SME house builder flags impact of one ‘below market’ offer in 20 from Section 106 bidders

One 154-home site in Faversham has 54 affordable homes on offer, but has struggled to find any takers, Mr Ellis said.

“We have spoken to and engaged with 20 affordable housing providers, and we don’t have a single viable offer. We have one offer, but we consider that to be well below what it should be, and the other 19 refused to bid,” he said.

“That gives you an indication of the scale of the problem.”

A number of social landlords have revealed they have scaled back Section 106 acquisitions.

Large landlord Riverside told Inside Housing it did not plan to bid on new Section 106 properties “for the foreseeable future”, as it focused on existing properties and build contracts.

Mr Ellis pointed out that the government’s plans to scale up building will only widen this gap, as more Section 106 properties seek bidders.

“As an SME, when we have sites, we have to put them into production, because we don’t have the financial strength to land bank,” he said. In contrast, bigger house builders can “wait for grant to come”.

“It’s a very immediate problem. We are faced with the stark reality that there is this gap at the minute, and the only way we can really address it is to try and find a way of attracting grant into the schemes,” Mr Ellis said.

Fernham Homes recently exchanged contracts with Maidstone-based housing association Golding Homes for 43 affordable properties.

“In order to make the site work for both us and for Golding, we agreed to put 10 additional three-bed shared ownership homes on top of the Section 106 requirement, in order that they could get grant on the additionality to make the deal work,” Mr Ellis told Inside Housing.

The mix of one- and two-bedroom apartments and three-bedroom houses on its Sutton Valence development will be available for affordable rent and shared ownership.

They are due for completion by mid-2027, with a new GP surgery and convenience store also part of the plans.

Tom Casey, executive director of development and strategic asset management at 8,000-home Golding, added: “These homes will help meet local housing need in this area of Maidstone.”

Mr Ellis explained that the developer met two sustainability requirements for Golding by installing photovoltaic panels to help achieve an Energy Performance Certificate rating of Band B and fitting rainwater butts.

The affordable homes will also be powered by air-source heat pumps and have access to an electric-vehicle charger.

Inside Housing recently used its exclusive data to reveal how much affordable housing is delivered via Section 106, and how much is in the pipeline.

Lobby group BusinessLDN has called on the Greater London Authority to consider launching an institutional investor-backed fund to acquire “stranded” Section 106 homes to prevent major developments stalling.