By Chris Gaunt, senior associate at Rosling King
Despite the many pronouncements of their imminent demise, Section 106 planning agreements (S106) look like they will be with us for the foreseeable future. Also referred to as planning obligations, what can and can’t you do with this much-maligned tool of the planning system and what concerns are presented by the Levelling-up and Regeneration Bill which proposes their replacement.
A S106 is a legal agreement made under the Town and Country Planning Act 1990 (as amended) between a Local Planning Authority, land-owner(s) and developer(s) which allows the Local Planning Authority to impose obligations aimed at mitigating the impact of a proposed development.
They are used to restrict a development or the use of land, require certain operations or activities to be carried out on land, require land to be used in a certain way, or require financial contributions to be paid to the Local Planning Authority in connection with a development.
The most common forms of planning obligation covered by a S106s are requirements to deliver:
- Public open space
- Affordable housing
- Education
- Highways
- Town centre improvements
- Health provision
Law
Planning obligations may only constitute a reason to grant planning permission if they meet the tests set out in Regulation 122 of the Community Infrastructure Levy Regulations 2010 (as amended). These Regulations require that the obligation is:
- Necessary to make the development acceptable in planning terms;
- Directly related to the development;
- Fairly and reasonably related in scale and kind to the development
Levelling-up and Regeneration Bill proposals to replace S106s
The Levelling-up and Regeneration Bill, published in May 2022, is currently in the Report stage in the House of Commons, allowing MPs the opportunity to consider further amendments to the Bill or suggest new clauses they think should be added.
The provisions in the Bill propose the replacement of S106s and the Community Infrastructure Levy with a National Infrastructure Levy (Levy) which would be paid by developers to Local Planning Authorities.
So, whereas a S106 is often the subject of detailed negotiation and is site-specific, the proposed Levy would be non-negotiable and would be charged by reference to Gross Development Value (GDV). The main aim being to reduce delays and uncertainty, allowing developers a greater opportunity to “factor expenditure into the price paid for land” and which should mean that “affordable housing and infrastructure delivery is improved”.
However, limited details have been provided so far in relation to how the Levy will work in practice with detail to follow, in the now standard, but far from helpful way, by regulations. It is to be hoped that those regulations will be clearer than the Community Infrastructure Levy Regulations 2010 which have had to be amended on multiple occasions.
The intention is for the Levy to differ from the Community Infrastructure Levy as:
- It will be obligatory for the charging authority to charge the Levy;
- It will not be a viability informed floorspace-based flat rate;
- Affordable Housing will be funded and delivered through the Levy with the Local Planning Authority able to determine the portion of the levy to be received as on-site affordable homes.
There does however remain a number of questions yet to be answered, including:
- Will the Levy replace all financial contributions?
- The Government indicates that S106s are to be replaced but concedes they will still be used in a narrowly targeted way. It hasn’t indicated when they are expected to be used.
- If S106s are to be replaced, what mechanism will be used to secure the other type of obligations we would usually see in a S106 – for example what about the allocation and location of affordable housing or mortgagee clauses (the protective clause preventing mortgagee liability unless they take possession) to list a few concerns.
- The intention is for affordable housing to be funded and delivered through the Levy, but how? What if the development becomes unviable?
- Will Local Authorities be able, or indeed willing, to borrow against predicted Levy receipts for forward funding of infrastructure projects?
- How does a standard Levy affect development viability? Will there be different rates to take account of the location of the development – for example greenfield sites versus city centre locations?
The S106 system has been criticised by developers for being slow and overly bureaucratic, but what has been proposed in the case of the National Infrastructure Levy, from the detail we have received so far, appears to raise more questions than answers, and with the Bill still being considered in the House of Commons, it may be some time before we get clarity on any future changes.