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Mark Edgerley is associate director of Boyer (part of Leaders Romans Group)
Will the Infrastructure Levy bring about more housing?
With so many councils in dire financial straits, Mark Edgerley asks if the Infrastructure Levy will help
With so many councils in dire financial straits, Boyer’s Mark Edgerley asks if the Infrastructure Levy will help #UKhousingWhen, in September, it was announced that Birmingham City Council had been forced to issue a Section 114 notice, the message resonated far beyond the West Midlands: local authority financing was in serious trouble.
Section 114 notices (a reference to the section of the Local Government Finance Act 1988) are becoming increasingly common. In November, the County Councils Network and Society of County Treasurers conducted a survey of 41 of county and unitary authorities. This found that 10% were not confident they could balance their budgets in 2023. The figure increased to 40% in 2024 and 60% in 2025.
It followed research by the Chartered Institute of Housing in June which showed that 44% of local authorities were reducing housing programmes, while a quarter had already halted development – with a devastating impact on the supply of social and affordable housing.
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The means by which the government hopes to address the financial issues facing local authorities is a new Infrastructure Levy. It is proposed that the levy would replace both the Community Infrastructure Levy (CIL) and Section 106 payments.
The rationale for the new levy is the government’s stated objective in the context of levelling up: “ensuring local communities can take back control”.
Central to this is additional borrowing and budgeting powers. A new ‘right to require’ aims to strengthen local government’s powers in the negotiation process and, through the Infrastructure Levy, it is intended that developers pay more (a “fairer share”), to help fund social and affordable housing and local infrastructure, including transport, healthcare and education.
“Forty-four per cent of local authorities were reducing housing programmes, while a quarter had already halted development – with a devastating impact on the supply of social and affordable housing”
With much of the levy payable on completion rather than throughout development, the change (to be implemented through secondary legislation attached to the Levelling Up and Regeneration Act 2023) would give local authorities additional borrowing powers.
However, I question whether these extended powers will ultimately benefit local authorities, which are already almost universally under-resourced and whose circumstances have, in some cases, been worsened as a result of poor commercial decisions.
My concern is that enabling local authorities to borrow against future receipts opens up the potential for yet more Section 114s.
Furthermore, there is concern in the industry that, unlike the CIL/Section 106, Infrastructure Levy funds may be spent on costs not associated with infrastructure.
There is an increased likelihood that rather than the funding being used to provide social and affordable housing, for rent and for sale, in the new communities to which the funding is attached, the funds will be used in response to other demands, from social care to meeting net-zero commitments.
Under Section 106 and the CIL, local authorities may not use funding in a commercial and speculative manner. While this limits the opportunity for smart investments, it also reduces risk, and ring-fences the funds for community infrastructure and provision of housing and services associated with a new development.
“I question whether these extended powers will ultimately benefit local authorities, which are already almost universally under-resourced”
The downside of the ‘flexibility’ brought about by the Infrastructure Levy is that more mistakes could be made in public expenditure.
Financial decision-making by locally elected politicians will invariably be compromised by the fact that politicians, understandably, are motivated by achieving electoral support within a specific political cycle. This tends to be achieved through short-term successes, rather than the longer-term approach strategic investment requires. Changes in leadership, policy priorities and political agendas will inevitably compromise long-term success.
Rather than councils taking on more responsibility for commercial and investment decisions directly while having increased responsibilities for budget allocation (compromised further by diminishing resources), I propose greater collaboration with the private sector.
There are many instances in which public-private partnerships have created successful housing and regeneration bodies. In these arrangements, both parties can play to their strengths and the council is freed up to make decisions that only the council can make.
Like many in the development sector, I have reservations about the Infrastructure Levy. Most importantly, the increased flexibility that it offers local authorities should not necessarily be regarded an advantage.
If the Infrastructure Levy is to be implemented, I would suggest that the greater flexibility (or responsibility) it bestows on the public sector should be supported by greater flexibility for local authorities to pursue public-private housing development companies.
Mark Edgerley, associate director, Boyer (part of Leaders Romans Group)
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