Government to impose levy of £15,000-20,000 for each house in growth area in lieu of section 106 payments

Developers competing to build more than 15,000 houses in the Milton Keynes growth area in Buckinghamshire will be required to pay a charge of at least £15,000 for each home.

This “roof tax” is a localised example of the infrastructure levy on developers proposed by Kate Barker in her review last year. The Treasury and the ODPM are currently weighing up the merits of Barker’s system against a standardised section 106 agreement.

It is believed developers will be asked to pay between £15,000 and £20,000 for each unit.

The charge is seen by deputy prime minister John Prescott as a way to create a pot of money for schools, road junctions, waste and utilities and other long-term commitments.

The ODPM will look at the plan in detail this month to check that it is legally and practically watertight. If it is cleared, it could be used as the model for financing sustainable communities rather than negotiating ad hoc section 106 agreements.

The proposal is a product of negotiations between the Milton Keynes Partnership (a consortium of English Partnerships, the council and local stakeholders) and MK Forward, a consortium of local developers.

The Milton Keynes Partnership appointed accountant KPMG to work out the infrastructure needs of the two main expansion areas east and west of Milton Keynes, which is expected to double in size to 142,000 homes by 2031.

The team originally tried to work out the infrastructure bill for all 71,000 homes but decided in September to scale that back to the first 15,000, which will be completed by 2016.

Dennis Hone, EP’s regional director for Milton Keynes, said this had been necessary to give developers a realistic idea of what would be expected from them.

He said: “Rather than crystal-ball gaze, we are giving a level where we can offer reasonable certainty. When we wanted to go to 2031 we would have had to make some heroic assumptions.”

Hone said the Milton Keynes Partnership wanted developers to see the charge as a way of ensuring certainty over financial burdens in contrast to section 106s, which are carried out on an ad hoc basis.

Nevertheless, the charge represents an increase on what developers in the region often pay. Milton Keynes planning consultancy David Lock Associates is understood to have recently negotiated a section 106 package of £7000.