www.insidehousing.co.uk/comment/comment/the-end-of-section-106-is-a-transformative-moment-which-could-threaten-social-housing-delivery-67414
The end of Section 106 is a transformative moment which could threaten social housing delivery
COMMENT
05/08/20
BY PETER APPS
The new zonal planning system in England will see Section 106 replaced with a fixed levy on development to fund infrastructure. This is a transformative moment, which puts the current level of affordable housing supply at risk, writes Pete Apps
The Section 106 era is coming to an end. As part of the sweeping planning reform being imposed by housing secretary Robert Jenrick, the mechanism - which gives councils the power to demand a certain percentage of affordable housing in new schemes - will be abolished.
In its place will come an infrastructure levy, which will constitute a fixed sum equivalent to a portion of the development value of the scheme. This will create a pot of cash which will fund “new roads, upgraded playgrounds and discounted homes for local, first-time buyers”.
While we await more detail about how exactly this system will work, such a move could mark another new era for the social housing sector: a change as transformative as the grant reductions in 2010 and the rent cuts announced in 2015.
It also threatens to fatally undermine affordable housing at a time when the need has never been higher.
When Section 106 was first introduced in 2001, it delivered only around 2,000 of 33,000 overall affordable homes, with the lion’s share at the time funded by government grant.
That picture has now changed. With grant rates receding due to austerity, Section 106 has become the primary vehicle for affordable housing delivery – with 48.9% of 57,185 affordable homes built in 2018/19 coming through the mechanism.
Over the last five years, it has accounted for for 82,490 affordable homes – 46% of all those built – and has been particularly important in maintaining a supply of socially-rented properties (13,458 in five years – 52% of the total).
In short, it provides a route to the delivery of affordable housing in a low-grant environment and offers local planning authorities a say on the tenure type which can resist central government’s drive away from low cost rented housing.
We now face an era where grant is both low and Section 106 does not exist: unprecedented in the post-war history of affordable housing in this country
The new mechanism will generate cash to fill this void, but there are number of reasons why it does not look like being an adequate replacement.
First, if it is linked to value, the taxes raised will be meagre in lower value areas. This risks depriving already deprived areas of affordable housing, and widening the north/south divide this government has staked so much political capital on closing.
Second, a cash sum is very different from an affordable house. The current system has a mechanism for developers to pay cash in lieu of providing housing, but it does not bode well. The money is prone to remain stuck in council coffers for years without being converted into an actual house.
Planning gain on the other hand offers an affordable house ready and waiting for tenants to move in as soon as the private scheme is built. Despite being undermined by poor doors and segragated playgrounds, it also creates mixed communities, whereas a cash-based scheme creates separate blocks for the rich and poor
Finally the tone of the government’s press release is ominous: the reference to ‘local, first time buyers’ appears to suggest this money will be used first for Robert Jenrick’s pet ‘First Home’ initiative, where properties are sold with a 30% discount.
This may make nice headlines, but it will not be of any use to the 88,330 households in temporary accommodation.
And First Homes are not the only thing which will be competing for cash with more traditional forms of affordable housing. A long list of infrastructure is promised and getting money out of developers can prove tough. Housing may well not be top of the list, with a lot of calls set to be made on a relatively small pot.
Then there is the impact on the affordable housing sector. Section 106 remains an important mechanism for development by housing associations. Despite a shift away from it among some of the bigger players, 40% of the 48,183 homes built or acquired by the biggest providers last year came via Section 106.
Scrapping it will change the sector: the only development game in town will be land-led. Doing this in a low-grant environment entails cross-subsidy from market sale and the commercial nous to compete directly in the land market.
While many have gone down this route already, there are plenty who have so far resisted it. That option no longer exists. With the cross-subsidy model more precarious than ever, calls for higher grant rates will intensify. Without them, it is hard to see how some smaller organisations will be able to develop,
There are other ripple effects. What, for example, will become of the new for-profit entrants to the market who have staked their chips on buying up Section 106 units in bulk from developers? If development sites in the ’growth’ areas are snapped for private housing, where will we put the affordable?
Only last week, the (cross-party) Housing, Communities and Local Government select committee reviewed the evidence and concluded there is “compelling evidence” of the need for 90,000 socially rented homes per year, saying it should be “top of the government’s agenda” post COVID-19.
The evidence would suggest this message is further from being heard than ever
Ive copied and pasted because not everyone can get into the website.
Will clap for key workers now become crap on key workers?!