Mayoral community infrastructure levy prompts fears of schemes at risk. Mark Wilding reports

Fears that London projects may be scuppered by a mayoral development tax have been heightened, after a planning inspector conceded that marginal schemes will be at risk.

Mayor Boris Johnson’s community infrastructure levy will require London boroughs to impose a tax on new development to pay for Crossrail — in addition to the separate, countrywide levy that will be set by local authorities from this year.

Plans for the Crossrail levy were given the nod this month by an examiner after a year-long consultation process, during which London boroughs claimed the proposals could render some developments unviable. The examiner also concluded that there may not always be enough money to go round.

The Crossrail levy means London landowners will need to pay two levies: one to the mayor and one to the borough. The mayor’s charge will take precedence. Johnson has set three charging levels, calculated according to property values in each borough, but they have prompted concern among council representatives.

“Projects may suffer, as developers can’t commit as much to local infrastructure planning agreements,” says councillor Chris Roberts, executive member for economic development and infrastructure at umbrella body London Councils.

Opinion is divided over who is likely to bear the brunt of charges on development. In his report, the examiner concludes that boroughs might have to accept lower levy contributions than they would like.

“The mayor’s approach may put some marginal schemes at risk, but it is more likely that what might be at risk is the scope boroughs have for imposing a local community infrastructure levy,” he wrote.

Others believe that developers or landowners will bear the brunt of the charges. Beverley Firth, planning partner at law firm Mills & Reeve, says the method of assessing viability will have a negative impact on landowners, as the mayor has opted to use an established use value, plus a margin — despite calls for the use of market values. Firth says boroughs could do the same, which could lead to higher charges and reduced land values.

Business group London First has raised concerns that the charge could make development unviable.

Policy director Faraz Baber says: “Our indications suggest that boroughs are setting their own levy rates that in some cases are meteoric.”

He urges the mayor to scrutinise borough tariffs to ensure that they remain reasonable.