ROOF Blog

The Chartered Institute of Housing (CIH) has said private developers, local councils and housing associations must work better together to manage land supply more efficiently to boost the supply of affordable housing. It argues that a poor grasp of land economics, an over reliance on section 106 agreements and an aversion to risk is hindering the provision of land, and added that housing organisations must invest in skills to value land, assess a project’s viability and negotiate better.

Guidance on renegotiating section 106 agreements is to be released by the Homes and Communities Agency later this month. The guidance for local authorities and developers is needed following a High Court ruling last year that quashed Blythe Valley borough council’s 30 per cent affordable housing policy and a similar High Court challenge currently against Wakefield Metropolitan district council.

Section 106 agreements may need scrapping, an inquiry into regeneration has been told. Michael Parkinson, director of the European Institute for Urban Affairs, has warned that developers are unwilling to pay for infrastructure and said the community infrastructure levy needs to be revised to find new ways of ‘doing regeneration’.

In London, mayor Boris Johnson has said he would review his commitment to deliver 50,000 new affordable homes in light of the difficult economic circumstances. City Hall released a statement outlining the mayor’s plan to change the rules on affordable housing, and repeated his commitment to removing the London-wide affordable housing target of 50 per cent.

A banker was only given permission for converting a former hotel, bought for £18 million, into a home on condition that he paid £500,000 towards low-cost housing. The scale of his plans – including a 16ft diving pool underneath the house and gardens – meant that the council allowed the 168-page application after imposing the section 106 provision usually applicable to commercial property developers.

A number of local authorities are letting developers pay reduced section 106 contributions or defer payment until the economic outlook improves. Medway council for example has started a flexible payment policy in response to concerns from house builders including waiving interest on late contributions, while Norwich city council is prioritising section 106 contributions where developers cannot afford to pay them. The councils argue that unless they are prepared to take calculated risks ‘they are never going to help stimulate the market’.

Communities and Local Government is conducting research to gain a better understanding of the scale and extent of unspent section 106 contributions. Housing minister Margaret Beckett said the investigation was a response to questions MPs had raised about the amount of unspent planning cash for section 106 agreements held in local authority bank accounts around the country – estimated by Chorley MP Lindsay Hoyle as £4 billion. He argues that this money could be used to provide social housing and get those in the construction industry back to work.

Councils are facing a funding gap of up to £7 billion this year because of a fall in section 106 contributions. EC Harris consultancy estimated that the fall in anticipated income from ‘planning gain’ deals where developers agree to provide affordable housing in return for planning permission, will get worse. A spokesperson said that as most section 106 contributions were from residential developments, they expect the value would fall below £2 billion for the next few years as fewer schemes get started, and this is likely to force the government to fill the funding gap.

A coalition of organisations in the construction industry has called for the suspension of section 106 agreements to help the sector survive the recession. The group wants a s.106 holiday, and then a cap on the value of such agreements; it wants targets for all local authorities to fast track the planning process to release and designate land for social housing; and wants to develop a ‘coherent strategy’ to deal with existing housing stock to make them more energy efficient.

The Killian-Pretty review into speeding up the planning application system was published today and contained 17 recommendations to establish a faster and more responsive process. Among the recommendations are a presumption that formal pre-application discussions of major developments are held; making a clearer distinction between community infrastructure levy (CIL) and section 106 agreements; and delegating a larger percentage of applications to planning officers to decide without having to go to committee. A consultation period will now follow and the government must decide which recommendations to adopt and when. David Pretty one of the authors of the report said that the planning application process was too slow and was ‘bogged down in unnecessary red tape… It is crucial, particularly given today’s economic climate, that we tackle this problem.’