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Community Infrastructure Levy: Has It Been A Success?

In April 2010, the government introduced a Community Infrastructure Levy (CIL). Local authorities are now able to raise money from developers who choose their area to start building projects. The money raised is supposed to be used to recharge an area's infrastructure where development has taken place.

It sounds like a great idea, but the construction of new homes has plummeted in areas where it has been introduced, according to research conducted by real estate firm Savills.

CIL doesn't seem to be living up to its promises as far as Savills is concerned. Following on from their research, "CIL: Is it delivering?" they found a 49% drop in the number of new residential planning consents granted over the last year, after its introduction. What was supposed to be an attempt to simplify the system and generate cash, has become a deterrent. The drop was partially attributed to the rush to file applications before the levy was introduced.

Where Has It Been Successful?

Councils are free to decide how much they'll charge, but only 16 have adopted the tax and had it in place for a year. These 16 councils together have raised £57m from the tax but it is still labelled as "counterproductive" in its early stages by Savills. London appears to be the one place in England and Wales where the implementation of the scheme has been a success. Here, two separate levies are in place as opposed to the one applied by other councils that have signed up, with one set across the city by the Mayor and one set by the local council. Boris Johnson, the Mayor of London, has used the CIL to help contribute towards Crossrail and is on target to raise £300m by 2017 for the east-west rail project.

Previously undesirable areas of London for office space such as Paddington, Holborn and Stratford have become hot spots for developmental activity, due to the success of the new Crossrail route.

London seems to have become the poster child for the CIL scheme, but whether other local authorities will follow suit is another question. In essence, the CIL is a "catch 22" for most authorities, which makes it difficult for it to be a success. In most cases, development cannot commence without the necessary infrastructure being in place, and the infrastructure is not in place because no developments have been completed to claim the levy.

The Best Way to Implement CIL?

The levy has been operating for less than a year with some commentators such as the Department for Communities and Local Government calling Savills' conclusions "premature".

For those local authorities in England & Wales that do choose to take up the CIL charging scheme, they should look to London to see how it can be done best. For those that don't, they should keep an eye on the figures and stats that come out over the next few years before they make any changes.

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Dated: 06/11/2014

Author: Greg Cox

Landlord - Residential Letting Contract

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