Goodbye, Section 106?

The Planning White Paper (PWP) proposes to replace section 106 agreements and the Community Infrastructure Levy at a local authority level (the PWP suggests that CIL charged by London/regional Mayors will remain) with a single Infrastructure Levy (IL) which is:

• set nationally;
• chargeable for every development above a certain value threshold; and
• payable upon occupation.

The Government argues that introducing the IL will bring numerous benefits, including providing greater clarity for communities and developers about the level of developer contributions expected and being more effective at capturing land value uplift.

The PWP (perhaps understandably) particularly focusses on the role of S106 in the delivery of housing and the payment of financial contributions but the reality is that S106 performs a much wider function than delivery of these benefits alone. It remains to be seen precisely how the proposed IL will substantively replace all the functions of the current S106 regime.

Existing S106 – a broad power and application in practice

Section 106 of the Town and Country Planning Act 1990 allows a developer to enter into an agreement with a local authority to:

1. restrict development or use of land;
2. require works to be carried out to land;
3. require land to be used in a certain way; and
4. require financial contributions to be paid.

The ability for local authorities to treat obligations as a reason for granting planning permission is further controlled by regulations that require an obligation to be necessary to make the development acceptable, directly related to the development and fair and reasonable. This underlines the main purpose of S106 planning obligations – to unlock development by securing mitigation that allows planning permission to be granted for development that would otherwise be unacceptable.

The scope of S106 is therefore much wider than the financial contributions and affordable housing delivery on which the PWP focusses.

Items such as management of open space and community facilities, highways improvements, local employment and training, education, health facilities, community assets, delivery and servicing and other site-specific mitigation (to name but a few) are all commonly secured as S106 obligations.

More novel matters such as linkages between developments, occupancy controls for specialist forms of housing, noise mitigation, carbon reduction and offsetting, securing of Suitable Alternative Natural Green Spaces (SANGs) and habitat offsets, and other statutory requirements are often secured through the S106 too.

S106 planning obligations are also used in connection with the Development Consent Order process and other consenting regimes and can even be used independently from the grant of any planning permission or consent.

As well as having wide application, S106 is an incredibly flexible tool. It allows for detailed bilateral obligations that can cater for changing circumstances and unknowns at the time of grant of permission in order to maximise or tailor affordable housing and other commitments to best suit the local community, environment or market as it evolves during the lifetime of the development.

Without S106, how will key offsite mitigation be guaranteed within required timescales?

Grampian conditions to planning permissions would still be available to control development until necessary infrastructure or other mitigation off site is delivered. The new IL will provide the funding for the new infrastructure.However, neither will guarantee the delivery of that off-site infrastructure, which will largely be down to the local authority.Developments could be held up.

Without certainty of delivery of key mitigation:

• some of the mitigation could not be relied on in the environmental assessment process and for the grant of consent;
• communities would not be able to decide to support a development;
• investment decisions to start development could not be made; and
• purchasers would struggle to choose particular properties to be their homes.

What about mitigation closer to home?

On the flip side, and equally importantly, where infrastructure (including social and green infrastructure) forms part of the development itself - such as schools, health centres, play and open spaces that are key components of new settlements and other larger schemes - local authorities will only have planning conditions at their disposal. Planning conditions are far less flexible compared with S106 obligations and unlikely to be able secure these facilities in a way that maximises the success of new communities.

The long-term legally land-binding nature of S106s is also particularly important, for example helping with the guardianship of items like open space or encouraging sustainable travel methods on a long-term basis through the use of travel plans. Some of this could be dealt with in planning conditions but in a less detailed, more rigid and unilateral fashion.

The replacement of S106 would therefore severely limit the nature and degree of control local authorities would have over how and when these critical elements of developments are provided. Limiting the control of local authorities may be one of the aims of the Government but will they respond by seeking to substantively reproduce these controls within the new Local Plans as pre-requisites for automatic or streamlined permissions in Growth and Renewal areas?

The potential for double counting also seems to have been overlooked. The PWP implies that a developer would have to pay full IL where a development already includes much of the infrastructure it requires (e.g. a school or community centre) or even major highway improvements such as a bypass or a new station. The PWP only envisages affordable housing as an in-kind IL payment (and in a very rigid way compared with how S106 agreements currently secure and maximise affordable housing).

Whilst highways agreements could play a role for local improvements, they are naturally limited in their scope to highway matters. In the absence of S106, there is no equivalent mechanism for securing, for example, management of open space or community facilities, local employment and training, education, health facilities etc.

The new IL receipts from a development, like CIL currently, will not be calculated, based or required to be spent on specific pieces of mitigation for a development that will be needed to make the development acceptable. Although it will be the source of funding for local authorities to deliver new and maintain and improve all existing infrastructure to meet the demands of new development generally, the PWP envisages local authorities having broad discretion to spend the IL as it sees fit. It seems there would be nothing to prevent a local authority from changing the priority of certain infrastructure on which a development depends. This could result in stalled developments or completed developments with inadequate surrounding infrastructure.

Footnote 16 - scope for compromise?

The replacement of S106 (and CIL) by the IL is one of the key proposals of the PWP; however, footnote 16 of the PWP leaves the door open to retaining S106 in some form for “covenant[s] against the land” but where the value of the development would be captured through the IL, rather than S106. It remains to be seen if this footnote will be given more prominence as these reforms are developed; the main body of the PWP appears explicit in its intention for S106 to be removed, with footnote 16 being the sole reference to any potential retention.

Even if S106 is retained for certain, non-financial matters, the Government should still consider the potential tensions outlined above around double counting, LPA discretion on infrastructure delivery and the narrow scope of planning conditions.

Conclusion – a new delivery agreement?

The PWP is, not unexpectedly, light on detail and many of its aims are laudable. However, the unfortunate reality is that the replacement of S106 that the PWP contemplates (and the wide discretion local authorities will have on how to spend the IL) could result in uncertainty for developers, funders, purchasers, communities and local authorities themselves.

Ultimately, a new form of delivery agreement (either standalone or co-opted into any retained S106 elements) may be required that secures the application of a proportion of the new IL payment to development-specific infrastructure, social infrastructure and other mitigation, including delivery timescales in line with the development programme.