The Government have announced that they are now bringing in changes to the Community Infrastructure Levy (CIL) that will allow developers to claim relief for any First Homes provided as part of a CIL liable development.
First Homes are a discounted market product where properties are sold at 70% (or below) their market value and this discount is retained through any re-sales of the dwelling.
The Government’s recent consultation on a series of wider changes to the planning system included the proposal to formally introduce of the First Homes product (this followed on from a consultation specifically on First Homes earlier this year) and set out how they propose to secure this type of product.
Subsequent to this, the draft Community Infrastructure Levy (Amendment) (England) (No.2) Regulations 2020 have been laid before parliament and will take effect on the 16th November 2020 if approved.
A number of reliefs and exemptions are already available under the existing CIL regulations. These allow various forms of development including affordable housing to be removed from the overall CIL liability if certain criteria are met. Two forms of relief apply to affordable housing:
- a mandatory Social Housing Relief that currently applies to Shared Ownership, Social Rented and Affordable Rented Housing; and
- a discretionary Social Housing Relief that applies to Discounted Market Housing, but only if it is has been expressly adopted by the charging authority.
The proposed changes in the draft regulations would make First Homes qualify for the mandatory Social Housing Relief. The qualifying criteria are:
- The first sale of the dwelling is for no more than 70% of its market value; and
- A planning obligation has been entered into prior to the first sale of the dwelling to ensure that any subsequent sale of the dwelling is for no more than 70% of its market value.
In the same way as it currently is for other forms of affordable housing, the relief is subject to a claw back period, which means that if the relief is granted, but the dwelling is then subsequently sold in a way that does not meet the qualifying criteria, the CIL must be paid. For First Homes, the claw back period begins when the development commences and ends when it is first sold in accordance with the qualifying criteria.
The draft regulations also make a change to the discretionary Social Housing Relief as it applies to discounted market housing. For a dwelling to be a qualifying dwelling under the existing Regulation 49A, it must be sold for no more than 80% of its market value; it must be sold in accordance with a relevant policy published by the CIL charging authority; and liability to pay any CIL in relation to the dwelling must remain with the person granted CIL relief under regulation 49A. These Regulations introduce, as an alternative to the last of these criteria, a requirement that a planning obligation has been entered into designed to ensure that any subsequent sale of the dwelling is for no more than 80% of its market value.
The proposed amendments to the regulations pave the way for the introduction of the First Homes product as a mandatory form of affordable housing under proposed changes to the National Planning Policy Framework (NPPF).