To consider the further findings arising from the scrutiny Task and Finish Group - Community Infrastructure Levy (CIL) and to recommend the report to the Executive for consideration.

The Vice-Chairman, as Chairman of the Task and Finish Group on the Community Infrastructure Levy (CIL), introduced the report with the following remarks:

 

1.         The Overview and Scrutiny Committee had commissioned the Task and Finish Group to undertake policy shaping scrutiny work, alongside policy development activity, on the implementation of CIL in Herefordshire.  An interim report was presented to the General Overview and Scrutiny Committee on 10 December 2012 (minute 15 refers), with the Executive response reported to the Committee on 4 March 2013 (minute 54 refers).  The Group reconvened in February 2013 and a further interim report was now presented to the Committee on the Group’s findings to date.

 

2.         Officers and Members of the Group were thanked for their time and engagement on the subject.  It was noted that it was a difficult piece of work, particularly as the timetable mirrored policy development and public consultations on both CIL and the Core Strategy.  Shortly after the consultation was completed on CIL, the government had published further guidance and had also initiated a national consultation on revisions to the existing legislation relating to CIL.

 

3.         As reported at the last Committee meeting (minute 7 refers), it was understood that the development of CIL would, temporarily, follow behind work on the Local Development Framework and the revised timetable for the implementation of CIL was Autumn 2014.

 

4.         It was anticipated that the Group would reconvene in September 2013 to review the responses to the CIL consultation, once they had been analysed, and to undertake further work in preparation for recommending revised rates to Cabinet in October / November 2013.  However, a detailed timetable had not yet come forward.

 

The Vice-Chairman explained that the structure of the report followed the themes of the Group’s investigations since February 2013 and had been informed by the guidance and best practice report to the Department for Communities and Local Government by the Local Housing Delivery Group, entitled ‘Viability Testing Local Plans - advice for planning practitioners’.  An overview was provided of the report, the principal points and related recommendations are detailed below.

 

The Economic Viability Assessment 2013 (EVA-2013)

 

a.         The EVA-2013 had been made available to the Group shortly before the public consultation in March 2013.  The Group had identified that there were a differences in the approach taken to viability work for EVA-2013 compared that used for EVA-2011; only a portion of the full infrastructure costs had been taken into account, contrary to guidance in the National Planning Policy Framework (NPPF) and Viability Testing Local Plans document.

 

Recommendation 1: That

 

a.          modelling of the cumulative effect of plan policies, to include full costs of all infrastructure mentioned in the Core Strategy policies, be undertaken as a matter of urgency; and

 

b.          the results from this modelling be used to inform the setting of draft CIL rates throughout Herefordshire and to assess the viability of the Core Strategy/Local Plan ahead of examination in public.

 

b.         In terms of sustainable development and realistic economic viability, it was reported that the Group had concerns about some of the CIL rates that were being proposed for the County, in particular:

 

·                There appeared to be discrepancies between the house and land values used in the modelling and those currently representative of prices being paid on the ground, so further investigation was recommended.

 

·                It was considered that the Zone 4 housing market sub area, with the highest CIL rate of £140m/2, was too large to represent a homogeneous market. 

 

·                The December 2012 report recommended variations within geographic areas to account for housing market differences between towns, villages and rural areas.  The Group had been advised that there were insufficient differences within the housing market areas to warrant that level of discrimination.  However, this meant that there were some very sharp CIL rate differences at the boundaries and it was considered that the precise positioning of these boundaries needed to be reviewed, especially where developer activity might reasonably be expected.

 

Recommendation 2: That 1-2-1 meetings with stakeholders, or stakeholder group meetings within Localities, are held to gather further information about house/benchmark land values to inform revisions to rates, areas and boundaries.

 

c.         It had been identified that not all of the strategic housing sites had been modelled with appropriate assumed land values; a site in Ledbury had been given an agricultural land use value but the land had already been designated as employment land under the current policies.

 

Recommendation 3: That the benchmark land values ascribed to strategic sites are checked for correctness and new modelling take place for any strategic housing development which has been inappropriately classified according to its land type.

 

d.         It was noted that there were some differences in the modelling assumptions in the current EVA-2013 compared to EVA-2011 which had not been explained clearly in the documentation.  In particular, there had been a change in the method for handling Section 106/developer funded infrastructure.

 

Recommendation 4: That all modelling assumptions should be discussed collaboratively with stakeholders; cross referenced with documents in the Core Strategy/Local Plan evidence base for consistency; and clearly stated/explained in EVA-2013 with respect to wider benchmarks, guidance, previous studies and best practice.

 

e.         It was recognised that geographical variation of house and land prices had been taken into account, albeit without further zoning as recommended in the December 2012 report, but EVA-2013 had not modelled viability across time which would be of assistance in planning the approach to utilising CIL revenue in the broader financial management framework of the Council as a whole.

 

f.          The Vice-Chairman welcomed the statement, in the answers to supplementary questions from the public at the last meeting, that ‘In response to the consultation, Councillor RB Hamilton has invited his Cabinet colleagues to a future review of the IDP to include the prioritisation of identified infrastructure, projected timescales for delivery and potential funding mechanisms.  The outcome of this review will be fed into the IDP for the independent examination.’

 

Recommendation 5: That, ahead of examination in public:

 

a.          the fully costed infrastructure projects in the Infrastructure Delivery Plan are phased to match with the development delivery trajectory in the core strategy; and

 

b.          time-based viability modelling of the whole plan be undertaken.

 

g.         It was reported that there had been a discussion with the Chief Officer: Finance and Commercial about the capabilities of the existing finance system to manage CIL monies.  It was also noted that the final EVA-2013 had not been made available to the Group ahead of the preliminary draft charging schedule being released to public consultation, although some of the Group’s suggestions had been incorporated into the schedule.

 

Preliminary Draft Charging Schedule

 

h.         In view of the issues raised about modelling assumptions, it was suggested that it might be necessary to revisit the question of payment phasing to ensure that development came forward and would be viable.

 

Recommendation 6: That:

 

a.          the reasons for the revised modelling assumptions for net developable area and opening-up costs compared to EVA-2011 are clearly explained; and

 

b.          assurance be provided that there is no detrimental impact on the viability and deliverability of all aspects of developments by the recommendation that the phasing of CIL payments is not now necessary.

 

i.           The Group had made some suggestions regarding changes to the gradation of the proposed phasing criteria, due to concerns that the installment schedule for CIL payment was too narrow to take into account the range of development sizes that might come forward.  Although these suggestions had not been incorporated into the CIL consultation document, it was noted that government had recently consulted on changes to guidance and the potential impact of this was still being evaluated by officers.

 

Recommendation 7: That the gradation of the payment phasing criteria should be reviewed to provide flexibility when tested for large, small and staged developments.

 

j.           The Group had been disappointed that the CIL consultation did not include special rates for self-build and high energy efficient build projects as recommended in the December 2012 report.  However, it was reported that the latest national consultation on CIL did recommend such allowances and it was expected that this would feature in the draft rates in autumn 2013.

 

k.         In view of the ‘Understanding Herefordshire 2013’ report, that indicated that a significant proportion of households already suffered from fuel poverty and given below national average wage levels, the Group made a further recommendation that consideration be given to a negative CIL rate for high energy efficiency developments; it was noted that this would not preclude Section 106 agreements.

 

Recommendation 8: That the Executive consider setting a £Negative CIL rate for developments delivered to PassivHaus standards to recognise their contribution towards reducing the strain on strategic infrastructure.

 

CIL Public Consultation

 

l.           It was reported that the Group was broadly content with the consultation process itself but made observations and recommendations in respect of the CIL rate for the ‘superstore’ category and had sought clarification about the definition and treatment of ‘large’ stores.

 

Recommendation 9: That

 

a.          a ‘Superstore’ rate of CIL be proposed for the next round of consultation; and

 

b.          question 9 of the CIL consultation be reviewed for correctness.

 

New Guidance

 

m.       The report contained hyperlinks to recent government guidance.  It was noted that officers were assessing the implications of the new guidance at present but it was clear to the Group that a number of the policy changes would involve additional work for the Council in administering CIL.  In particular, the potential for large developments to be divided into smaller schemes or many phases could result in additional workload and costs for the authority which might not be reflected in the management charge for CIL.  The Group made the following recommendations arising from government guidance.

 

Recommendation 10: That following submission of the Core Strategy/Local Plan to full Council in July 2013, priority is given to bringing the CIL and Core Strategy back in alignment (in line with guidance) and that this be achieved ahead of the Core Strategy being submitted to examination in public.

 

Recommendation 11: That officers assess the impact of CIL capping for councils holding a parish plan and provide guidance to all parishes by the end of August 2013.

 

Future Work Programme

 

n.         It was commented that the revised timetable for the implementation of CIL was dependent on the publication of the outcomes of the latest government reforms.  The report set out further work that would need to be undertaken.

 

o.         It was noted that CIL was a new levy on development, that there would need to be a period of adjustment, and economic conditions had slowed the rate of development in the County.  Consequently, the Group considered that CIL should not be implemented in such a way that would further inhibit development and recommended that a transition plan be devised, along with monitoring indicators to enable market conditions and behaviour to be reviewed post-implementation.

 

Recommedation 12: That

 

a.          a set of transition CIL rates be initially introduced which are significantly lower than those modelled as viable, to assist with immediate market land price adjustment and to encourage development to come forward following the introduction of CIL; and

 

b.          consultants provide advice on monitoring indicators and trigger thresholds for future rate review.

 

p.         The Vice-Chairman said that, as identified in the December 2012 report, it was crucial that appropriate CIL rates were set an appropriate level at the outset, as CIL would be non-negotiable once implemented.  It was noted that affordable housing and local infrastructure would be negotiable elements.  Therefore, to achieve the best outcomes for communities, the Group considered it essential that negotiations with developers were sufficiently robust and sought assurance about the approach to be taken.

 

Recommendation 13: That

 

a.        The Executive provides information and assurance to the reconvened Task & Finish Group to demonstrate that the District Valuation Office approach comprises detailed and continually updated market and economic information on whole development costs sufficient to ensure the robust defence of local infrastructure and affordable housing targets; and

 

b.        this is demonstrated to the Group's satisfaction ahead of the Core Strategy being submitted to examination in public.

 

The Chairman thanked the Vice-Chairman and the Task and Finish Group for this significant piece of work; Committee Members also congratulated the Group for the thoroughness of the report.  The Chairman noted that some of the pilot areas for CIL had encountered difficulties and the government seemed to be making changes as the situation evolved.  In response, the Assistant Director - Economic, Environment & Cultural Services (hereafter ‘Assistant Director’ in these minutes) acknowledged that there had been a steep learning curve but said that, informed by experiences in the pilot areas, government advice was clarifying outstanding issues.  He added that this consolidated the view that CIL should follow behind work on the Core Strategy, thereby enabling the authority to proceed with confidence in view of the most up to date guidance and findings.

 

A Committee Member raised a number of issues, including:

 

·                It was questioned whether the work on economic viability applied only to CIL or whether it also applied to the Core Strategy.

 

·                Clarification was sought about the reasons for the delay in the analysis of the CIL consultation responses.

 

·                Referring to recommendation 8, it was commented that self-build and high energy efficiency developments should be given priority, adding that on-site sewage disposal systems also reduced the burden on local infrastructure.

 

The Assistant Director said that it was a mandatory duty for a council to prepare a Local Development Framework and Herefordshire Council had been working on this kind of plan since 2007.  It was a matter of discretion whether the authority chose to bring forward CIL and it had decided to do so.  Therefore, the issues were linked but had to be treated on their own merits and in the context of the legislation.  The Planning Obligations Manager outlined the EVA modelling approach and advised that, as identified in the reports to Cabinet and Council, work on viability would continue to be refined, particularly for strategic sites; it was noted that helpful discussions had taken place with Ward Members for all the market towns.

 

The Planning Obligations Manager commented that self-build developments had not been included in previous CIL work but this element had now been identified in the latest government consultation.

 

The Assistant Director advised that analysis of the CIL consultation responses had not yet been undertaken because of the time and scope available within the team.

 

Another Committee Member sought clarification about paragraph 3.3.1 of the report which read ‘The Group was not permitted to engage with stakeholder parish councils during the period of the public consultation on CIL’.  The Vice-Chairman said that the Group had been advised that it could be confusing for parish councils if they were engaged in scrutiny work on CIL at the same time as the consultation on the preliminary draft charging schedule.  The Cabinet Member Environment, Housing and Planning (hereafter ‘Cabinet Member’ in these minutes) said that he was comfortable with his decision on this matter, as the public consultation was a statutory process and it would not have been appropriate to complicate the process.

 

Clarification was also sought about recommendation 8.  The Vice-Chairman acknowledged that the recommendation was innovative and said that it sought to encourage energy efficient housing, as this form of development did not create as much loading on County infrastructure and reduced lifetime running costs.  The Chairman noted that some Councillors had been campaigning for a number of years to get building regulations to the highest possible standard, so that as many properties as possible were zero emission.

 

The Assistant Director commented that: good, modern housing of this type was supported, this was reflected in the Core Strategy; CIL was perhaps a blunt tool to encourage energy efficient development to come forward; the legislation encouraged the setting of zero CIL rates where appropriate, but it might not be possible to set a negative CIL rate; and it might be not be appropriate to pay developers to build particular types of houses given current financial conditions.  The Cabinet Member supported the comments of the Assistant Director and said that sustainability should be integral to all forms of development.  He added that the authority could take a sophisticated look at the range of options to incentivise the highest standards of sustainability.

 

A Committee Member proposed that, rather than setting ‘a £Negative CIL rate’, recommendation 8 be amended to refer to ‘a significant reduction in the CIL rate’; perhaps with a sliding scale to recognise that any development would require some infrastructure to some extent.  The amendment was not seconded, therefore no vote could be taken.

 

Attention was drawn to paragraph 4.1.4 ii) of the report which read ‘We question whether the definition of a ‘large’ store in Herefordshire should start at 280m²’.  A Committee Member suggested that, for consistency, the determination of ‘large’ store should follow the same legal definition as used for trading purposes for Sunday restrictions.  This amendment was agreed by the Committee; the Vice-Chairman abstained, noting that the purpose of the paragraph was to seek clarification about question 9 of the CIL consultation prior to the next round of modelling.

 

In response to a question about recommendation 12, the Vice-Chairman said that the authority would need to identify some key indicators in order to monitor what was happening with CIL and with the development situation in the County, adding that CIL rates would need to be reviewed several times during the lifetime of the Core Strategy.  It was the view of the Group that a set of transition CIL rates were needed initially, at a level at which the market could cope with given current conditions.  The Assistant Director said that legislation provided some flexibility but, given the potential for developments to come forward once the Council had reached a decision on the Core Strategy, the authority needed to be cautious about setting CIL rates lower than levels indicated as being viable from the evidence.

 

Referring to a response given at the last meeting (see Questions from the Public, 18 June 2013, Answer 1 b), appended to the minutes of the last Committee meeting), the Vice-Chairman queried the use of the phrase that CIL would ‘be used to bridge a funding gap’.  The Assistant Director said that CIL in itself would not be paying for all infrastructure in the County but would add value to what was available to the authority, either through public and/or private funding.  It was acknowledged that a number of Members wished for a more detailed plan but, as a living document, the Infrastructure Delivery Plan would inevitably change during the 20 year period and the authority could not speculate on future government policies and funding.

 

In response to a question from a Committee Member, the Assistant Director advised that it was intended that the analysis of the CIL consultation responses would be brought back to Cabinet in autumn 2013.

 

The Cabinet Member thanked the Vice-Chairman and the other Members of the Task and Finish Group for the work that had been undertaken to date and acknowledged the effort that had gone into the report.

 

RESOLVED: That

 

(a)       The report of the Task and Finish Group - Community Infrastructure Levy (CIL) be received and, subject to the amendment identified in respect of paragraph 4.1.4, the Committee agree its findings for submission to the Executive; and

 

(b)       The Executive be invited to provide a response to the review, including an action plan, to be reported to the first available meeting of the Committee after the Executive has approved its response.