New Infrastructure Levy to Replace S106 Contributions?

The government is consulting on a new infrastructure levy to replace section 106 contributions for most developments. 

A 'Technical consultation on the Infrastructure Levy' was recently launched by the Department for Levelling Up, Housing and Communities (the "DLUHC"). This consultation sets out details regarding the new Infrastructure Levy (the "Levy"), which is a reform to the existing system of developer contributions under section 106.

The Levy will be introduced as part of the Levelling Up and Regeneration Bill and will be introduced through ‘test and learn’ over a 10-year period, with a small number of councils initially implementing the Levy and testing its operation in practice, before being rolled out more widely.

DLUHC stated that:

“the aim of the Levy is to create a swifter, simpler, more transparent system, and one that will raise at least as much revenue as at present, if not more, for local authorities to provide the infrastructure and affordable housing that communities need”.

Consequently, there could be significant amendments to the way contributions are secured and administered, with a raft of new measures proposed including timings on when the Levy is paid, and how affordable housing will be delivered. Under the proposals, councils will able to set the applicable rates and the amount developers will have to pay will be calculated once a project is complete, instead of when a site is given planning permission, so that councils benefit from increases in land value.

Councils will be given a new ‘right to require’, so they can specify how much of the levy is delivered through affordable housing on site in new developments, and how much is given in cash for other infrastructure, such as new schools, transport links or GP surgeries. A portion of the money will be passed directly to communities as a ‘neighbourhood share’ to fund their infrastructure priorities, while councils will be required to engage with communities and create a infrastructure delivery strategy.

The consultation closed on 9 June 2023 and the government anticipates that it will consult further on proposed regulations, when the consultation responses have been fully considered.