In this article, we provide an overview of the use of developer contributions at the moment, what the issues are, and how we help overcome the problems we found with better insights.
Developer contributions are a vital part of the UK planning system often part of a way of achieving positive outcomes from development for new residents. This is relevant to developers who have regulatory and fiduciary requirements and negotiations as part of their planning application process.
While the majority of contributions enable affordable housing provision, contributions can also go towards improving education and health provision locally. The key point in this article is that the achievement of positive impacts depends how well aligned developer contributions are to local challenges.
What are developer contributions in the UK?
The best new developments can have a positive impact on its place and community if the change is well managed. Picture this: a fresh housing project is on the horizon, leading to a surge in local residents. Growing demand for education or healthcare facilities will need planning for. New job opportunities may arise and essential transport infrastructure is required to connect residents with workplaces. These factors are all interconnected and must be thoughtfully addressed to ensure a prosperous and harmonious community development.
These considerations are of paramount importance for UK developers, given the Community Infrastructure Levy and S106 payments, collectively referred to as Developer contributions.
According to the PAS guidance, Community Infrastructure Levy and S106 payments deliver local investment, but do so in different ways:
S106 contributions (£)
Community Infrastructure Levy contributions (£)
The S106 payment is a mechanism for negotiation between Developers and the council about payments or required actions that are specific to a development project.
S106 agreements were introduced with the Town and Country Planning Act 1990 in England. Therefore, S106 is particularly useful in enabling developments that may otherwise not have been acceptable.
CIL, on the other hand, is a compulsory and defined payment that needs to be paid. The levy is charged on the basis of floor space and the planned usage of the new spaces. Furthermore, CIL is intended to compensate for the overall impact of development, not for the impacts of a specific development.
Developer contributions are a mechanisms to secure payments either in kind or money from larger construction projects to assist in addressing impacts from new developments within communities. Contributions can range from school facilities, new built and natural infrastructure as well as delivering on affordable housing commitments.
What are developer contributions used for?
Developer contributions are therefore important to fund social infrastructure locally. They can be used to support health and well-being as well as to contribute a built environment suitable to a wider group of people.
New affordable housing is made possible through developer contributions. 48% of affordable housing in 2018/19 was delivered through contribution payments. Affordable housing is often developed by the main contractor and then purchased by social registered providers, who provide ongoing management and maintenance services.
The new build or relocation of existing health facilities. They can also fund new infrastructure that is significant to health, such as green space, pedestrian walkways, cycle lanes, and safe accessible places for people to gather.
Analysis of developer contributions for 2018-19 confirms that the value of developer contributions was significant. For England, developers paid GBP 7 billion. In absolute terms:
Challenges with contribution payments
Especially S106 contributions are negotiated for every development separately. As such this is often a protracted process of negotiation between the local authority and developer. There are range of challenges with the existing setup:
Lack of agreed standard for applying contributions
There is a lack of guiding standards or common evidence cases to determine best practice contributions. There are few formal triggers for specific contributions.
As Inside Housing noted, “council policies and practices on developer contributions are “highly inconsistent” across the country. There is "limited transparency and public engagement.”
As a result, payments are very uneven across England. A staggering, 53% of developer payments were made in London or the south-east!
Matching what is negotiated with what is provided
There is little guarantee or transparency that communities receive the amenities they require. This can be due to limited evidence, engagement, or understanding of what is immediately useful to the local community; or due to mismatches in the timing of payments and delivery of any interventions.
From Developers' point of view, at times, there are issues if contribution payments are effectively used on areas not near the development project. This will be more common with CIL payments, which are not used for site-specific investments.
S106 contributions (£)
Community Infrastructure Levy contributions (£)
In terms of S106 contributions, there is a very clear link between the development and what the contributions can be spent on.
For CIL contributions, this link is often weaker which can lead to arguments between Developers and authorities. Councils often have to build a strong evidence base and apply specific criteria on how the receipts can be disbursed. According to PAS, 85% of the contribution needs to be invested in infrastructure projects. However, those works may not be required to be close to the development that is causing the identified impacts.
Viability and S106 contributions
One of the issues raised with respect to S106 contributions is whether there is an unrealistic push for affordable housing that is difficult to deliver. This use is often subjective especially when the expected profit goes below 20% of the investments for the development.
Manchester is a case in point: The lack of contributions for new development is particularly controversial when there was a building boom and property prices were rising.
A recent report found that only 6% of development applications had a contribution for affordable housing. This was in contrast to the vast sums that were invested on prime city centre estates. At about £74 million per site, to total across 79 sites analysed in this study gives a total of £5.85 billion investment.
However, bold outcomes can also be achieved, as demonstrated in the new Mayfield development in Manchester, which will also provide Manchester's first new park in 100 years, which represents a significant contribution on site, which reduces developer contributions otherwise.
Making the most of developer contributions
There’s a number of ways developer contributions can be used better, especially if aligned with the needs in the local area, and productive for the new development, too.
Identifying investments with better neighbourhood insights
Effectively, whether it is CIL or S106 payments that are collected, any receipts need to be based on well-founded local data that clearly demonstrate investment needs and priorities in the area. If a local authority fails to provide that evidence or the data is out of date, it will have a much poorer opportunity to properly work with Developers in securing mutually beneficial outcomes.
As a consequence, the opportunity for long-term improvement of the wider area will be missed. This can be overcome with readily structured evidence, around needs for local provision based on capacity shortfalls or lack of key provision.
Garnering support with improved community engagement
Developer contributions are generally discussed when it comes to making a planning application, which is especially true for project-specific contributions (such as S106). Local councils provide an annual report and all payments are publicly listed.
However, payments and the benefits of CIL and S106 should be included in the discussions with residents as well.
Early engagement provides an opportunity to prioritise the use of the receipts for improvements in the local area. Secondly, these payments are a benefit of new development locally, and can be an aid to local residents being more open to the idea of new development close to their doorstep.
Maximising investments with better coordination of contribution schedules
As the 20-minute neighbourhood report has shown, in any new development, especially at edge-of-town locations, it’s crucial that there is good coordination in place when it comes to the engagement, prioritisation and allocation of social infrastructure, that need to be funded from multiple contributions.
Social infrastructure needs to be planned early in the development cycle. It is dependent on the land and funds being available at the time of the development. It also needs organisations to be in place to take ownership and deliver. on the outcomes.
Communicating the positive outcomes
Another aspect that developers can benefit from and do better relates to capturing and communicating the benefits of their contributions payments. Understanding how contributions performed across a portfolio and in different contexts will substantially improve insights into best uses of developer contributions, and will be a clear talking point to more conscientious buyers.
Deliver or plan in social amenities on site
Providing facilities or social amenities on site is perhaps the best way for developers to influence part of the development contributions! If a local playground is required within a certain walking distance, and there is none, providing one on site is a great way to work towards local needs, while also raising the credentials of the development itself.
Developer contributions are essential for funding new infrastructure. However, often Developer contributions are not used or explained in the best possible way.
Investments will ideally be tied back to purposeful outcomes that translate into benefits to current and future residents, such as that better cycling infrastructure can offer an easier, safer, and more convenient neighbourhood environment.
Easy-to-access evidence on the local provision of key social assets makes it easier for developers and local councils to maximise investments while early stakeholder engagement can help shape the use of contribution payments in order to secure improved outcomes for the developer and local stakeholders.
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