The rising number of Section 106 (S106) affordable housing units sitting uncontracted and unsold across development sites in England has prompted the government to issue a new roadmap for S106 delivery.
The government has recently introduced time-limited, emergency measures aimed at unlocking housing delivery on stagnant S106 sites, alongside an early indication of longer term reforms. The measures will have immediate implications for developers, registered providers (RPs) and local planning authorities.
The policy statement sets out:
This article outlines the emergency measures now in place, what they mean for developers, affordable housing providers and local authorities, and how longer-term reforms may reshape the future of S106 agreements.
The current challenges facing S106 sites are well-established. Concerns over declining demand for S106 units have previously resulted in developers seeking to include ‘cascade’ mechanisms in S106 agreements which permit tenure variation, often in exchange for a financial contributions. However, these mechanisms have been increasingly resisted by local planning authorities concerned about losing control over the delivery of affordable housing.
In response, the new emergency measures introduce clear conditions that must be met before the tenure for a S106 unit can be varied:
Other conditions are more ambiguous. Developers must demonstrate that they have exhausted all reasonable endeavours to find an RP buyer, though no criteria or examples have been given to explain what ‘reasonable endeavours’ might entail.
Similarly, local planning authorities are expected to resist renegotiation where RPs have made reasonable offers, and to adopt a ‘light-touch’ approach to bids while these emergency measures are in place. Developers and RPs will no doubt be waiting to see how local planning authorities interpret and apply their discretion in this respect.
Any tenure change actioned under the emergency measures will be documented via a deed of variation to the original S106 agreement. Deeds of variation can be notoriously slow to complete and, with the potential for an influx of applications, there will naturally be concern about the possibility of further delays. The measures do, however, require local planning authorities to act quickly and clearly in relation to any proposed variation, with decisions required within 12 weeks of the six-week Homes England Clearing Service period ending.
The declining S106 market has been attributed in part to outdated and inconsistent S106 drafting. The policy statement reiterates the introduction of a new template S106 agreement, which the government announced last year. The template will be used for medium sites, fewer than 50 units, before being rolled out more widely. The new template is intended to simplify negotiations, but there are also opportunities for the template to address legacy issues caused by S106 agreements for RPs - for example inconsistencies in the drafting of mortgagee in possession clauses.
Further clarity is also promised on S106 build standards, to ensure that RPs are able to meet consumer standards set by the regulator, and on a framework to help developers, RPs and local planning authorities work together at the planning application stage to ensure the units constructed will be acceptable to RPs.
With bidding shortly opening for the £39bn Social and Affordable Homes Programme 2026-2036, the government has previously expressed hope that the capacity of RPs will be improved by the additional funding, allowing them to reassess unsold S106 units.
However, given that grant funding cannot ordinarily be applied to S106 units, it is possible that RPs will instead continue to focus their attentions on land-land acquisitions. To help steer RPs towards S106 acquisitions, the government has stated that the Social and Affordable Homes Programme (SAHP) bidding process will require RPs to disclose their delivery of S106 units.
The policy statement also highlights the financial resources available for S106 units, and refers specifically to the availability of low-interest loans and the potential creation of RP consortiums. Such collaboration between RPs is not uncommon, and when aligned carefully to each RP’s requirements and priorities, it can be an effective way for RPs to secure S106 units.
For more information, please contact our housebuilding and development team.
