Guide Viability Guidance Notes

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6. Viability Guidance Note 6: CIL and Viability

This notes provide advice on how various issues in relation to CIL should be considered and addressed in Viability Appraisals, when a developer is seeking to argue their scheme can not to afford to provide the amount of affordable housing, or policy requirements for reasons of viability.

East Devon District Council adopted CIL with the Local Plan in 2016 and began charging CIL from Sept 1st 2016.  CIL is a non-negotiable charge that must be paid on all CIL liable development. For more information about CIL, including the current rates and charges at East Devon. You can also access Government information on CIL.

CIL and Viability

As CIL charges can be a significant cost for any development scheme, applicants should carefully factor in any CIL costs when preparing a development appraisal. CIL charges should be shown as a cost in any viability appraisal.

The supporting statement to the viability appraisal should set out how CIL has been calculated, clearly setting out the amount of the floor space used to calculate the amount CIL liable development and how this was arrived at, as well as the CIL rate used to undertake the calculation. This will enable the calculation to be easily updated if the floor space and/or the rates change during the course of the application.

Changes to the design and layout of a scheme which impact on floorspace are likely to affect the amount of CIL chargeable on the development. This may result in the viability calculations needing to be re-run to reflect the updated CIL calculations. For example, CIL is payable on garages so the removal or inclusion of garages from a scheme would result in a change to the CIL costs for the development scheme.

CIL and Section 106

Although CIL is a mechanism to pay for infrastructure, its introduction does not necessarily negate the need for Section 106 contributions in all cases. On-site requirements, for example open space and play provision, and off-site elements required to make a development acceptable in planning terms, for example footpath links into the town centre may still be necessary. Such costs should be identified, costed and evidenced in the viability appraisal. The requirements for any Section 106 contributions will need to be agreed with the Council before any assessment of the viability appraisal is commissioned. 

CIL and Validation

A correctly completed ‘CIL Form 0 – Additional Information’ is required with any application, without this form your application is not valid.  Please note a form is required even if your scheme is not CIL liable, or is for a use that is £0 CIL rated.

If you are seeking to argue viability then some kind of viability information is required at validation.  We recommend a Residual Land Valuation with a supporting commentary explaining all of the costs, values and assumptions used.

Please ensure the figures used on the CIL form, match the amount of floor space shown on the plans and the floor space used in any viability appraisals.  This will need to be agreed with the Council before any assessment of the viability appraisal is commissioned.  The viability appraisal calculations will need updating if the design of the scheme changes and amount of CIL liable floor space increases or decreases.

CIL is calculated on Gross Internal Area, as defined by RICS Property Measurement Guidance                

CIL and Index Linking

CIL rates are index linked and increase in line with BCIS All-In Tender Price Index on January 1st each year.  Please ensure you factor in any indexation to your viability calculations, bearing in mind the amount of CIL payable is assessed for charging on the date that planning permission is granted.

CIL and Social Housing Exemption

It is possible to claim relief from CIL costs if the housing is affordable housing.  What counts as affordable housing is set out in the CIL regulations. 

From a viability perspective, the full CIL rate should be calculated initially and then a deduction made for the Social Housing Relief.  The calculation and/or assumptions used should be clearly explained in the viability appraisal’s supporting text.  This will enable the calculation to be easily updated if the amount of social housing floor space changes during the course of the application.

CIL and Self-Build

It is possible to claim relief from CIL costs if you are a self-builder of a new home that you then live in.  The CIL regulations however, set out very strict requirements for the evidence that needs to be supplied to claim this, requiring:

  1. Proof of an approved Self Build or Custom Build Mortgage from a bank or building society for your development OR
  2. Proof of a specialist Self Build or Custom Build Warranty for your development OR
  3. An approved claim from HM Revenue and Customs under `VAT431NB: VAT refunds for DIY housebuilders'

It is not possible for anyone other than the self-builder themselves to claim exemption.  Developers cannot apply for permission to create self-build plots and claim the credit themselves.  In such cases self-builders would need to buy the plots and then apply for the CIL exemption with their planning applications. 

From a viability perspective, unless you are the self-builder of your own plot, no self-build exemptions should be included in your CIL calculations.

CIL and Habitat Regulations Mitigation Costs

If your development falls within the Pebble land Heaths and/or Exe Estuary habitat mitigation zones see map part of the CIL contributions go to pay for infrastructure habitat mitigation measures. However this does not include non-infrastructure contributions which are also required, these can be addressed via a Unilateral Undertaking or a Section 111 upfront payment.

Viability appraisals should therefore include both CIL and non-infrastructure Habitat Mitigation charges and any on-site other mitigation as itemised costs.  For example, the provisions of on-site Sustainable Urban Natural Green Spaces (SANGS) should be shown as an itemised cost against the development scheme, with supporting evidence provided.

CIL at Outline

Calculating the CIL requirement at outline stage may be difficult if the internal floor space details of the scheme are not known.  Applications for outline are often accompanied by indicative schemes, and viability appraisals of those indicative scheme.  Where a viability appraisal is submitted at outline it would need to relate to the indicative scheme provided.

However, please be aware that para 6.25 of the Council’s adopted Planning Obligations SPD  clearly sets out our approach to dealing with viability at outline stage, including the challenges of pinning down CIL contributions at outline stage and how we would address this.

Amendments to a Scheme

The purpose of the viability process is not only to identify where viability may be an issue, but also to seek to find ways of improving a scheme viability.  This may result in suggested changes to layout and the resulting floorspace.  Any changes or amendments to a scheme that require a new/revised viability assessment are also likely to require a re-calculation of CIL and submission of revised CIL forms for re-assessment.

Viability Re-appraisals and Charges

As the Planning Practice Guidance (PPG) explains “decision-taking on individual applications does not normally require consideration of viability.”

It is for the applicant to demonstrate that a scheme cannot afford to provide the required affordable housing/Section 106 contributions for viability reasons.  The PPG indicates that costs incurred in securing planning permission can be a legitimate costs for the scheme, repeated re-assessments will increase these costs, to the point where the costs of the viability appraisals themselves make the scheme unviable.  This is clearly not the intention of the guidance, and it is expected that applicants will take reasonable care to avoid incurring excessive charges through numerous viability re-assessments. 

It should also be noted that it is expected that any costs incurred in securing outline planning permission before a site is sold, would have been factored into the sales price.  These costs therefore should not be factored into any appraisal of viability at reserved matters stage.