Section 106 is not red tape or bureaucracy. It’s essential for the provision of affordable housing and brings benefits to the whole of the UK.
Individual sections of Government Acts may not be the most glamorous subject in the world, but buried in the 1990 Town and Country Planning Act is a piece of legislation that really makes a difference in this country. Section 106 is the part of the act which places specific obligations on developers and is the critical driver behind affordable housing, which brings benefits for the whole UK.
What is Section 106?
As mentioned before, Section 106 is part of the 1990 Town and Country Planning Act. The aim of this piece of legislation is to balance the impact of construction on the local area and its infrastructure.
This is how it works in relation to new housing developments: For a construction company to receive permission from the relevant local authority to build on a piece of land, they have to achieve a Section 106 agreement. Because a new development will have an impact on the local community and infrastructure, such as more children in schools and more cars on the road, Section 106 requires the applicants to make a contribution to pay for this impact.
This could be a financial contribution, but another requirement is that a certain percentage of the new homes is allocated for affordable housing, with lower rents, more in the realms of possibility for people on lower incomes. The exact percentage allocated for affordable housing is up to the local authority, but the UK Government has set thresholds to determine who needs to contribute and who does not.
Section 106 has played an essential role in the provision of affordable housing in the UK since its inception. A 2019 study by Savills found that Section 106 made up almost half (47% of total new build affordable housing delivery since 2016 – the equivalent of 18,000 homes a year.)
In 2015, the Government revised the rules around Section 106. These rules are still in use today. Here are the most important rules relating to the provision of affordable housing.
- Developments of fewer than 10 units are not required to make contributions.
- In some rural areas, this is reduced to 5 units
- Developers can offset their contributions by bringing existing vacant buildings back into use
Affordable housing is defined by the Government as, ‘social rented, affordable rented and intermediate housing, provided to specified eligible households whose needs are not met by the market.’
We need more affordable housing in the UK because the population has risen dramatically over the past twenty years, but the number of houses built has not increased to keep up. This means demand for property is high, with prices rising to match. It has led to millions of people not able to buy a home, forced to live with the uncertainty of renting. In some cases, it has led to homelessness.
Improving Section 106
Section 106 has been effective in getting affordable properties in the hands of people who need them. However, there are several ways in which Section 106 could be improved.
Studies show that by and large, developers keep to their obligations. However, not all do. There have been some high profile court cases where developers have been accused of selling off properties allocated as affordable housing at full price. Local authorities must also stay on top of developers to make sure they keep to their Section 106 agreements. It is reported that some councils do not have departments dedicated to monitoring Section 106. They should.
Local authorities could be more bullish about the number of affordable properties they require from developers. Developers want to make money, so they negotiate hard to try and keep the number of affordable houses as low as possible. But, local authorities could offer concessions in other areas of Section 106 in order to raise the requirements for affordable housing.
There are also regional disparities that need to be addressed. While in cities like London, affordable housing is vital, demand is high and affordable properties are always filled; there is less demand for affordable housing in rural areas. Housing departments do not want to administrate these allocations, perhaps because the number of available properties is really small. What can be done to make these areas more attractive to live in and the affordable housing more appealing?
Benefits of affordable housing
It is clear that Section 106 has been instrumental in getting more people into properties they can afford. While there are tweaks that could be made to improve things, all in all, it is a success. It ensures a steady flow of properties at affordable rents.
As mentioned in a previous article (Why building affordable homes makes economic sense), affordable housing brings benefits to the whole country, not just the people who get to live in them. The more affordable properties built, the more we see:
- Job creation
- Improved health and wellbeing
- Reduction in homelessness numbers
- Cost savings and more tax revenue for the Government
- A multiplier effect on the wider UK economy
The more we can get affordable properties in the hands of people that need them, the better it is for all of us.
For these reasons, we have to keep a close eye on Section 106 and ensure that local authorities do not relax the rules around what is required.