My Lords, I am almost sorry to come to a very complex group of amendments at this stage of the evening, but this is an important part of the Bill. We have had lots of discussions about housing, and this is about how the infrastructure levy fits into that picture. The key issues to which this group responds were powerfully set out by my noble friend Lady Warwick earlier today, and they have been discussed extensively in earlier groupings.
The significant number of amendments in this group reflect our discussions about the ability of the levelling-up Bill in general, and the infrastructure levy in particular, to deliver the levels of affordable housing needed. I apologise for the repetition, but this is not helped by the Government’s abandonment of national housing targets, under pressure from Back-Benchers in the other place. There remain a number of unresolved issues in relation to the provision of affordable housing with the infrastructure levy, and a great deal more clarity is needed about just how IL, Section 106 and CIL fit together to deliver affordable housing for the future. It is vital that we all understand this so that we can begin to make an impact on the housing crisis.
Is it the case that the first call on levy proceeds is to be affordable housing, because the costs of affordable provision are to be netted off from the levy payment, with what is left over being used for all the other infrastructure required? This residual may not be sufficient to pay for all that is needed. Just in today’s debates, we have heard about so many different aspects of funding that will be needed from the infrastructure levy. In practice, local planning authorities may find themselves juggling affordable homes and infrastructure to decide what the levy can fund, as they do now with Section 106 and CIL.
Is it the case that, where infrastructure is delivered in kind, it is subject to the levy backstop amount to ensure that any shortfall in the value of the infrastructure delivered in kind is made whole to the full infrastructure levy liability with cash? Homes for the North, in its very helpful briefing, cited Department for Levelling Up, Housing and Communities figures that developer contributions funded 47.3% of all affordable housing provision between 2021 and 2022. DLUHC figures also show that in the year before the pandemic, nearly 80% of Section 106 developer contributions were generated to support affordable housing provision. Therefore, we must have clarity going forward about how this will be funded for the future.
With construction costs subject to the significant inflation we have heard about, and with the financial burden on housing authorities for retrofitting energy-efficiency measures to social homes, the ability to fund new social and affordable housing through developer contributions becomes ever more challenging. Homes for the North believes that, even if the infrastructure levy is prioritised for affordable housing, its research demonstrates that basing the IL on historical levels of provision through developer contributions will not deliver levelling up but will replicate spatial inequalities.
Our Amendment 313 is a probing amendment to determine the extent to which the infrastructure levy is optional for local authorities. Leaving the other two regimes of CIL and Section 106 in place as the infrastructure levy is introduced has the potential to increase the complexity of the landscape with the associated legal process and valuation challenges. There is also a danger that the new system will take time to introduce and bed in, and therefore the potential reduces for achieving affordable homes to the scale and in the timescale we need through this route as the transition occurs.
I understand that the Government wish to adopt a test and learn approach to the introduction of the infrastructure levy—we heard from the Minister about that this afternoon—but would it not have been preferable to have tested that before putting it into law, instead of afterwards? With all three systems remaining in place, is there likely to be further uncertainty for developers that will capitalise on the difference in implementation from place to place? Noble Lords across the Committee will be concerned, as we are, about any delays this may introduce to the essential delivery of housing to mitigate the housing crisis.
My Amendment 317 refers to the introduction of pilot schemes for the infrastructure levy—although this is probably shutting the stable door after the horse
has bolted—as we feel that it is essential to see whether there are unintended consequences of the introduction of the IL, and to ensure its impact is evaluated and assessed before it is rolled out across the country.
Amendment 321 in the name of my noble friend Lady Hayman attempts to resolve the confusion about whether it is intended that the infrastructure levy delivers the infrastructure discussed under a previous group of amendments—the first group—and then Section 106 continues to deliver the affordable housing required from the development. This is not clear from what is in the Bill about the infrastructure levy.
We absolutely agree with my noble friend Lady Armstrong that there must be a distinction between the Government’s term “affordable housing” and social rented homes. Her Amendment 322, and Amendment 323 in the names of my noble friend Lady Hayman and the noble Lord, Lord Shipley, refer to that point. As we have discussed previously, local authorities know their own housing need best and must be able to specify that they need social rented housing where that is appropriate.
There has been much debate in local government and planning communities about the difference between levy-funded infrastructure and integral infrastructure, and in what circumstances developers can be required to deliver on-site affordable housing and/or in-kind funding for off-site housing. Amendment 326 in the names of my noble friend Lady Warwick, the noble Baronesses, Lady Watkins and Lady Thornhill, and the right reverend Prelate the Bishop of Chelmsford would place in the Bill the right for local authorities to determine the delivery of on-site housing through an in-kind levy payment. We support the proposition of exemption for developments containing 100% affordable housing to have special treatment under the infrastructure levy regime—Amendment 327 and our Amendment 328 refer to this.
The noble Lord, Lord Carrington, and the noble Baroness, Lady Bakewell of Hardington Mandeville, are proposing a similar exemption from the infrastructure levy liability where this relates to farm buildings that support food security. We agree with this where such buildings would be likely to accrue an infrastructure levy, as it is essential for food security that farms are able to diversify.
Amendment 332 in the names of the noble and learned Lord, Lord Etherton, and the noble Lord, Lord Thurlow, would make strategic housing and market assessments compulsory and link them to the setting of the infrastructure levy. I confess that I am a big fan of strategic housing and market assessments. We understand the principle behind this amendment, as it would put rigour into the process of determining what housing is needed and the role that the infrastructure levy plays in delivering that. It will not be solely the responsibility of the infrastructure levy to deliver affordable housing though, so we look forward to hearing from noble Lords about the benefits of making this compulsory. We are generally very supportive of SHMAs, but they can be complex in local authority areas where land availability is limited, and planning for affordable homes has to take into account travel-to-work areas across more than one local authority boundary.
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We support Amendment 334, which seeks to introduce the principle that infrastructure levy rates must be set at a level that would not result in a loss of affordable housing. Our Amendment 334A is similar, in that it would require the infrastructure levy to be set at a level to deliver the amount of affordable housing set out in the local plan, as would Amendment 344 in the names of the noble Lords, Lord Best, Lord Young and Lord Shipley, and the right reverend Prelate the Bishop of Chelmsford. We also need to flag up here that there are consequences for regional imbalances, and this should be a consideration for the levelling-up agenda. The values of completed developments are much greater in London and the south of England than elsewhere, so we must be aware of the possibility of a disproportionate impact on the setting of IL rates on the ability to deliver affordable housing in different parts of the country.
Amendment 340 in the name of my noble friend Lady Hayman seeks to introduce the concept of sustainability into projects funded by the infrastructure levy. This could be a whole day’s debate on its own, and I will not pre-empt later groups relating to environmental outcomes and landscapes. However, we believe that consideration must be given to the sustainability of infrastructure levy-funded projects such as transport, green and built infrastructure, public service provision and, essentially, housing.
Amendment 344A in the name of the noble Lord, Lord Young, is coming to the rescue of authorities that are facing bills of millions of pounds for the retrofitting of energy efficiency measures. In the case of my own authority, this is well over £250 million, just for council housing stock. Although it would be very helpful to be able to include this in the remit for funding from the infrastructure levy, it would be interesting to understand what level of contribution this would make to the enormous backlog of retrofitting we have around the country.
Our Amendment 345 would ensure that the provisions in Schedule 11, which allow later changes to what is covered by the infrastructure levy, specifically allow affordable housing to be added at a future date.
Amendment 349 in my name proposes that the charging authority sets out how it intends to use the infrastructure levy to meet identified housing need within the infrastructure delivery strategy. This meets the concerns of planning professionals relating to the purpose of the infrastructure delivery strategy—we had a discussion about that on an earlier group today—if it is not to ensure that the appropriate infrastructure is delivered to enable the delivery of the local plan, specifically in relation to housing need but also the question of wider infrastructure.
We support Amendment 350 in the names of the noble Lords, Lord Best, Lord Young and Lord Shipley, and the right reverend Prelate the Bishop of Chelmsford. It would be very helpful to understand the Government’s thinking about just how much of the infrastructure levy is to be applied to affordable housing—or, as we would prefer, social housing. Does a demonstrated housing need mean that it has first call on the infrastructure levy? How will local authorities balance the need for affordable housing against all the competing infrastructure demands that development brings?
We are interested to hear the Minister’s answer to Amendment 356 in the names of the noble Lord, Lord Teverson, and the noble Baroness, Lady Bakewell. Like most of local government, we believe that more clarity is needed about the future role of Section 106 and CIL under this new infrastructure levy regime. As the noble Lords tabling this amendment have indicated, Section 106 has proved helpful in identifying site-specific obligations for biodiversity measures and nature recovery. Will this still be the case? Amendment 357 in my name similarly seeks to clarify the future role of Section 106 and whether that is likely to be changed by regulation.
Too often, we have seen developers trying to negotiate for the affordable housing obligation to be discharged away from the site where they are developing. Some have been quite open in disclosing that that is because they feel that having mixed-tenure housing will affect the sale of their other properties, yet it is clearly the case, demonstrated over many decades, that mixed-tenure developments are more successful in community terms. We agree with Amendment 358 from my noble friend Lady Armstrong that where a local authority’s local plan and development aspirations suggest it, it should be able to specify onsite delivery of affordable homes funded through the IL.
It is time that the absolute need for social housing, rather than the government definition of affordable housing, is recognised, so in principle we support trying to achieve a higher percentage of social housing funded from the affordable housing pot obtained through the infrastructure levy. Amendment 359 from the noble Lords, Lord Best and Lord Shipley, set this at 50%, which we feel would be very desirable, but more important is the principle that it can be set at the planning stage and that the level of social housing should be able to be determined by the local planning authority according to its local housing need.
We note that the noble Lords, Lord Lansley and Lord Young, have proposed that Clause 126, which sets out that the CIL will in future apply only to London and Wales, should not stand part of the Bill and will be interested to hear the noble Lords’ argument and the Minister’s response. There is a need for clarity about the levy regime and the future role for Section 106 and the CIL
Lastly—and sorry for the length of this introduction —our Amendments 364 and 364A are tabled to probe how the Minister intends to assess the proposed impact of the infrastructure levy on the delivery of affordable housing. These amendments are very important because it is not indicated how levelling up, and therefore the building of more affordable housing which will help levelling up, is going to be achieved through the process of the infrastructure levy. I beg to move.