Permitted developments to pay contribution levy as government looks to SME builders

However, the exemption will be continued for self-build and custom-build development.

At present PD conversion schemes are excluded from the Community Infrastructure Levy and planning obligations which can be levied by local authorities.

However, the latest proposals would bring together these developer contributions into one Infrastructure Levy set by central government, with PD schemes included.

The government said it wanted to use the reformed Infrastructure Levy to raise more revenue than the current system and deliver at least as much affordable housing.

“In making this change to developer contributions for new development, the scope of the Infrastructure Levy would be extended to better capture changes of use which require planning permission, even where there is no additional floorspace, and for some permitted development rights including office to residential conversions and new demolition and rebuild permitted development rights,” the consultation said.

“This approach would increase the levy base, and would allow these developments to better contribute to infrastructure delivery and making development acceptable to the community,” it added.

The levy would be charged on the final value of a development based on the rate at the point planning permission is granted.

It would be charged at the point of occupation and would only apply above a minimum threshold to prevent low viability developments becoming unviable, while the levy would only be charged on the value exceeding the threshold.

This would “provide greater certainty for communities and developers about what the level of developer contributions are expected alongside new development” the government argued.

Small builders key players

Despite this focus on permitted development rights, the government has also said it is targeting small and medium builders to put the planning reforms into action.

It believes a greater role for smaller builders will increase the number of properties built and speed of development.

The proposals suggest that plans for large sites should seek to include a variety of development types by different builders which allow more phases to come forward together.

“The changes will be a major boost to SME builders currently cut off by the planning process,” it said.

“They will be key players in getting the country building on the scale needed to drive our economic recovery, while leading housebuilding that is beautiful and builds on local heritage and character.

“The current system has shown itself to be unfavourable to small businesses, with the proportion of new homebuilding they lead on dropping drastically from 40 per cent 30 years ago to just 12 per cent today.

“Recent studies show smaller firms feel the complexities of the planning process and its associated risks, delays and costs are the key challenges they face in homebuilding.”