New mayoral powers could support local growth but risk adding to development costs

Proposals to expand mayoral planning powers could help unlock development and support local growth, but a proposed infrastructure levy could add to the cumulative cost pressures facing developers, BCIS has cautioned.

Under proposed reforms to planning and devolution legislation, regional mayors across England could gain greater powers over planning applications of potential strategic importance (PSI).

Mayors outside London could also be given powers to raise funds for infrastructure through a Mayoral Community Infrastructure Levy (MCIL), a charge on development currently operating in London.

Dr David Crosthwaite, chief economist at BCIS, said the use of MCIL to help fund London’s Elizabeth line demonstrated how such a levy can contribute to major infrastructure. However, he cautioned that extending the approach needs to be considered in the context of wider development costs and viability.

‘Giving mayors greater powers to unlock development could help speed up decision making, particularly for larger schemes that have become stalled in the planning system,’ he said.

‘However, changing who makes the decisions does not change the underlying economics of development. Developers are still contending with elevated construction costs, taxes, levies and regulatory requirements, while affordability pressures and softer demand continue to weigh on the housing market.

‘The new proposals could add to those pressures, with mayors outside London potentially able to charge a levy on development to help fund major infrastructure. This approach has had some success in practice, but it needs to be monitored carefully. Adding another levy to developers’ costs risks putting another brake on activity.

‘The government clearly has to find the funding for infrastructure somewhere, but there is a balance to strike. Asking developers to shoulder more of that burden could prove counterproductive when they are the very businesses being relied upon to deliver the new homes the government wants to see.’

If introduced following consultation, the new powers could also allow mayors to grant upfront permission for development, enabling building to begin without a separate application from a developer.

The proposed powers would enable mayors to make decisions on developments of more than 150 homes, more than 15,000 square metres of commercial space or buildings over 30 metres tall.

Mayors could also have a greater say in how national housing funding is spent in their areas, with Homes England funding and expertise focused on priorities agreed locally.

The government has said councils would continue to determine the majority of planning applications.

Secondary legislation to enable the new powers is expected to be laid by the end of the year, subject to the outcome of the consultation and parliamentary scheduling.

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