconnected to development. This would exacerbate significant existing funding shortfalls for affordable housing and infrastructure.
• Restrict the use of Section 106 (planning obligations) agreements which may prevent off-site mitigation works from being undertaken, or other important obligations such as employment and training measures, affordable workspace, construction monitoring or carbon offsetting from being secured.

Mr Khan said: ‘I welcome the government’s ambition of securing more funding for affordable homes and infrastructure and creating a developer contributions system that is quicker, clearer and more consistent. Unfortunately, the proposed Infrastructure Levy fails to achieve any of this.

‘Ministers should work with councils and the housing sector to improve the current developer contributions system, building on the trailblazing progress we have made in London in recent years as we seek to create a better, fairer and more prosperous city for all.

‘Unworkable proposals like the Infrastructure Levy cause uncertainty and eat up resources from a planning system that is already struggling. This proposal needs to be dropped from the Levelling Up Bill so that the development sector can focus on delivering the affordable homes and community infrastructure that Londoners desperately need.’

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