In April 2013, the ‘Growth and Infrastructure Act 2013’ ushered in a significant change in the world of town planning with the introduction of Sections 106BA, BB, and BC into the Town and Country Planning Act 1990. These sections were designed to allow for a review of affordable housing obligations based on viability within five years of signing an original Section 106 agreement. However, a ‘sunset clause’ in April 2016 effectively ended the viability review possibility.
In light of challenging market conditions and the ongoing economic uncertainty, we believe there is a compelling argument to bring back Section 106BA to accelerate housing delivery
During a recent meeting with Will Grant at Pocket Living, we discussed why S106BA has not been reinstated and what it would take for the government to consider it, especially considering the ongoing uncertainty and viability challenges affecting project delivery. Will shared,
“S106BA would be an impactful and practical mechanism to keep construction activity and housing delivery going. It will take housing starts to fall below 125,000 homes pa and the temporary accommodation crisis to hit front page news for this government to intervene. Let’s hope the election does not get in the way.”
While we have narrowly managed to avoid another recession for now, there is no doubt that economic and market conditions are challenging, causing developments to stall, with many seeking to re-negotiate terms. Developers are still striving to meet aspirational affordable housing targets, yet current conditions often make these targets unviable, leading to delays and stagnation in housing projects.
Advantages of Reintroducing Section 106BA
Section 106BA, or the viability review mechanism, offered several advantages in addressing these challenges:
- Focus on Housing Delivery: The primary focus of Section 106BA was the renegotiation of affordable housing contributions, not other financial obligations or policy considerations. This streamlined approach facilitated quicker housing delivery, often without applications having to go back to planning committee.
- Appeal Mechanism: Section 106BC provided the right to appeal, allowing developers to have their case independently reviewed by a Secretary of State-appointed Inspector. This appeal mechanism could potentially save time, as councils are currently not obliged to entertain such requests within five years of signing a Section 106 agreement without this provision.
- A route to delivery: An appealing prospect for developers, lenders, and shareholders, Section-BA offers a clear path to delivery, accommodating fluctuations in the market, and providing a mechanism to reassess and renegotiate contributions towards affordable housing if they render a scheme unviable. This flexibility can make investment more attractive, instilling confidence in stakeholders that projects can adapt to changing economic circumstances, ensuring completion and return on investment.
Addressing Ongoing Challenges
Several ongoing challenges in the housing industry, including housing targets and nutrient neutrality rules, have further underscored the need for swift housing delivery. The rejection of government plans to scrap nutrient neutrality rules by the House of Lords has highlighted the importance of legislative solutions to address housing issues.
Additionally, the need for retrofitting around existing designs, such as the incorporation of a second stair core, has raised questions about the viability of certain developments. While some pragmatic councils are accepting these changes in principle, there is still a need for prioritising these decisions to ensure that viable projects move forward.
Next steps
The reintroduction of Section 106BA both now and in the future (when required) could be a crucial step in addressing the challenges currently faced by the housing industry in the UK. By allowing for the renegotiation of affordable housing contributions based on viability (at todays prices), this mechanism can expedite housing delivery and help meet the growing demand for housing in a volatile economic climate.
It is essential for policymakers to consider the benefits of Section 106BA, its objective decision-making process, and the appeal mechanism as valuable tools in accelerating housing projects while ensuring that affordable housing remains a central part of the development process. As ongoing challenges persist, it is increasingly clear that Section 106BA’s revival may be an effective solution to the pressing issue of stalled housing developments, ultimately benefiting both developers and communities in need of affordable housing.
The whole basis of the s106BA mechanism was that “Unrealistic Section 106 agreements negotiated in differing economic conditions can be an obstacle to house building” (Section 106 affordable housing requirements Review and appeal DCLG document from April 2013). While a further sunset clause would be sensible, our take on the government’s original intention is that it should not be a ‘one off’ occurrence and should be revisited regularly where there are clear signs of housing delivery shortages – let’s identify the issue before its too late.
To contribute to these essential discussions surrounding the reinstatement of Section 106BA, or to learn more about how such a move could benefit your development projects, get in touch with our team. We can assist you in navigating the complexities of the housing industry, making sense of legislation impacts, and finding the best path forward in an uncertain economic climate.
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