The impact of Section 106 provisions

The underlying message that councils and planners are receiving from the Government is that they will have to accept an element of starter homes in Section 106 agreements for sites over a certain size but would be able to resist a 100% starter homes demand from developers. They may also still be able to negotiate with developers over the provision of affordable homes to rent once the starter homes regime has begun.  The Bill, as drafted, also allows the Government to make regulations preventing councils from granting planning permission for residential developments unless the starter homes requirement is met.

Recent figures published state that there are around 1400 housing schemes of over 10 units with planning permission that are currently stalled, approximately 62% of those developments predate April 2010. The section 106 agreements that relate to these stalled developments might be making sites unviable due to being agreed in a different economic climate.

The Growth and Infrastructure Act (2015) introduced new provisions for Section 106 with a new application and appeal process to review planning obligations which relate to the provision of affordable housing. It allows a developer to renegotiate contributions based on lower development viability relative to the conditions that were agreed when planning permission was first granted.

The changes to Section 106 have been welcomed by developers who have sites stalled due to onerous planning obligations. The ability to make a formal application to renegotiate within one month of the new regulations coming into force means that these stalled developments can be re-started promptly.

However, the government is being asked to put in particular measures to prevent existing section 106 agreements from being reopened with a fear that developments could slow down as a result of investors and developers reappraising their schemes.

Richard Ford, a partner at law firm Pinsent Masons, the law firm behind Out-Law.com, said that “existing Section 106 agreements are already being looked at for the purposes of variation in anticipation of starter homes happening; developers are currently running financial models“.