Prime Minister Consults on Plan to Pay “Compensation” to Individual Homeowners from Developer Contributions

24 August, 2016
by: Cripps Pemberton Greenish

Many new residential developments, especially in rural areas of the country, often face strong opposition from local communities. Sometimes this opposition can be so strong that action groups are formed to fight development plans. It is not just housing that stokes anger in many local people, the ever-looming prospect of fracking in the UK has also faced fierce resistance from locals and environmental campaigners. Would this aversion to new residential and energy developments be calmed if payments were being made by the developers directly to those affected?


One of the key announcements of last year’s Autumn Statement was the establishment of a “Shale Wealth Fund” to share proceeds of revenues resulting from shale gas fracking with local authorities and community trusts. The Prime Minister, Theresa May, has now announced that the Government will consult on whether to share the proceeds of the fund with individuals in communities affected by fracking, rather than just the local authorities. She has gone even further, by suggesting that the principle of giving community payments directly to individuals could extend to include payments from residential developments.


Payments such as this are not new. Since 2013, the UK Onshore Operators Group published a community engagement charter which includes commitments from the industry to share 1% of the proceeds of revenues from fracking to the community. The Department for Energy and Climate Change has also published a voluntary protocol which the onshore wind energy industry has signed up to, whereby a community benefits package is given to the value of £5,000 per MW of installed capacity per year, from wind projects above 5MW.


The idea of direct community benefits for hosting residential development is not new, but has not been tested in practice. In 2013, the then Deputy Prime Minister Nick Clegg was reported to suggest that individuals nearby new garden cities whose homes lose value could benefit financially. It was assumed that this compensation would come from the Government, however, not the developers.


These payments could come from money collected through the Community Infrastructure Levy (CIL), which is currently under review. The intention of CIL was to make the collection of payments easier, faster and more transparent. Liz Peace, the chair of the CIL review panel, has said that CIL is failing to deliver on these aims and is “not providing a huge amount of funding for infrastructure”. It was hoped that the review would be published by the Government during the summer or autumn but the implications of the EU referendum and this new intervention are likely to postpone the report.


Last year, David Cameron’s Government considered a similar plan but dropped proposals after a survey on the public’s social attitudes found that 65% of respondents said these payments would make no difference to opposition to housebuilding and only 18% of respondents claimed that the money would make them more supportive. The survey also found that 16% of respondents say they would become more opposed to development if they were offered a payment. The survey also asked what would make those opposed to new development more supportive. Popular answers here were greater employment opportunities, green spaces and transport links.


David Cameron’s government sought to relax planning laws to speed up new developments. Among the measures were a temporary right to appeal against affordable housing obligations on viability grounds, a new permitted development right for a change of use from offices to residential and the introduction of starter homes as affordable housing. These measures should assist in unburdening developers from some planning restrictions but perhaps more outside-the-box thinking, such as payments to locals, is needed.


The proposal is not without its problems and further questions need to be answered. How close does your property have to be to the development to be given a payment? Will a payment be given to the owner of a second home who rarely resides in it? Will there be any clawback provisions if the payee moves shortly after taking the payment? How do you put a value on the “loss” suffered by residents? Why stop at residential development, will this proposal open the floodgates?

The proposal is one that has been suggested previously and ditched without any real review of its merits and it warrants at least that. It will not be easy to implement and will have its fair share of critics. The only statistics that have been published so far suggest that individual payments would not sway the minds of most objectors but the idea does warrant further investigation as more ideas are needed to push through development other than just relaxing planning laws.