Section 106 & AFFORDABLE HOUSING
Section 106 agreements are described by the Planning Advisory Service (PAS) “as a mechanism which makes a development proposal acceptable in planning terms that would not otherwise be acceptable.” The National Planning Policy Framework (NPPF) states that planning obligations should only be sort in the following circumstances:
- Necessary to make the development acceptable in planning terms;
- Directly related to the development; and
- Fairly and reasonably related in scale and kind to the development.
The agreements are therefore devised upon a site specific basis and are therefore tailored to the development scheme that is being proposed. The NPPF also provides guidance that obligations being set by the Local Planning Authority (LPA) should take into account any changes in market conditions over time and in appropriate circumstances be sufficiently flexible to prevent development from becoming stalled.
Section 106 obligations are therefore incredibly subjective and small changes in market conditions can help to stall potential development. It is therefore possible to negotiate with LPAs to reduce or remove any Section 106 costs, through the use of economic viability reports.
An economic viability report can be submitted at any time during the planning process and can help to mitigate / remove any Section 106 costs and avoid any stagnation in the development process.
Section 106 obligations can often be coupled with affordable housing contributions which can place even more stress upon a development scheme. Accordingly, it is suggested that local authorities consider the benefits of a proposed scheme and are to ensure that their local development plans are deliverable.
There are three types of Section 106 affordable housing:
- Social Rent - usually based on 25% of average earnings. This has a sub construction cost value.
- Intermediate Housing - which often takes the form of shared ownership lease (more valuable)
- Affordable Rent - which is a rent equal to 80% of open market rent and probably the most valuable tenure.
Affordable housing contributions vary between LPAs and requirement levels change with number of units in a development.
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