The Royal Borough of Kensington and Chelsea (RBKC) have published their community infrastructure levy (CIL) draft charging schedule (DCS) for consultation.
As you know, the DCS is the next stage in the statutory CIL charging preparation process. RBKC began consultation on the first stage (the preliminary draft charging schedule PDCS stage) exactly a year ago.
At that time, the rates proposed were the highest in the UK. The high rates attracted quite a lot of criticism from the industry. The Council therefore commissioned some ‘viability’ work to assess the suitability of the levy rates. This viability work has now been completed and the DCS has been issued on this basis.
Well. The rates for residential development have increased. The highest CIL rate for Zone A (the Knightsbridge part of RBKC) is now proposed to be £750 per square metre (previously £650 psm).
The increase in the rate is due to a reduction in the ‘cushion’ for residential development from 30% in the PDCS to 20% in the DCS. The cushion is the difference between the maximum CIL rate, which could viably be charged (in the Councils view) and the actual CIL levy proposed to be set.
The main points given by RBKC in justification for the change in the ‘cushion’ are as follows:
It would result in an increase in the CIL rates and thus allow more CIL money to be collected.
Market conditions have improved.
Demand for residential has strengthened over the past 6 to 12 months.
Values have increased by 9.2%
Sales values are likely to increase over the next 5 years.
In addition, RBKC have latched onto the advice of some Consultants who have argued that because the market is picking up, developers are having to take less risk and on this basis they should reasonably expect to see a reduction in their profit.
The Borough is again spit up into the six residential charging zones with differential rates ranging from £160 psm (in W10) to £750 psm (in Knightsbridge). It is proposed to charge £160 psm for hotel and £125 for student accommodation Borough wide and these rates have not changed from the PDCS stage in 2013.
In addition to CIL charged by the Council, any developments in the Borough will also be subject to Mayoral CIL. The Mayoral CIL charge in RBKC is £50 per sq m on all uses except for health and education purposes, which are exempt.
The consultation period on the DCS runs from Tuesday 21 January to midnight on Sunday 23 February 2014. A link to the consultation paper can be found here. It will be interesting to see the comments!
Please contact Kieron Hodgson at Iceni Projects for more information.