A quick history of Section 106
And why I am the most fun at every dinner party I go to
Looking ahead to 2026, developer contributions are likely to feature high in the housing debate. Already in public the Housing Minister Matthew Pennycook has noted that Section 106, the main vehicle for securing payments from developers for affordable homes and infrastructure provision is in need of reform, supported by a report on land value capture from the Housing Select Committee.
The debate has also raged in the housing sector, particularly around the issue of the suitability of homes built through Section 106 for housing associations to take up.
Rather than weighing into this debate, I thought that it fit in with my idea of fun to recap the history of Section 106, the discussion around it, and what this might say about our present moment.
Section 106…of what??
One thing which most of us forgot to do last year was to wish a happy 35th birthday to Section 106, three and a half decades after Royal Assent was granted to the Town and Country Planning Act on 24th May 1990.
The legislation was introduced by Secretary of State for the Environment, Chris Patten, in the dying days of the Thatcher Government and when his plate was presumably a lot fuller with the unrest over the poll tax, as this also fell within Patten’s portfolio. The Act passed through with relatively little controversy as mostly a tidying exercise to formalise a number of pre-existing elements of planning law.
Before Section 106, developer contributions were completely localised in their design and negotiation, and primarily concerned offsetting the impact of new homes through new transport and infrastructure. However, Section 106 introduces language specifically related to affordable housing within these agreements, laying the ground for them to become the principle mechanism of delivering new affordable homes that it has become today.
This is where the second political context of Section 106 comes in, the Right to Buy. Already by 1990, a million homes had been sold through the Right to Buy, slashing the number of council homes by more than half. The impact of this was increasingly known, with Labour MP David Clelland in 1990 saying:
“Is the Minister aware that his reply demonstrates that, despite recent events, nothing has changed and that we are being subjected to the same old claptrap from the Dispatch Box? Is he further aware that, contrary to the recently expressed opinions of the Minister for Housing and Planning, local authorities’ ability to use the receipts from council house sales to provide additional council housing has been severely restricted, which has led to a complete standstill in the provision of council housing, in Newcastle and Gateshead in particular and in other local authority areas? What will the Government do about the growing army of homeless and inadequately housed people that they have created?”
Indeed this slow-down was evident in action – from 1980 to 1990 new starts from local authorities had declined from 33,550 to 6,640, fuelled by the slashing of grant funding and restrictions on councils’ ability to borrow to build. At the same time, stock transfers to the financially freer housing associations fuelled the growth of the sector while council stock steadily diminished.
The introduction of Section 106 thus came at a time when direct delivery was in crisis, and amidst administrations intent on the privatisation of the market, transferring delivery from the state to the private sector.
The 2000s and the failures of S.106 laid bare
The Blair and Brown Governments were one whose economic policy was defined by partnership between the private sector and the public sector, and its approach to affordable housing delivery followed in this model, with the encouragement and upscaling of Section 106. This was noted during contributions from then Housing Minister Nick Raynsford in a debate at the time:
“The Government wish to optimise the contribution that the planning system can make to the overall supply of affordable housing. We wish also to ensure that there is certainty in the planning process, and that the overall supply of housing is not unduly hindered…We must therefore ensure that affordable housing policies are consistent with guidance, consistently applied. I consider that our planning policy will help to optimise the contribution that the planning system can make to the overall supply of affordable housing in London.”
The Government’s Planning Policy Statements, a precursor to the NPPF, encouraged the use of Section 106 by local authorities, not just for the delivery of affordable homes, but also broader transport and infrastructure through this mechanism. Accordingly, the proportion of new developments with accompanying planning agreements increased from 1.5 percent in 1997/8 to 6.9 percent in 2003/4, and soon Section 106 was providing half of all affordable homes, a number which has remained relatively firm up to the present day.
However, Labour’s economic plan was only as strong as the private market which drove it, and the financial crash of 2008 exposed the weakness of using Section 106 as a model to deliver social homes, with these dropping off at broadly similar rates as private development did in this period. The peak of 3,444 social homes delivered through Section 106 in 2007/8 was only met a decade later, even as other development continued. But, to explain this story, we must turn to the Governments which succeeded Brown into the 2010s.
The Coalition, Thatcherism 2.0, and the acceleration of S.106
When the Coalition was elected in 2010, the direction of debate at the time was one particularly focused on getting private development restarted. In this context, social homes were either seen as an afterthought or a feature which would depend on private development, with interventions like this from then Shadow Housing Minister Grant Shapps indicative of the direction which he would take in Government:
“One of the extraordinary things about the [Labour] Government’s programme…is that they allotted £8.4 billion for affordable housing in the comprehensive spending review from April 2008 to 2011. If we ask how much of that has been spent, we discover that it is very little, because the issue is driven by market housing, and the market housing is not happening.”
The Coalition’s direction in housing is well-known, with the reinvigoration of the Right to Buy, the slashing of grant funding, the introduction of Help to Buy, and the introduction of the National Planning Policy Framework as a way of decentralising target-setting from Whitehall to local authorities.
In this context, Section 106 was also liberalised to prevent new developments from stalling. The first 2012 NPPF draft contained strict language to ensure that affordable homes did not prevent land owners and developers from achieving “competitive returns” and that “Planning obligations should only be used where it is not possible to address unacceptable impacts through a planning condition.” Similarly, the Growth and Infrastructure Act (2013) strengthened developers’ ability to appeal Section 106 contributions in the cases of stalled sites.
Meanwhile, intermediate rent and shared ownership were explicitly included within definitions of affordable housing, while student housing was added into direct policy considerations around Section 106 negotiations in 2015.
All in all, the focus of central policy was on allowing developers to build unfettered by constraints on delivering affordable homes.
On the face of it, this was a success, and the number of affordable homes delivered through Section 106 increased from 3,729 in 2009/10 to 30,075 in 2019/20. But, dig into these stats a little deeper, and the diversification of this market of what S.106 could be used to fund shows.
While new social homes represented 2,143 of S.106 homes funded in 2009/10 (57%), this only increased to 3,842 in 2019, representing just 13% of new affordable homes. Meanwhile, shared ownership represented 31% of these new homes (9,315) and affordable rent, set at 80% of market rents, represented 45% (13,656).
The 2020s and attempted replacement of Section 106
The role of Section 106 as the primary method of capturing land value uplift has been in dispute for much of its history. Guidance was interpreted differently depending on the implementing local authority, and an NAO report from 2005 records varying times to conclude Section 106 agreements ranging from 6 to 67 weeks as a result of this confusion, an issue which has persisted into the 2020s.
As early as 2006, legislators were looking at alternatives to this, with reports from DCLG and the Housing Select Committee on the potential of a ‘planning gain supplement’. This was intended to be used as a more strategic offsetting mechanism, while saving Section 106 for specific site-by-site mitigation measures.
While not implemented, the Brown Government instead introduced the Community Infrastructure Levy (CIL) through the Planning Act (2008). Activated in 2010, and broadened by the Coalition Government, CIL was marketed as a more universal way to raise funds from development, reducing uncertainty for developers and admin from councils.
However, it quickly hit a number of stumbling blocks: actually implementing CIL locally required an extensive consultation process which typically took two to three years, and many councils were reluctant to adopt it, and accordingly set lower rates than anticipated to not reduce development.
Thus, while CIL was estimated to raise £1 billion by 2016, by this time only 39% of available authorities were actually using it, raising a total of £286 million. At this time, 85% of developer contributions were still being levied through Section 106 – despite the marketed simplification of CIL, most negotiations are still negotiated on a site-by-site basis from larger, more impactful developments.
Faced with these obstacles, the Johnson Government and its successors under Rishi Sunak and Michael Gove attempted to undergo a significant reform by actively replacing Section 106 with a broader Infrastructure Levy through the Levelling Up and Regeneration Act (2023). However, opposition from within the housing sector quickly meant that this was watered down with extensive monitoring and opt-outs for developers to pay the Infrastructure Levy via the provision of affordable homes.
As of writing, the Infrastructure Levy remains on the shelf, and there is no indication that Labour in power has any indication of bringing forward the secondary legislation necessary to activate this.
Crucial questions for 2026
The Government has made it clear that reform of Section 106 is on the cards for 2026, with Matt Pennycook saying at the Environmental Audit Committee:
“To ensure that we are getting the appropriate level of public gain through development, we are committed to strengthening the existing developer contribution system—section 106 and CIL—to ensure that councils can more readily negotiate in a proper way to ensure that public gain is secured, and that developers are held to their commitments when we do. We are taking action in that regard and many others, and we are only a year in.”
One issue which has been raised is the use of Section 73 orders by developers to renegotiate their commitments, after a number of high-profile negotiations in recent years as the delivery market has become more difficult. Cases such as renegotiations on the Canada Water master plan, where a Section 73 notice was used to reduce affordable housing provision from 35% to 3%, have put this issue under the spotlight.
Looking back at the history of Section 106, it is clear that this is among the many questions which have been raised since its introduction. Broadly, there is a broad purpose question as to the extent to which Section 106 should be intended to capture site-specific mitigation, or to achieve broader strategic objectives, and how Section 106 and CIL should interact to minimise this confusion.
The delays, confusion, and renegotiation of Section 106 also remains a substantial challenge, and the push for standardised templates by the HCLG Select Committee is the latest in attempted innovation to streamline the system.
The long-running issue of the quality of Section 106 homes also remains up for debate, in particular in inner urban areas where the market sale homes are usually leasehold flats, and an overall managing agent runs the site. The feelings of resentment caused by the design of Section 106 staircases through a “servant door”, and the unequal treatment offered by some managing agents between shared owners and private leaseholders only exacerbates the existing design issues most recently voiced by Fiona Fletcher-Smith as the departing G15 chair.
Finally, the question remains of which homes should be delivered through Section 106. What is the social value of an intermediate rent home versus a social rent one? As MHCLG looks to major on the direct delivery of social rent through the new Social and Affordable Homes Programme, can developers be let off the hook or should Section 106 be the tool to make them part of this national mission?
Another huge task for MHCLG after a year dominated by such hard tasks. But, Ministers and civil servants can bring the zeal with which they treated private renting, planning, leasehold and social housing, we can have hope yet for Section 106.