In 2023/24 alone, Section 106 agreements were responsible for producing more than 29,000
homes
Palma Oxley is a Researcher at the Fabian Society, working at the Fabian Housing
Centre
A single set of powers has played a dominant role in delivering affordable housing in
England. Through Section 106, councils can require housebuilders to build affordable and
social homes within wider schemes as a condition of planning permission. This has been
implemented to great effect.
In 2023/24 alone, Section 106 agreements were responsible for producing more than 29,000
homes. Since 2015, they have delivered nearly 248,000 affordable homes, roughly 46 per
cent of all affordable housing built over the past decade, making these agreements a critical
tool for the government to implement what they have called the ‘biggest increase in social
and affordable housebuilding in a generation’.
However, Section 106 is falling short of its potential due to a lack of demand. The system
depends on housing associations bidding for these homes, but in recent years their
enthusiasm has declined.
Homes England estimates that roughly 10,000 affordable homes are not being built because
housing associations are not interested in buying them. This has also held back wider
housebuilding, with up to 700 sites stalled due to challenges within the system, according to
the Home Builders Federation. There are two main reasons for this lack of demand.
First, the poor financial position of many social housing providers. Housing associations
have faced rising maintenance costs from their existing stock, the need to improve building
safety and energy efficiency, and increased borrowing costs. At the same time, they have
had years of cuts to grant funding and uncertainty around the future of social rent, which has
reduced their financial flexibility.
Second, the growing gap between expectations of housing in the social rented sector and
homes built by the private sector. Housing associations prefer family homes rather than
single-person properties, and they often want to avoid acquiring several properties scattered
across several developments, favouring a significant number of units in one development.
Their dwellings also tend to be more energy efficient than homes built by the private sector –
72 per cent of housing association homes are EPC C or above.
Building homes to these higher standards is more expensive for private developers and is
often not required under the current Future Homes Standard or building regulations. This
issue is often compounded by unclear responsibilities around the rectification of faults in
Section 106 dwellings, which have undermined social housing providers’ confidence in these
homes. More fundamentally, these mismatched expectations and challenges stem from a
lack of engagement between developers and housing associations before construction, from
design and specification through to completion.
These issues within Section 106 carry significant consequences. They pose a serious threat
to the delivery of 1.5m new homes in this parliament, particularly social and affordable
housing. For the 1.3m English households on local authority waiting lists for social housing,
they have a direct and tangible impact.
Recent government policy will help address these problems to some extent. The £39 billion
Social and Affordable Homes Programme and the long-term rent settlement are likely to give housing associations a stronger financial position. This will improve their ability to bid on
Section 106 dwellings, even if the grant cannot be used to purchase them. The Section 106
clearing service is also a welcome step, as it improves communication about the availability
of affordable homes already built and for sale. The government’s new Future Homes
Standard will hopefully narrow the gap between what housing associations want, and what
private developers deliver.
However, the government could go further by building trust and supporting collaboration
between developers and housing associations before construction begins. This should
include simplifying negotiations around Section 106, ensuring they focus more on the design
and specification of the units themselves, rather than the overall development obligations.
The Housing, Communities and Local Government Committee has suggested that the
government works with the Planning Advisory Service to develop a suite of Section 106
template clauses that focus negotiations on site-specific considerations. There should be
additional investment in local authority planning services to support delivery through Section 106 aagreements. The government can also encourage social housing providers to take risks on new
properties by providing recourse for defects in Section 106 units.
A well-functioning Section 106 system is essential if the government is to meet its housing
target, and its potential is far from exhausted. However, without swift action, it will continue to
underperform. Given its role as the single largest driver of affordable supply, Section 106 will
be a central focus of the Fabian Housing Centre’s work in the months ahead.
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