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Section 106 agreements and the White Paper

What do reforms that propose replacing Section 106 agreements with a National Infrastructure Levy mean for registered providers? Alex Jones explains.

At present, affordable housing provisions tend to be included in Section 106 Planning Agreements in order to secure affordable housing at new developments. However, the future of Section 106 Agreements is uncertain, with the White Paper proposing to scrap Section 106 Agreements and replace them with a National Infrastructure Levy.

The White Paper proposes a nationally set, value based flat rate charge at either a single rate or at area -specific rates, that would be levied at the point of occupation. Initially this was designed to be set nationally, but the levy will now be set locally to give local authorities the ability to determine where the levies are spent in their local area.

The Planning Bill was due to be considered in 2021, but this has been delayed. Initial reports suggest that it will now be considered in Spring 2022 – a delay of over 18 months. This may largely be down to initial consultation responses which have not been positive to date. Over 44,000 responses were submitted to the White Paper, and the Government will need to respond to these before the Planning Bill can be put before Parliament.

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The HCLG Select Committee published findings in June 2021 stating that although the replacement of Community Infrastructure Levy with a National Infrastructure Levy is welcomed, Section 106 Agreements should not be abolished, in order to protect against the possible loss of affordable housing. A number of concerns have been raised about the abolishment resulting in less funding for affordable housing, with the Royal Town Planning Institute (RTPI) stating that this could ‘perpetuate the likelihood of trade-offs between infrastructure and affordable housing’. This is a real concern given that the affordable housing will sit within the same funding pot as key infrastructure and First Homes.

This topic was discussed by the CEOs from four affordable housing organisations as part of our video series, who have also raised concerns with the abolishment of Section 106 Agreements. Charlie Norman from Mosscare St Vincent stated that the demise of section 106 agreements will be a really big problem for the sector and Steve Coffey from Torus raised concerns that the abolishment of Section 106 Agreements may net wise reduce the numbers of affordable housing delivered, which is a big concern.

If Section 106 Agreements are abolished in the future, then this would have a huge impact on Registered Providers, as there needs to be a way of securing affordable housing at development sites.

At present, Section 106 Agreements can still be used for new developments, and they usually would be the preferred method to secure affordable housing at the site.

In fact, despite proposing their abolishment, when introducing First Homes central government included that "[...]to qualify as a First Home, there should be a section 106 agreement securing the necessary restrictions on the use and sale of the property[...]". In further support of this, it then issued its own ‘preferred’ Model S106 specifically dealing with First Homes (23 December 2021).

If Section 106 Agreements are abolished, there are two options:

  • Use planning conditions to secure affordable housing. In the recent case of Zins, R (On the Application Of) v East Suffolk Council [2020] EWHC 2850, the High Court confirmed that affordable housing can be lawfully secured via planning conditions. In this case, planning permission was granted by the local authority to the developer which contained a condition requiring 32 affordable housing units. The condition required the affordable housing details to be agreed prior to development commencing. It was claimed that this condition gave too much discretion to the local authority and didn’t secure policy compliant affordable housing, but this was rejected by the Court. Although lawful, this method of securing affordable housing is not usually as desirable for a number of reasons, not least because lenders of registered providers tend to prefer the certainty afforded by a Section 106 Agreement, alongside the built in protections and ‘mortgagee carve outs’. Likewise, planning conditions could become very long and cumbersome if they had to set out all of these provisions in detail.
  • Utilise the replacement of a Section 106 Agreement for affordable housing, if Section 106 Agreements are abolished. The White Paper does suggest a range of options for local authorities as to how a scheme might deliver against an affordable housing requirement, including rights of first refusal, on-site delivery and the opportunity to flip a dwelling back to market housing in certain circumstances. However, there is very little detail as to how this is to be delivered or monitored on a site by site basis.

Alex Jones is an Associate at Brabners.

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