A new levy on development in the Royal Borough of Kensington & Chelsea

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1 February 2013

The Royal Borough of Kensington and Chelsea (RBKC) is consulting on a new Community Infrastructure Levy (CIL) until 20 February. It will impose significant additional costs on many developments in the borough. The levy will apply to planning permissions issued after it comes into force and some permitted development works. It will be sought in addition to the Mayor of London’s CIL. RBKC’s CIL is envisaged to come into force in February 2014.

What is CIL?

CIL was introduced by the Planning Act of 2008 to address concerns that payments towards local infrastructure improvements were ad hoc, slow and unpredictable. Its intent is to help deliver the necessary finance for infrastructure projects through a simplified collection of payment systems. CIL is based on gross internal area (GIA) realised through development.

Within London, in addition to the Mayor’s CIL only the boroughs of Wandsworth and Redbridge are currently charging their own CIL. Many boroughs are however currently preparing CIL regimes (eg Camden). The City of Westminster is not currently preparing a CIL.

How does CIL relate to Section 106 (S106) Agreements?

RBKC currently uses a calculator-based approach to seek generalised standard contributions from certain types of new development. These contributions, which are negotiable, are sought through S106 Agreements.

RBKC’s proposed CIL will mostly replace S106 contributions, although there will be site-specific circumstances where they may additionally be sought. RBKC acknowledges that CIL contributions will be much higher in most instances than the current S106 approach. The sums will not be negotiable except in exceptional circumstances.

What will RBKC’s CIL pay for?

Payments made under RBKC’s CIL will be pooled and spent on social, physical and green infrastructure. While the Council has identified investment it could make, they are not bound to make any particular investment.

When is it payable?

Common instances where there may be a liability to pay CIL might be:

  • the development creates a new dwelling
  • where 100 sq m or more additional GIA floorspace is created
  • changes of use where existing floorspace has not been continuously occupied for over six months in the 12 month period before development is permitted.

Overall a crucial caveat to i) and ii) above is that existing floorspace can only be discounted where there has been six months’ continuous occupancy. Another key point to note is that permitted development can also be liable.

Which uses will RBKC apply CIL to?

While RBKC could impose a CIL on a variety of different types of development, the authority is not looking at this time to seek contributions from anything other than residential uses, hotels and student accommodation. There is some ambiguity about the definitions at present. Non-residential uses will not be subject to RBKC’s CIL.

The scale of CIL sought by RBKC

RBKC is seeking significant contributions and acknowledges that these would be, if implemented as proposed, the highest rates in London. The proposed amounts are based on what is deemed tolerable before development - in a general rather than site-specific sense - becomes unviable.

Residential rates per postcode-based zone vary from 650 per sq m in SW1X to £100 per sq m in W10. Rates for ‘extra care’ housing are lower and flat sums are to be sought of £160 per sq m for hotels and £125 per sq m for student accommodation. While certain exemptions are allowed, as a general rule CIL is a standard charge and the amount cannot be negotiated except in exceptional circumstances.

What uses does the Mayor’s CIL apply to?

Unlike RBKC’s proposed CIL, the Mayoral CIL applies to all types of development except for most health or education uses (e.g. it applies to residential and offices). The rate payable under the Mayoral RBKC in RBKC (alongside the other most affluent London Boroughs) is £50 per sq m.

Are RBKC’s CIL amounts acceptable?

Many will feel that RBKC’s CIL will discourage residential development, particularly in the south of the borough. as we have seen elsewhere, often CIL charging regimes see considerable change between the date they are first consulted on and the date they come into force.

Next steps

The current consultation runs until 20 February 2013. A further consultation will follow with an Examination in Public by an Inspector following that. The Council envisages that its CIL will come into force in February 2014.

Once the CIL is adopted, it will be ever more important to ensure that properties that are or will be promoted for development are occupied, in order to minimise CIL contributions. Turley can advise on potential liabilities and opportunities and assist with making representations to this consultation. It may be important to do this, especially at this ‘Preliminary Draft’ stage when the Council is best placed to make changes.