Government proposals to standardise Section 106 agreements for medium-sized housing developments could cut delays and costs for SME housebuilders, but their success will depend on consistent adoption by councils, according to Paragon Development Finance.
The Ministry of Housing, Communities and Local Government has launched a consultation on four standard Section 106 templates for developments of between 10 and 49 homes on sites of up to 2.5 hectares.
The Government says negotiations over Section 106 agreements have become associated with “inefficiency and delay”, consuming council resources and having a disproportionate impact on SME builders. The new templates are intended to become the default approach, reducing the amount of time developers and councils spend negotiating standard provisions.
The move forms part of wider planning reforms aimed at supporting smaller housebuilders. The new National Planning Policy Framework, published earlier this month, formally introduced “medium development” as a category covering schemes of 10 to 49 homes and up to 2.5 hectares.
AFFORDABLE HOUSING BLOCKAGES
One potentially significant element is a proposed discretionary affordable housing “cascade mechanism”.
It is designed for situations where a developer has been unable to find an affordable housing provider willing to acquire homes secured through a Section 106 agreement.
Under the proposals, developers would initially have to market the affordable homes to providers for at least six months. Where no deal can be reached, options could include changing the affordable housing tenure mix, giving the local authority an opportunity to acquire the homes or, ultimately, allowing the developer to make a financial contribution in lieu of on-site provision.
The Government says the mechanism recognises evidence of reduced Registered Provider demand in some areas while maintaining a preference for affordable housing to be delivered on site.
Neal Moy (main picture), Managing Director of Paragon Bank’s Development Finance division, says: “Anything that reduces uncertainty and shortens the path from planning approval to breaking ground is welcome. For SME developers in particular, lengthy Section 106 negotiations add significant cost, delay delivery and ultimately can impact project viability.
“The new proposed affordable housing cascade mechanism is an important acknowledgement of a challenge we see on the ground. Developers are increasingly encountering situations where there is limited Registered Provider appetite for affordable units, leaving homes and developments in open-ended limbo. A clearer process for addressing those circumstances should help unblock viable schemes and keep much-needed housing moving forward.”
CONSISTENCY WILL BE KEY
The proposals would not remove councils’ ability to reflect individual site circumstances. However, the new NPPF states that national model planning obligations should be used where relevant unless there are strong reasons for taking a different approach.
Moy warns that widespread local variations could therefore undermine the benefits.
He adds: “The effectiveness of these changes will, as always, hinge on consistent implementation. The benefits of standardisation will only be realised if local authorities adopt the new approach consistently and avoid introducing significant local variations.
“Without that consistency, many of the delays and uncertainties the reforms are intended to address will likely remain, particularly at a time when planning departments grapple with ongoing resource and capacity shortages.”
The consultation applies to England and closes on 20 October.
