Council fears rule change for builders’ payments would leave it out of pocket

CASH FOR SCHOOLS, SURGERIES ETC WOULD BE PAID AFTER SCHEMES HAVE BEEN BUILT

A DERBYSHIRE council is worried about new Government plans which would see housing developers not pay out for infrastructure improvements until construction is finished.

As it stands, developers agree to legal deals with councils for how much they need to pay to mitigate the impact of their schemes, including money for new schools and play equipment and for road improvements.

This is agreed upon before work starts and is paid out in legally-binding stages, such as when half the homes are occupied.

However, new plans from the Department for Levelling Up, Housing and Communities would see this pushed back to the end of construction and the money owed would be tied to the value of the finished scheme – through a new infrastructure levy.

It hopes this will avoid developers saying they cannot afford to pay for infrastucture or affordable homes they agreed to provide – due to the additional cost, a situation which often sees fewer or no affordable homes provided.

The new measure would ensure that the mix of affordable housing is ironclad but the rest of the financial burden would be tied to the final development value and delivered at the end of the project.

South Derbyshire District Council officials say that this could leave the authority itself having to take out loans to fund infrastructure projects to make sure they are in place before the impact of housing schemes hit existing communities.

It also worries about the enforcement resources required in making sure developers who have completed schemes actually follow through and pay out for mitigating infrastructure.

The council’s official response will say: “In order for the local authority to be able to fund any infrastructure to mitigate the impacts of the development then they will have to borrow against existing cash flows or borrow out of the Public Works Loan Board.

“The borrowing is something that the district council has been reluctant to do due to the possible implications that this might cause.

“Any borrowing rates would have to be at favourable rates for the council and the process of securing the payment from the developer would need to be guaranteed so as to not leave the council out of pocket should any issues arise.

“Currently the Section 106 contributions are collected at 40 per cent occupation of the development, which ensures that the developer still has the cash flow to be able to pay the contributions from the sales of the houses at that point within the development, however it does not impact sites coming forward and have an impact on viability.

“Therefore, it means that the opportunity of mitigating the impacts of the development available early enough to ensure that all of the residents are having infrastructure delivered early within the timings of the delivery of the development.

“The council strongly agrees that payment of the levy should be required prior to site completion to ensure that the infrastructure to mitigate the effects of the development is delivered in a timely manner for the benefit of the residents of the district. In particular, the area most impacted by the development.

“This will help to ensure that the infrastructure can be delivered in an efficient manner as the delivery of the site progresses.

“The provision of infrastructure is vital in ensuring that a development is well designed into being a good environment for residents to live in the future.

“Therefore, it is essential that they have the key infrastructure in place for them to have a good quality of life to start with. This includes street lighting and adequate highway provision.

“The ability for the council to request where required the infrastructure payments upfront in order to help bring forward key strategic items such as a school or doctor’s surgery in a timely manner as part of a strategic development across multiple developments is essential.”

Council officials say the new plans would avoid the issue of developers “negotiating downward” on the amount of affordable homes they provide based on financial viability issues.

At a district council meeting on Tuesday, Cllr Kerry Haines said: “If I was a developer the final sale price would be the lowest possible sale price I could find.”

Cllr Amy Wheelton said the proposals were currently still “a bit vague” and queried whether it would be the council or an independent district valuer who would assess the value of finished schemes.

She also indicated that developers could sell off parts of their schemes in a bid to avoid paying money to the council.