, Property
The committee resolves to grant. Nine units on a cleared yard, and you have been at it for fourteen months. Your appraisal said the scheme worked at a £310,000 land value and you paid £295,000, which felt like room.
Then the section 106 heads of terms come back with a financial contribution towards education, one towards open space, and one towards highways. The CIL liability notice follows a few weeks later with a figure per square metre and an indexation calculation. Between them they are more than your margin.
CIL is arithmetic and it is not negotiable
The Community Infrastructure Levy is set by the Community Infrastructure Levy Regulations 2010, as amended more times than is comfortable. A charging authority adopts a charging schedule setting rates in pounds per square metre, and those rates can vary by use and by geographic zone within the same district. Some authorities charge nothing. In London there is also the Mayoral CIL on top of the borough's rate.
The chargeable amount is based on the net additional gross internal floorspace created, so existing floorspace in lawful use can be deducted if it meets the conditions, which are stricter than they sound and turn on the building having been in lawful use for a continuous period within a defined window before permission. The rate is then indexed from the year the charging schedule was adopted to the year permission is granted, which is why the figure on the liability notice never matches the figure on the charging schedule.
The important thing about CIL is that it is not a negotiation. There is no viability argument against it at the point of permission. It is a formula applied to your floorspace, and the only routes out are the specific reliefs: social housing relief, charitable relief, self-build exemption, residential annexes and extensions, and the exceptional circumstances relief that most authorities have never adopted.
The procedural traps are worse than the money. Somebody has to assume liability in writing before development starts. A commencement notice must be submitted before you start. Get either wrong and you lose the right to pay by instalments, meaning the whole sum becomes payable immediately, and you can incur surcharges. Relief that was granted is withdrawn if you fail to submit the commencement notice, which has caught self-builders for a five figure sum on a technicality.
Note also that CIL does not apply everywhere in the United Kingdom. Scotland does not operate it, relying instead on section 75 agreements, and the Infrastructure Levy (Scotland) Act 2019 provided a framework that has not been brought into general use.
Section 106 is a negotiation, and that is the harder part
Planning obligations under section 106 of the Town and Country Planning Act 1990 are agreements between the developer and the authority, binding on the land. They do the things CIL cannot: they secure affordable housing, they impose restrictions, and they deliver things on the site itself.
They are constrained. Regulation 122 of the CIL Regulations makes an obligation capable of being a reason for granting permission only where it is necessary to make the development acceptable in planning terms, directly related to the development, and fairly and reasonably related in scale and kind to it. Those tests have statutory force, which means an obligation that fails them is one you can push back on, and applicants routinely do not.
The biggest line is usually affordable housing. National policy sets a threshold below which affordable housing contributions should not be sought on major developments, generally 10 dwellings or more, or a site of 0.5 hectares or more, with a lower threshold available in designated rural areas. Above that, the local plan sets a percentage, commonly somewhere between 20% and 40% depending on the authority, and whether it is delivered on site or as a commuted sum is itself negotiable.
There is also the vacant building credit, which allows an offset against affordable housing requirements where a vacant building is being brought back into use or demolished. It is applied inconsistently and it is worth asking about on any brownfield scheme.
Viability is a formal argument with rules attached
If the scheme genuinely cannot bear the policy requirements, the route is a viability assessment. National planning practice guidance sets out how these are supposed to work, and the framework has tightened considerably since the days when a spreadsheet nobody could see produced a reduced contribution.
Two numbers do the work. Benchmark land value is established on an existing use value plus a premium basis, the premium being what a reasonable landowner would require to release the site. Crucially it is not what you paid. Overpaying for land is not a viability argument, and the guidance says so directly.
Developer return is the other. The guidance refers to a return of 15% to 20% of gross development value as a suitable benchmark for the developer's profit in many circumstances, with a lower figure potentially appropriate for affordable housing. If your appraisal shows a return above that after the contributions, the contributions stay.
Viability assessments are now normally published, so the argument is made in public. They also take months and cost money in consultants, which means arguing viability on a nine unit scheme frequently costs more than conceding the contribution.
The scheme stops working once you count them properly
The honest lesson from all of this is about when you do the sums, not how.
A residual land valuation works backwards: gross development value, less build costs, less professional fees, less finance, less contributions, less developer profit, and what is left is what the land is worth. If you run that appraisal without CIL and without an estimate of section 106, you have produced a land value that is too high, and you will outbid the developers who did it properly. Winning that auction is the beginning of the problem, not the end of it.
- Before you offer, ask the authority for the adopted CIL charging schedule and the current index figure, and calculate the liability on your indicative floorspace. It is arithmetic and it takes an afternoon.
- Ask the planning officer, at pre-application stage, what obligations they would expect. They will tell you, in writing, without committing themselves, and that is enough to price it.
Do that and the contributions come out of the land price rather than out of your profit, which is what the system is designed to achieve and what a surprising number of schemes never do.
Where this shows up in the game
Housebuilding and development arrive in Business Baron with the Property & Construction Track, an add-on to the full game. Planning is a process with dates, and a scheme carries its costs month by month while it waits. Whether a site still works after you have counted everything against it is the decision, not a formality after permission.