‘CILver Lining’ falls short for SME Housebuilders

‘CILver Lining’ falls short for SME Housebuilders – what you need to know about the Government’s consultation proposals

So the Government’s consultation on proposals to kickstart house building in London is out.  The proposals centre on:

1. Temporary Community Infrastructure Levy (CIL) Relief; and,
2. Additional powers to the Mayor of London to call-in and determine both applications comprising 50 or more homes; and applications in the Green Belt or on MOL comprising development of over 1,000sqm.

Whilst this briefing note focuses on the above, there are further consultations from the Mayor of London in a draft ‘Support for Housebuilding’ London Plan Guidance which tackles:

• Temporary modifications to cycle parking requirements.
• Revisions to London Housing Design Guidance to relax dual aspect and dwelling per core restrictions.
• A temporary Affordable Housing concession proposed to set a new threshold route for 20% Affordable Housing (or 35% for Public Sector or on Industrial Land where industrial floorspace capacity is not being reprovided).

You can view our separate blogpost on Mayor of London’s proposals here.

The deadline for both consultations is midnight on 22^nd January 2026 (see links below).

Here we consider the key matters in more detail and share Planning Insight’s proposed consultation response for Clients that may wish to replicate our response in their own submissions.

1.CIL Relief

Despite Planning Insight’s initial enthusiasm for the Government’s proposals when announced in October, frankly the reality of the CIL Relief is quite disappointing.  Especially if you are an SME developer who’s schemes are unlikely to meet the threshold for CIL relief.  We recommend engaging with the consultation to lobby for greater flexibility.

There was much fanfare about this ‘support for housebuilders’ when trailed jointly by the Government’s and Mayor’s press offices at the end of October.  The principle of a 50% reduction in Borough CIL and a new fast track route set at a 20% affordable housing threshold (alternative to the current fast track route at 35%) was welcomed as a step in the right direction even if 20% affordable remains challenging for the majority of schemes.

This optimism has now been tempered by the finer detail in the recently launched consultation.

First the good news:

• CIL relief to be applied at 50% of Borough CIL where schemes commit to a policy compliant 20% affordable housing provision on private land or 35% on public sector land or on industrial land where floorspace capacity is not being reprovided.
• Potential to increase this CIL relief to 80% by committing to a larger quantum of affordable housing.
• There will be no ‘late stage review’ or clawback of CIL relief providing a development milestone has been reached by 31 March 2030. For most schemes this milestone will be completion of the first floor of buildings within the scheme.  For larger phased schemes the milestone will be the first floor of buildings that comprise 200 homes.  Note this is component of the separate London Plan Guidance Consultation but the ‘clawback’ of CIL is relevant to this consultation.
• Stalled planning consents that have not yet commenced development may also be eligible for this CIL relief and a reduction to 20% affordable but subject to presenting updated FVA evidence to demonstrate the consented scheme is unviable and could become viable with these changes.  In most cases this will require a deed of variation to the S106 but possibly other amendments to the original consent.

Now the disappointing news:

• Mayoral CIL is not included in the relief.  Justified on the basis that Mayoral CIL is already committed to financing major infrastructure projects but Borough CIL is apparently not!
• CIL relief will only apply to those applications generating a CIL liability of minimum £500,000 (after subtracting any CIL relief from existing floor space/uses at the site).  This means the relief will only be available to larger schemes. Each Borough has its own variables in CIL Rates but taking Newham Council’s CIL rates as an example, it would mean schemes of minimum 79 homes in their Zone 1 or minimum 158 homes in their Zone 2. This is certainly not helpful for SME developers.
• CIL relief will not apply to Greenbelt or Metropolitan Open Land or, and this is a new addition, neither to any other “…park, recreation ground, allotment, golf course or other locally designated open space.”  We foresee some challenges to the definition and application of that last grouping.
• Purpose Built Student Accommodation and Purpose Built Shared Living accommodation models are not eligible for this CIL relief or indeed the reduced affordable housing threshold.  Bad news for those sectors but possibly welcomed by ‘build to sell’ house builders who have struggled to compete with those alternative funding models.
• A £25,000 fee will be levied by LPAs just to access the CIL relief.  This is ostensibly to cover the LPAs resource in dealing with such matters.
• CIL Relief can only be applied for once a scheme has Planning Permission and a signed S106 and Grant Funding for Affordable Housing. This could create some uncertainty for a developer’s funding arrangements if the CIL relief is considered to be ‘at risk’.
• CIL Relief must be applied for prior to commencement of development and the development must have commenced by 31^st December 2028 to secure the CIL Relief. For emerging schemes this timescale seems quite tight as they will not only have secured Planning Permission (including S106) but they will also have to have discharged pre commencement conditions to allow construction to start before the end of 2028.  This will put pressure on both the Applicant and the LPA. Even for existing consents seeking to negotiate changes to CIL and Affordable Housing provision will take time to process.
• Awaiting Secondary Legislation – the route to applying for CIL Relief will only be available once new legislation is ‘passed’ by Government. The timeframe is vaguely referenced as “in the first part of 2026”.  The Government would do well to expedite this as quickly as possible as consented schemes will likely stall commencement until they are able to apply for and secure CIL relief (and a reduced quantum of Affordable Housing).

2.Mayors Call-in Powers for Green Belt and 50 home plus applications

Call-in for 50 homes or more

The revisions to the Mayor’s ‘call-in’ powers are also part of the consultations and probably more impactful to a wider cross section of developers given a new threshold for call-in is being set at 50 homes or above (currently the Mayor can call in schemes at 150 homes or more).  This will only become relevant where the Local Planning Authority (LPA) intends to refuse planning permission.

Importantly this new Power intends to have a more streamlined procedure that doesn’t require Stage 1 ‘duty to respond’ phase instead it will proceed directly to a revised Stage 2 process whereby the LPA notifies the Mayor of its recommendation, providing the Officer’s Report along with representations and any proposed conditions and obligations.  The Mayor then has 21 days to decide whether or not to intervene.

Green Belt and MOL Call-in power

The Mayor will also be given a new power to call-in applications on Green Belt or Metropolitan Open Land (MOL) where the proposed development includes a building of more that 1,000 square metres. These applications would follow the established call-in procedures.

Our only concern with the new powers for the Mayor is that it could result in a much higher volume of schemes being referred to the Mayor which could significantly increase of the volume of work putting pressure on GLA resource.

Conclusion and Planning Insight’s proposed consultation response.

Whilst we generally support the proposed changes to the Mayor’s powers of call-in,  we see very little benefit whatsoever for the SME developer in the CIL Relief.  In fact, it exacerbates an ‘uneven playing field’ where wider build costs and regulatory requirements already deter the SME developer.  Perhaps the Government has something up its sleeve to incentivise SME developers in the forthcoming NPPF and other regulatory changes.  We hope so!

Furthermore, the process outlined in the consultation over complicates the planning and viability process with additional cost and resource implications.  Planning Insight intends to make the following representations:

• The starting point should be that no residential development is viable at present, certainly none where at least 20% affordable housing is a planning obligation.   If the Governing bodies accepts this premise and removes the need for any viability assessment for the temporary period of this emergency policy then this whole process becomes more streamlined and simpler requiring little or no negotiation between developers and LPAs.
• We propose that no FVA should be required for new applications achieving a policy compliant 20% affordable threshold and thus no supplementary £25k fee should be necessary as LPA costs will be met through pre app and planning application fees in the usual way.
• We accept that where existing Planning Permissions are being reopened to facilitate CIL Relief and Affordable Housing reductions then an additional fee to the LPA is fair to meet their resourcing commitments.  This should not be a blanket £25k fee but should be lower depending on the scale of the development proposed with a cap at £25k.  We suggest starting at £10k.
• The £500,000 CIL liability threshold should be removed entirely.  All residential schemes are currently battling with viability and as this is a temporary relief it should be applied evenly to all residential schemes London.  Otherwise, SME developers are unfairly penalised simply due to the scale of their development.
• Whilst we acknowledge the desire to have a simple cut off date of 31st December 2028 this, in practice, will put significant pressure on LPAs and Applicants.  It may have unintended consequences of RPs and LPAs using the deadline as a beating stick to aid negotiations with developers. It puts unrealistic pressure on S106s being signed and pre commencement conditions being discharged by that date. These are resolutions that are often out of the Applicants control.  It would be fairer to apply a time limit on each new Planning Permission to achieve commencement within say 18 months of determination and/or to have submitted pre commencement conditions to the LPA but not necessarily have secured the resulting approvals which is outside their control.
• We do not agree that any “…park, recreation ground, allotment, golf course or other locally designated open space.” should be excluded from CIL Relief of 20% affordable housing threshold.  We understand the logic behind excluding Green Belt or MOL but there are sufficient local policies protecting or requiring reprovision of other facilities and in many cases there are significant infrastructure costs associated with unlocking undeveloped land which CIL Relief may help facilitate.

Link to view the CIL and Mayor’s Powers consultation documents and Link to the consultation portal.  Or you can email your responses directly on:

londonhousingconsultation@communities.gov.uk

The other consultation on London Plan Guidance can be found here.  Consultation responses can be mailed to londonplan@london.gov.uk

If you have a development opportunity that may be influenced by these proposals, please contact Stuart Ballie on Stuart@planninginsight.co.uk to discuss.