News today that the government is considering exempting selfbuilders from the dreaded Community Infrastructure Levy (CIL). This is A GOOD THING. At least it is for all of us involved in selfbuild, as the CIL was threatening to derail may selfbuilds because it was so damned expensive. However, we must beware unintended consequences.
My first thoughts on the consultation have been posted back to DCLG. Here they are:
I am Mark Brinkley, selfbuild author and consultant and chair of one of the 2011 Self-build Industry Working Group Committees, hosted by DCLG. I would like to comment on the selfbuld sections of the consultation. I will answer Q21 and 22 only.
Q21 Should we introduce a relief from the payment of the levy for self-build homes for individuals as set out above?
Yes. An excellent idea.
Q22 Do you agree that this approach provides a suitable framework to provide relief for genuine self-builders?
I think the proposals could be improved.
I think it's quite right to attempt to distinguish between self-builders and speculative builders, but it's not always easy. Sometimes some projects can be a mixture of both.
1. The seven year occupation rule. This seems an inordinately long time to establish a selfbuild. Job changes, divorce, bankruptcy or even death may well intervene before seven years is up. I would have though that two years is long enough to establish whether it's a selfbuild.
If it must be seven years, why not place a charge against the property which would require the payment of the CIL if sold before that time? Maybe the charge could reduce - i.e. 100% in first two years, trailing down to zero in Year 7.
2. Documentary evidence on completion. I would have thought that the original person applying for relief would have to prove that they are in occupation as the principle householder (via a rates bill) and that this was their principle private residence. All the other matters you call on as evidence may well not be in place on many selfbuilds. For instance, warranties are not mandatory (many selfbuilders don't buy them but use architects certificates instead). VAT refunds don't take place if the entire contract is let to a VAT registered builder. Self-build mortgages are similarly often not used — standard offset mortgages are almost as common.
In any event, many of these features of selfbuild are not concerned with what happens to a selfbuild after occupation. The house could be let out or become a holiday home and we would be none the wiser.
There might also be issues with loft-style apartments which are sub divided by developers and are sold as shells, to be fitted out by purchasers. The fitting out stage is often classed as selfbuild for VAT purposes. Would you want to offer CIL exemptions on these?
There might also be issues with group schemes where a company is used to purchase the land and deal with planning permission, but the intention is to split the scheme into selfbuilds. Would these fall foul of the qualification rules?
In summary, I think it's complicated and that it will not be straightforward to distinguish between genuine and sham selfbuilds. However, that doesn't mean it's not worth doing. It's just that I don't think the qualifying matters you present in §82 and §83 are tight enough.
3. The proposal as it stands doesn't attempt to distinguish between genuine local need and trophy homes. Why should someone building a ten-bedroom mansion be exempt from CIL, whilst a small local developer building starter homes for resale have to pay? This seems unfair. I feel there should be some size limit placed on qualification for selfbuild relief. I would suggest 200m2 internal floor area, which is large enough for a five bedroomed family home. Or perhaps the size threshold could be left up to the local authority, which would be more in tune with local needs?
Another option (the modest house proposal) would be to exempt selfbuilders from the CIL for a threshold of, say, the first 100m2 internal floor area. If they want to build bigger, they can, but they would start contributing to CIL at the standard m2 rate for floor areas above the threshold. Example: a 250m2 house would be due to pay CIL on 150m2 only, being the 250m2 less the 100m2 threshold. However, this proposal risks being abused by selfbuilders adding extensions soon after occupation - it may be too difficult to police and/or would lead to unforeseen and unwelcome consequences. There might also be issues with measuring internal floor area, for which there is no British standard method.
4. The proposal risks creating a two-tier land market where selfbuilders would obtain a substantial advantage over speculative developers for market land. The higher the local CIL levels, the bigger the selfbuild advantage would be. I would expect lobbying from small builders against this proposal for precisely this reason. However, if you wish to promote selfbuild in the way it occurs in many other countries, then CIL exemption will be a powerful tool.