Do developer obligations stimulate or stifle housing supply? The case of community infrastructure Levy in England

National and local governments need to engage in a delicate balancing act so that the costs of new and/or improved local infrastructure tied to housing development does not stifle it. Addressing a notable gap in the literature, we focus on the impact of land-value capture tools on housing supply by analysing the piecemeal adoption of the Community Infrastructure Levy (CIL) in England, 2009–2019. The endogenous relationship among housing supply, land-value capture and affordable housing is the key challenge in such analysis, which we address through a dynamic panel estimator. The adoption of CIL has a − 0.33% effect on supply only for local authorities that have not activated the flexible ‘exceptional circumstances relief’ mechanism. The CIL with the relief mechanism is shown to have a 0.65% effect in the supply-constrained Greater London. The privately provided affordable housing is shown to be tied to housing market fluctuations. This is not the case for the constantly decreasing public sector affordable housing, as the onus of providing affordable housing has slowly shifted towards the private sector. Our findings also suggest that this shift is exacerbated by CIL without the relief mechanism. The increasing reliance on the more volatile privately owned affordable housing exposes its provision to increasing property market risks, especially during peaks and troughs. These results highlight the value of flexibility in policy tool design and offer insights into the effectiveness versus efficiency debate over land value capture that is shown to be inexorably linked to affordable housing provision and supply constraints. • Land value capture tools finance local infrastructure needed for new housing • Analysis of the land value capture in England: Community Infrastructure Levy (CIL) • A dynamic panel model addresses endogeneity among supply, CIL & affordable housing • The lack of flexibility in a version of CIL has −0.33% effect on supply • The flexible CIL version has 0.65% effect on supply in London