CIH NI response to DfI consultation on developer contributions for wastewater infrastructure

☐ Strongly agree
☐ Agree
☒ Neither agree nor disagree
☐ Disagree
☐ Strongly disagree

CIH Northern Ireland acknowledges the dire need for increased investment in wastewater infrastructure to unblock current housing development constraints. The existing funding model for NI Water's Price Controls is demonstrably insufficient, and alternative mechanisms are urgently required to ensure the delivery of housing targets.

To address this, we recommend a review of the governance structure of NI Water, coupled with an evidence-based exploration of reform options. Such a review should consider the potential for service charges or alternative mechanisms that would ensure the long-term financial sustainability of water and wastewater services while supporting critical infrastructure development. Therefore, we do not fundamentally oppose the exploration of developer contributions as part of a wider funding solution, provided they are structured in a way that does not unduly burden housing affordability – including social rents – or viability. Our position is one of cautious consideration, weighing the urgent need for infrastructure against potential negative impacts on housing delivery.

☒ Option 1: Voluntary Developer contributions for Wastewater Infrastructure
☐ Option 2: Compulsory Developer Wastewater Contribution Levy
☐ Both Option 1 and 2
☐ Other

Based on our assessment and the feedback from our members and stakeholders, CIH Northern Ireland supports option 1 – voluntary developer contributions for wastewater infrastructure. This approach allows for developers to proactively engage in addressing specific wastewater infrastructure needs directly related to their projects, as some are already undertaking through 'developer-led and financed solutions' like stormwater offsetting.

Most of the feedback raises significant concerns about the potential negative impacts of a compulsory levy on housing affordability, development viability and the potential for increased complexity and delays in the planning process. However, it is crucial that even voluntary contributions are structured carefully to avoid negatively impacting housing affordability including social rents.

☐ Upfront payment
☐ Bond
☒ Both an upfront payment and a bond
☐ Not sure
☐ Other

We believe both an upfront payment and a bond mechanism could be viable options for voluntary developer contributions, offering necessary flexibility to developers. An upfront payment provides immediate capital for infrastructure works, potentially accelerating project initiation and offering funding certainty. A bond mechanism can offer greater flexibility for developers, particularly for larger or phased developments, by not requiring the full contribution upfront. It allows developers to provide a guarantee that the funds will be available when needed, potentially easing cashflow pressures.

The availability of both methods would cater to different development scales and financial structures, ensuring that a broader range of projects can progress while securing the necessary investment for wastewater infrastructure. Survey respondents were split between which of upfront payment or bond was the most appropriate mechanism for voluntary developer contributions.

☒ Strongly agree
☐ Agree
☐ Neither agree nor disagree
☐ Disagree
☐ Strongly disagree

There is strong support for a reimbursement scheme. Without a clear and equitable reimbursement mechanism, developers may be reluctant to 'go first' on significant infrastructure upgrades, potentially leading to land banking or a reluctance to progress projects, thereby hindering overall housing delivery. A reimbursement scheme would provide necessary assurance and encourage contributions.

CIH Northern Ireland has significant concerns regarding the introduction of a compulsory levy, primarily due to its potential negative impacts on housing affordability and development viability. Should a compulsory levy be considered, the following key factors must be meticulously addressed in its design:

• Levy calculation method: A crucial concern lies in how the levy would be calculated. It is widely recognised that NI Water incurs significantly higher costs for infrastructure works when procured through its Framework contractors. If the levy is based on these inflated rates, it would not reflect the true market cost of delivering the same works. In many cases, developers can engage the same contractors to undertake equivalent works at substantially lower costs. As such, a compulsory levy risks becoming a premium charge that does not represent fair or efficient pricing.
• Impact on housing affordability: The introduction of a compulsory levy would have a direct impact on housing affordability. In private developments, the cost may be passed on to homebuyers, increasing purchase prices. Of particular concern to CIH Northern Ireland is the impact on social housing. In social housing schemes – of which housing associations complete a long-term average of 1,400 homes per year – the cost burden would inevitably fall to the associations themselves. These organisations would, in turn, be compelled to recover the additional costs through rental income. This would place further financial pressure on tenants, many of whom are among the most economically vulnerable in society, potentially making housing unaffordable for those most in need.
• Viability of developments: A compulsory levy could negatively impact the financial viability of housing developments, particularly those with tighter margins or in areas where development is already challenging.
• Exemption or reduction schemes: If a compulsory levy were introduced, clear and transparent exemption or reduction schemes would be essential to mitigate its impact on specific types of development (e.g. social housing, affordable housing, or developments in regeneration areas) or to address projects that may already be financially constrained.
• Planning process complexity and delays: Any levy mechanism must be designed to avoid creating additional complexity and delays in the already burdened planning process. Uncertainty around how contributions will be calculated and applied is a significant concern for developers. Policy that sets out clear and consistent procedures for developer contributions (e.g. thresholds and capped contributions) and a joint approach from public capital would be vital.
• Funding certainty: It is unrealistic to expect homebuilders to contribute funds for projects with no guarantee of happening or without clear timelines for implementation. Any levy must be linked to clearly defined and deliverable infrastructure projects.

In conclusion, we believe that a compulsory levy, without comprehensive consideration of these factors, is not a proportionate or equitable approach and would have unintended negative consequences for both the development industry and future residents.

☒ Yes
☐ No

We advocate for a robust equality impact assessment and section 75 screening to be carried out. This is crucial to thoroughly assess whether the introduction of developer contributions, particularly a compulsory levy, would have a disproportionate impact on section 75 groups, rural communities or other vulnerable populations. Ensuring that any proposed framework is equitable and does not inadvertently create barriers to housing access for specific groups is paramount.