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John Perry is a policy advisor at the Chartered Institute of Housing
Is this the end of Section 106?
Section 106 has been requiring private developers to include a percentage of affordable housing since 1990 in England. Now the government wants to scrap it. John Perry considers the benefits – and the drawbacks – of what has been a powerful tool in building social homes
‘Section 106’ is the power in the planning acts that allows councils to specify how much affordable housing should be included in new, private developments, and what kinds of houses they should be. Otherwise known as developer contributions or planning gain, a system that was put in place by a Conservative government in 1990 is – 30 years later – about to be dismantled in England by a very different Conservative government. Why does this matter?
The government’s argument is that Section 106 produces uncertainty and delay. It admits that Section 106 helped to provide 30,000 homes in 2018/19, but says that charging a levy at amounts decided nationally would be fairer, produce more money overall and still ensure the ‘right’ affordable housing is provided locally.
“In the worst cases, Section 106 has created the ‘poor doors’ phenomenon where social tenants don’t have access to the amenities enjoyed by their homeowning neighbours”
What’s the problem with Section 106? Is it simply that developers don’t like it, or are there deeper issues? It’s certainly true that it’s not a fault-free system. It’s been too easy for developers to wiggle out of, the price of the affordable housing can be too high if social landlords get involved in bidding against each other for it, and there have been questions about the quality of the affordable homes provided. For this reason some bigger associations have opted out of the system, preferring to buy their own land.
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Set against this, there are lots of advantages. It’s controlled locally, so councils set the rules and social landlords should know what they are getting. It means affordable housing has sites – since the developer has to provide them – possibly in areas where land is otherwise expensive or difficult to buy. And it produces mixed developments – in the best schemes, creating a mix of houses lived in by owners and tenants with little to distinguish the two.
In the worst cases, however, especially in high-density developments in London, it has created the ‘poor doors’ phenomenon where social tenants don’t have access to the amenities enjoyed by their homeowning neighbours.
“There could be a huge gap between the old system ending and the new one having effect, because the levy wouldn’t be charged until a scheme was finished and the developer had started to make a profit. The scope for evasion looks even greater than it is under the current scheme”
A nationally determined levy would mean less local control and far fewer mixed developments. It would mean that Whitehall sets the rules. The scale of the levy, or the threshold at which it kicks in, could be varied over time.
Inevitably, developers will pressure governments to push it down, citing market pressures. Already we can see the result of that pressure, with schemes of less than 50 units to be exempt. And what happens in low-value areas where (as happens with Right to Buy) the amounts received by a local authority might be too small to fund the building of new homes?
The government argues that the new levy will allow councils to “secure more on-site housing provision”. But how will this work? On the face of it, this looks a very difficult aim to achieve if the levy is paid in money, not houses.
“Common sense would indicate that scrapping Section 106 should be done only if there is a convincing case that the alternative will be better – and not just for developers, but for social landlords, potential tenants and society as a whole”
Importantly, there could be a huge gap between the old system ending and the new one having effect, because the levy wouldn’t be charged until a scheme was finished and the developer had started to make a profit. The scope for evasion looks even greater than it is under the current scheme.
The government must remember that the present scheme, for all its faults, delivers a huge proportion – approaching half – of the affordable homes built each year. Most of this is provided without any government grant. Section 106 therefore plays a major part in delivering the housing the country needs for people on lower incomes, independent of the government’s Affordable Homes Programme.
Common sense would indicate that scrapping it should be done only if there is a convincing case that the alternative will be better – and not just for developers, but for social landlords, potential tenants and society as a whole.
John Perry, policy advisor, Chartered Institute of Housing
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