16 Nov 2015

Section 106 debate alive and well

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Section 106 debate alive and well

The controversial Section 106 was once again a topic of debate at October’s Conservative Party conference in Manchester. Essentially a mechanism to secure financial contributions towards infrastructure or affordable housing, the policy on Section 106 was reviewed in November 2014. This meant that small sites of 10 houses or less would be exempt from the charge.

However, in July 2015 Justice David Holgate deemed the changes of November 2014 as unlawful, following a high court judgement that ratified a challenge by West Berkshire and Reading borough councils. Then, in September, the Court of Appeal gave the government permission to appeal against the ruling.

A property at Fairgrove Homes' The Orchard custom build homes site

With nine units, Fairgrove Homes’ The Orchard site is typical of the size of development that in future would be eligible for Section 106 charges

But Housing Minister Brandon Lewis used the party conference to confirm that he hasn’t given up on finding a way to remove this challenge to small scale housebuilding, which would also affect smaller custom build sites. As part of this, Lewis has committed to changing the way Section 106 payments operate in an effort to facilitate growth in the sector.

“I’m still very focused on making sure that, on sites of 10 homes or less, we make it as accessible for small builders as possible,” said Lewis.

The original exemption was predicted to save around £15,000 per home, so the Court of Appeal’s ruling will have an impact on budgets, especially pertinent on sites that are trying to factor in affordability for homeowners. Lewis will now need to find a legal challenge that safeguards these smaller sites from the charge, which many see as counter-productive to facilitating the return of small building firms and affordable projects.

Editor’s comment

The reapplication of the Section 106 on small sites is deplorable, especially as it is the result of action by local authorities, who will soon be under legal pressure to bring on small sites of affordable homes. It is reflective of the barriers to growth in place in this country that are contributing to our restricted housing supply. Section 106 is a burden on small developers, a sector of the housing industry that is in almost terminal decline. Statistics show that small house builders are now building a third of what they were in 1990, when they supplied over 60% of all houses built.

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