The costs of building smaller housing developments are not taken into account when setting planning charges, according to a new report from the Federation of Small Businesses…
A new report has found some councils across England are failing to take into account the cost of building smaller developments when setting planning charges.
The report, which was carried out by the Royal Institute of Chartered Surveyors’ Building Cost Information Service on behalf of the Federation of Small Businesses, found smaller developments cost significantly more, yet these increased costs are not taken into account.
According to the data, the average cost for schemes with 10 homes or fewer is six per cent higher than for larger residential developments. This rose to 14 per cent in schemes that comprise exclusively of homes, rather than flats.
The authors of the report said this was the equivalent to an increased base construction cost of over £100,000 on a typical housing scheme of between one and 10 homes. They also said allowances to cover some of these costs “could amount to an uplift of more than 20 per cent of the total construction cost”.
The report said: “There is no evidence that [the increased costs are] taken into account when assessing the viability of smaller housing schemes and some local planning authorities are setting section 106 or Community Infrastructure Levy (CIL) rates for smaller developments without making allowance for these extra costs.”
Planning expert Jo Miles, of Pinsent Masons said: “The question of whether small housing developments should receive dispensations from planning charges is topical, with this study coming hot on the heels of last month’s High Court ruling in R (on the application of West Berkshire District Council and Reading Borough Council) v Secretary of State for Communities and Local Government.
“Following that case, the government has withdrawn those parts of its planning guidance which introduced an exemption for developments of 10 dwellings or fewer from providing affordable housing or tariff-style obligations. Whilst that decision will be seen as a win for local authorities concerned about meeting affordable housing needs in their area, the government has stated its intention to appeal, so uncertainty remains.”
Miles added: “This new report urges local authorities to consider setting a lower CIL rate for smaller housing developments to reflect the higher build costs associated with such schemes.
“Being a non-negotiable planning charge, unless a differential rate is identified in an authority’s adopted CIL charging schedule, then there is no scope to reduce the CIL charges levied on smaller schemes.
“Accordingly, any negotiation around the viability of individual small schemes will be centred on affordable housing and s106 obligations.
“Until such time as the government’s intentions on future policy for small housing developments is clarified, there is unlikely to be much appetite from local authorities to revisit their charging schedules to provide a lower differential CIL rate,” Miles added.
“However, those authorities who set higher differential CIL rates for small residential developments in reaction to the government’s exemption policy, may be wise to reconsider those rates in the wake of that policy being withdrawn”.