Commuted sums and how they are calculated

A commuted sum in planning is a payment made to the local authority instead of providing something on site. Most often it replaces affordable housing, but the same mechanism covers open space, play space, parking, highway maintenance after adoption and public art. The figure is rarely negotiable in principle, because it usually comes out of a published formula in a supplementary planning document, and the arguments that succeed are about inputs rather than about whether a sum is payable.

What a commuted sum replaces

The starting position in national policy is that affordable housing should be delivered on the site that generates the need. Off-site provision or a financial contribution of broadly equivalent value is acceptable only where it can be justified and where the agreed approach contributes to creating mixed and balanced communities.

That framing matters. A commuted sum is the exception, so the applicant has to make the case, and the case has to be about the site rather than about convenience.

The most common justifications are practical. A scheme too small to deliver a viable affordable unit. A site where a registered provider will not take one or two units because management costs make them unattractive. A conversion where the unit types do not meet affordable housing standards. A scheme where the tenure mix sought cannot be accommodated in the building form permitted.

Other commuted sums work differently. Open space and play space payments arise where a scheme cannot provide the quantum the standard requires within its own boundary. Highway commuted sums cover the cost of future maintenance once a new street is adopted, and they are calculated by the highway authority on its own basis rather than by the planning department.

Common formulas published in supplementary documents

Most authorities publish the method. Three approaches dominate for affordable housing.

Open space and play space payments are usually a rate per person, per dwelling or per square metre of shortfall, with separate figures for capital provision and for a maintenance period of a stated number of years.

Find the document before you design the scheme. The formula tells you what the sum will be, which means it also tells you at what point providing on site becomes cheaper than paying. On some sites that calculation changes the layout.

Where the scheme falls under the national small sites threshold for affordable housing contributions, check whether the authority has adopted a lower threshold in designated rural areas, because that is a common trap on sites just outside a village. The relationship between those areas and the plan's settlement boundaries is worth checking at the same time.

Indexation and payment triggers

Two mechanical points decide what you actually pay.

Indexation ties the sum to a published index, commonly a construction tender price index or a house price index, running from a stated base date. The base date is negotiable and matters more than people expect. A sum indexed from the date of the supplementary planning document is larger than the same sum indexed from the date of the agreement.

Payment triggers set the cashflow. Common formulations are payment on commencement, payment on first occupation, payment on occupation of a stated proportion of the units, or payment in instalments tied to phases. On a scheme of any size, an instalment trigger linked to occupations is materially better than a single payment on commencement, because it aligns the outflow with sales receipts.

Ask for both in the heads of terms rather than at engrossment. Once a draft agreement has been circulated internally, changing the trigger takes longer than it is worth.

Arguing for a sum rather than on-site provision

Where you want to pay rather than build, evidence the reason.

• Correspondence with registered providers declining the units, with their reasons stated.
• A schedule showing why the unit sizes or types cannot meet the authority's affordable housing standards.
• Management and service charge evidence where a small number of affordable units in a private block would carry disproportionate costs.
• Design evidence where the building form cannot accommodate separate access or the required tenure separation.

An Affordable Housing Statement should carry this material and reach a clear conclusion rather than presenting options. Where the argument is that on-site provision makes the scheme unviable, that is a different case entirely and belongs in a Viability Assessment prepared on the authority's stated methodology.

Where a council will refuse a payment

Some authorities will not accept a commuted sum for affordable housing at all above a stated scheme size, on the ground that mixed communities are the policy objective and money does not deliver them. Others will refuse where they have no pipeline to spend it on, or where past sums have gone unspent.

That second point is the one applicants can use. Where a council cannot show how a sum would be spent, the obligation is harder to justify against the statutory tests, and the answer may be on-site delivery of something smaller rather than a payment at all.

Open space payments attract the same question. A payment for off-site provision needs an identified project, and an Open Space Assessment that identifies where the money goes strengthens the case for accepting a sum rather than squeezing an unusable strip of amenity land into the layout.

Securing it in the obligation

The agreement should state the sum or the formula, the index and base date, the trigger, the interest rate on late payment, the purpose for which the money may be spent, the period within which it must be spent, and what happens if it is not.

That last clause is the one to press for. A clawback provision returning unspent money after a stated period, commonly five or ten years, is standard in many authorities and reasonable in all of them. Without it the payment disappears into a reserve.

Also check whether the sum is index-linked from a date before the agreement is signed, whether VAT is payable, and whether a monitoring fee is charged on top. Each of those has produced an unwelcome surprise at completion for somebody.

Budgeting the cashflow

A commuted sum is an early cost and an uncertain one, because indexation moves it between appraisal and payment. Treat it as a fixed outflow at the trigger point, index it forward in the appraisal at the same rate as the agreement specifies, and hold the difference as a contingency.

On small schemes the sum can be a large proportion of the margin, which is why the calculation belongs in the appraisal before the land is bought rather than after permission is granted. And where the choice between paying and building is close, remember that on-site units are sold once, whereas the sum is paid regardless of how the market moves.

PlanScope drafts the supporting statements that sit behind a contributions package, including the affordable housing and viability documents, from your scheme details. Browse the report types to see what a residential application usually needs.

This is general guidance, not legal advice. Check the position with your local planning authority or a qualified professional before relying on it. PlanScope provides AI-assisted draft reports for planning applications. Reports should be reviewed before submission. We do not guarantee planning approval.