Earlier this year the Department of Environment, Community and Local Government released the ‘Development Contributions Draft Guidelines for Planning Authorities Consultation Document’ and requested submissions by September 14, 2012.
The aim of the draft Guidelines was to provide updated direction on the formulation of development contribution schemes in local authorities across the country, and to reflect the altered economic circumstances since the previous guidance, which was supplied in 2007. While the adoption of development contribution schemes is a ‘reserved function’ (responsibility) of the elected members of the planning authority, practitioners in this area would be well aware that there is a lack of consistency in the manner in which contributions are levied in different authorities. One of the aims of the Guidelines is to achieve a level of national standardisation in the process, thus also providing a more stable environment to inform investment decisions.
The story so far
Development contributions were first introduced under section 26 (2) of the Local Government (Planning and Development) Act 1963, which empowered local authorities to require payment of a development contribution as a condition of a planning permission. The Planning and Development Act 2000 introduced provisions requiring local authorities to prepare development contribution schemes. The statutory basis for the operation of the various schemes is set out in the Planning and Development Acts 2000 to 2010.
Corresponding with the rise in development activity and related planning applications, there was a peak in incomes from development contributions in 2007. Since then the amounts collected annually have been in decline, which has put pressure on the funding of local authorities (Figure 1).
The main points of the draft Guidelines are that planning authorities are required to include the following in their development contribution schemes:
- reduced rates of development contributions or waivers for development in town centres;
- waivers in the case of change of use permissions (where change of use does not lead to the need for new or upgraded infrastructure/services);
- reduced rates of development contributions for particular grant aided or supported businesses;
- reduced rates for developments that would progress the Government’s jobs initiative;
- provision to charge only the additional area of development in cases of redevelopment projects (e.g., where 250m2 is proposed, of which 150m2 is replacing existing development, the contribution is based on the additional 100m2);
- waivers for broadband provision and sustainable energy infrastructure; and,
- waivers in respect of works on protected structures.
It is also open to local authorities to include options for deferred or phased payments to promote certain types of development, although no detail is provided. The authorities are also required to ensure that their schemes appropriately promote the development of areas prioritised in their core strategies required under the Planning and Development (Amendment) Act 2010. The Guidelines also proposed a methodology to be used in preparing a development contribution scheme.
Following the publication of these draft Guidelines, a Society of Chartered Surveyors Ireland working group was formed from the Planning and Development Professional Group to review and provide feedback on the policy. This submission outlined that the standardisation in the manner in which local authorities prepare the relevant contribution schemes is a welcome measure. It noted the importance of ensuring that the mechanisms put in place do not add further unnecessary impediments to otherwise worthwhile development.
At rates of €10,000 to €15,000 per typical residential unit2 and the equivalent for commercial development, these contributions can restrict the viability of new schemes and also form the basis for future increased house prices.
The Society’s submission included the following points:
- Levies are an appropriate mechanism, but not the only form of funding available and should be utilised in tandem with a property tax paid to local authorities. It is critical that the expenditure of these monies is transparent and detailed so that all contributors are clear on where the money was spent and what was received for the funds.
- The Society is in agreement with measures to facilitate reduced or waived levies in central areas to encourage and stimulate development. These areas should be linked to development plan objectives and have clearly defined supporting maps.
- A development contribution scheme should state the length of time that a local authority can retain a section 48 and section 49 contribution for infrastructure that has either not gone ahead or is deferred. After the specified period of time the contribution should be repaid to the applicant if the works have not commenced.
- The Guidelines should clarify that if a development contribution payment is refunded to an applicant after the specified period, this payment should include the interest accrued.
- Clarity should be provided as to what happens to a contribution payment that has been made in relation to a development that has been abandoned or only partially completed;
- Each scheme should specifically ringfence any contribution paid in respect of particular infrastructural projects, and contributions paid can only be used for the purpose of funding such infrastructure and not any other service provided by the local authority.
- The Guidelines would benefit from a clear and consistent approach to the manner in which floor areas are calculated in relation to levies, i.e., gross area. It should also be clarified that plant areas and areas of basement car parking associated with such development should not be subject to levies and should not be included in the calculation of the gross floor area.
- The clarification that an offset for demolition should apply in the calculation of levies is welcomed, and also that no levies should be charged on change of use applications or on works to protected structures.
- It is recommended that a standard index should be used by all local authorities for consistency. As the leading indicator on changes to construction tender prices in Ireland, the Society’s Tender Price Index should be utilised.
- Further detail is required on the options that could be adopted to allow greater flexibility, including the process for phasing of levies in larger schemes.
These Guidelines are welcomed, although they require further clarity in a number of areas as per the Society’s submission. A functioning development contribution system can provide local government with much-needed funds for investment in infrastructure and utilities, and provide certainty to private investment and development into the future.
1. DoEHLG, Chambers Ireland, 2010.
2. Based on Draft Dublin City Council Development Scheme 2013-2015 rate of €115.82 per m2.
Source: Development Contributions Draft Guidelines for Planning Authorities. Department of the Environment, Community and Local Government, 2012.