The Coalition Government has introduced draft regulations which could see the cost of making a planning application increase by as much as 15 per cent, writes Tom Newcombe, senior associate with the Planning and Environment team at Birketts LLP.

It goes without saying that this news will not be universally welcomed by those in the property industry, particularly when most local planning authorities are looking at shortly introducing a new Community Infrastructure Levy (CIL) Charging Schedule, applicable to most residential and certain retail and commercial development, which is set to considerably increase the cost of planning permission over and above the more familiar “section 106” obligations currently required on many schemes.

Further, it comes at a time when many developers are facing frustration with local planning authorities resourcing issues in their planning departments and the number of staff at the Department of Communities and Local Government (which includes the Planning Inspectorate) having fallen by 28.3 per cent in the period from March 2011 to March 2012.

Lack of suitable funding streams for development, massive reduction in Government grant for Affordable Housing, the stalling of the residential property market and the new and often ambiguous National Planning Policy Framework have also had an impact on the amount of new development schemes coming forward, and this hike in fees is not necessarily going to help.

By way of an example, currently local planning authorities can charge for outline residential planning applications £335 per 0.1 Ha up to 2.5Ha, then £8,285 with an additional £100 for each 0.1 Ha over 2.5, up to a maximum of £125,000. For full permissions they can charge £335 per dwelling up to 50 dwellings, then £16,565 plus £100 per each additional dwelling up to a maximum £250,000.

Under the draft regulations, it is proposed that the two maxima remain the same, outline residential planning applications would be £385 per 0.1 Ha up to 2.5Ha, then £9,527 with an additional £115 for each 0.1 Ha. For full permissions they could charge £385 per dwelling up to 50 dwellings, then £19,049 plus £115 per each additional dwelling.

Most other types of application have seen similar increases, including a straight-forward householder extension/alteration increased from £150 to £172 (14.6%)

In justifying these increases, Greg Clark, Decentralisation Minister, highlighted that planning fees have not increased since 2008. He stated: “The planning application fee is a relatively small component of the costs of any development, but delays by planning departments in the processing of applications can lead to substantial costs for residents and professional developers.”

He also warned that disproportionate cuts to budges to planning departments must not result in them becoming the “poor relation” in local authorities. Responding to the announcement, the Local Government Association said:“The Government listened to the LGA argument on planning fees and the proposed 15 per cent increase will provide some important respite to town hall budgets.

“Under the current system, hard-pressed council taxpayers have been subsidising the planning fees of multinational developers. We will continue to press for an even fairer, more transparent, localised system for planning fees which is evidence based.”

Of note is that the proposals to allow local planning authorities to set their own fee levels is missing from the draft regulations. This was consulted upon by the Government back in 2010 with a view to ensuring local planning authorities covered all their planning costs, and many authorities have been working on their figures with this in mind. Whilst there were fears that this could lead to very wide range across the country, and potential unintended consequences of that, the comfort was that local planning authorities would not then be cross subsidising planning applications with tax-payer monies, and could genuinely look at self-sufficiency in their planning departments. The Planning Officer’s Society is one organisation to express its disappointment at the lack of local control over planning fees.

The Government had also raised the issue of whether the ‘free-go’ (allowing a second application to be made following a withdrawal or refusal) should be scrapped back in 2010. This was met with hostility by many in the industry and developers will be pleased to see that this has not been introduced into the draft regulations either.

So what might be the impacts of these changes?

Firstly, the effect on small businesses faced with a 15 per cent increase in planning costs might be to deter them from expanding or making property investments during this tight economic period.

Secondly, viability arguments had by developers surrounding development costs (and often resulting in a reduction in the amount of affordable housing being delivered) will only be strengthened by this increase in the up-front development cost.

Thirdly, there will be further pressure on local planning authorities planning departments to match this increased cost of making applications with an equivalent uplift in service.

This will be particularly pertinent if the Government fulfils its promise to introduce a ‘Planning Guarantee’, designed to ensure that no planning application should take longer than one year to reach a decision, (including any appeal) something many in the industry are hoping for in 2012.

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