Planning obligations invaluable for affordable housing

Scholars at the Universities of Cambridge and Sheffield carried out the research to investigate the effectiveness of the Section 106 agreements, which are negotiated by local planners when granting permission for new developments.

The obligations ensure that the necessary infrastructure to support new developments is in place and also stipulate that developers of private housing schemes create mixed communities by providing an element of affordable housing on new, private estates.

The research, which was commissioned by the Department of Communities and Local Government (CLG) is published today and shows that in 2007-8, private developers agreed to fund £5 billion of England's local capital infrastructure through planning obligations - more than ever before.

It also found that the contributions have become a major asset in efforts to create more affordable homes, nearly two thirds of which are now provided through S106 agreements. In principle, these contributions are funded by developers from the increase in land value that occurs when planning permission is granted.

The obligations first became enforceable under the Town And Country Planning Act of 1990, but until recently little was known about their extent and value. The new study, which is the third in a series commissioned by CLG, reveals just how substantial those contributions have become in recent years.

The analysis shows that the total sum raised from S106 agreements has risen from £2bn in 2003-4, to £4bn in 2005-6 and £5bn in 2007-8. Half of the money in each of these years went towards affordable housing. The increase reflects both the greater capability of planning authorities when negotiating these contributions and the rise in the value of developments over the same period of time.

The most recent study also suggests that, while planning authorities continue to focus their efforts on the largest sites, they are also negotiating more contributions for smaller sites compared with earlier years. However, it further shows that there are still large variations in the extent to which different planning authorities negotiate agreements and in the value of the contributions secured. This is partly due to the varying demand for development and land values, but also because of significant variations in local authority policy and practice.

Dr. Gemma Burgess, from the University of Cambridge Centre for Housing and Planning Research and one of the study's co-authors said: "This report illustrates the increasingly important role S106 agreements have played over the last few years in contributing to local infrastructure and supporting affordable housing, and it will be crucial, given the current financial climate, that local authorities continue to do so."

"Local authorities that may not have used S106 agreements to their full effect in the past are clearly improving practice, but we also found that policy and practice still vary enormously from one authority to another."

One important new finding from the latest research is that developers have been delivering a very large proportion of the agreed obligations. Allowing for changes to the timing of delivery, obligations were fully delivered on 80% of the sites where they were agreed in 2003-4 and 2005-6. Later agreements have been affected by the economic downturn because sites have been developed much more slowly, but planning authorities will require all obligations to be delivered once the market improves.

Professor Tony Crook, from the University of Sheffield's Department of Town and Regional Planning, who led the research team, said: "The last decade of this century has seen a very substantial increase in these contributions by developers, facilitated by the significant increase in land values."

"The size of the country's future requirement for new homes will require a substantial investment in infrastructure to support it, while the new homes target of the Government includes increased targets for affordable homes."