CIH’s submission to the consultation on standardised planning agreements for medium-sized sites

Owner refers to the housing developer.

Council refers to the local planning authority (LPA).

Housing provider refers to the affordable housing provider acquiring the homes, such as a housing association.

In agreeing a standardised template for S106, it is crucial that delivery of affordable housing is an expectation for all agreements. S106 agreements provide opportunities for local authorities to ensure that homes built in their areas will continue to meet local housing need, as determined by housing needs assessments and local plans. This also allows local authorities to meet a range of other duties and expectations, such as those set out in supported housing and homelessness strategies.

While it is important, and necessary, to increase the delivery of all types of housing, it is also important to build the right types of homes to meet local needs. The affordability of homes must remain an underlying principle when deciding what homes are built, to meet the needs of local communities and tackle high levels of housing unaffordability, homelessness and people living in temporary accommodation.

This means that local authorities must be provided with the flexibility required to shape S106 agreements to meet their area’s needs, according to the local plan. This can be achieved within a standardised template, but the template should not be too prescriptive or take a ‘one size fits all’ approach. It should allow for flexibility when required, particularly for rural areas which may require specific approaches to meet acute rural housing needs.

We would support changes to the tenure mix without a deed of variation (question 58), as members have fed back that this would be helpful. However, this must be accompanied with the understanding that affordable housing requirements are a minimum level of provision, rather than a fixed proportion. This allows registered providers to increase their acquisition of affordable homes, and allows local authorities to enforce where affordable housing levels can increase upon viability assessments within the process. Our members have raised that further guidance on schemes that are 100% affordable housing or deliver additionality would be welcome. There can be ambiguity about these sites in relation to S106 agreements, Community Infrastructure Levy (CIL) relief and use of Homes England grant funding. Two points have been raised for consideration:

• To provide flexibility and to incentivise affordable housing delivery, the definition of Affordable Housing Units, could reference “at least [number] of affordable dwellings”.
• To provide additional guidance for LPAs around review mechanisms, such as viability reviews, for circumstances where market conditions have changed and there may be an opportunity to increase affordable housing provision.

All wording within the template should also align with Homes England’s grant funding requirements, as well as expectations on the use of the clearing service in the future, as it passes over from Homes England to MHCLG. Additionally, our members would find it helpful for further guidance on the implementation, and variation, of the template within the Planning Practice Guidance.

While we encourage the government to consider the technical planning document changes raised by individual local authorities and housing providers, our members have raised some specific points which we would like to highlight:

• ‘Homes’ – Our members have raised concerns about the use of ‘units’ within the template. Whilst we understand the legal and planning framework for this, it is important to note that all housing delivered through S106 agreements are homes, which residents will live in. There can be a disconnect between planning obligations and the understanding that residents live in these homes, which can influence decision-making within the planning process and lead to unsuitable homes being delivered. We encourage the use of the Joseph Rowntree Foundation and FrameWorks UK’s toolkit ‘How to talk about homes’ within the sector and would welcome these principles being reflected in government’s planning and housing framing.
• Definitions (question 57) - The document should better align with the agreed definitions of affordable housing within the National Planning Policy Framework (NPPF), to ensure that the template works for all tenures and areas.
• Owner’s covenants (clause 2.2) – We support the introduction of this clause to ensure that affordable housing remains prioritised within the development timeframe, by restricting the occupation of market sale homes until an agreed percentage of affordable homes are complete. However, the language could be ambiguous with the use of “practically complete” and “or are under an unconditional contract for transfer”. We recommend removing this language and replacing it with simpler phrasing, such as: “market homes cannot be occupied until the required affordable homes have been transferred”. Members have also noted that whether a scheme is considered ‘practically complete’ should be confirmed by both parties, not just the developer, due to some ongoing issues of defects and snagging, within a reasonable expectation of quality.
• Mortgagee in possession clause (question 66) – We support the inclusion of the mortgagee in possession clause in the template, which has been highlighted by members as a point of contention within the S106 process. This reflects the existing mortgagee in possession clauses from the National Housing Federation and Greater London Authority, which are already used within the sector.
• Agent fees – We support calls from sector partners for developer agent fees to be absorbed by the developer. Where these are not currently absorbed, the additional costs are reflected in the bids from housing providers and can impact upon the acquisition of S106 homes.
• Affordable Housing Plans – It has been raised that the language of footnote 6 in the draft template does not adequately support the purchase of S106 homes. The lack of expectation to produce a plan to identify the location of the S106 homes makes it difficult for housing providers to plan and assess whether the homes fit their needs and would be easily maintained in the long-term. We recommend strengthening this expectation to identify locations where possible. 

Cascade mechanisms remain contested within the housing sector, with concerns regarding the loss of on-site housing provision through S106 agreements, or creating a ‘loophole’ without adequate safeguards in place. We understand the need for cascade mechanisms in some circumstances as a last resort and therefore feel it is helpful to have information on these included within the template for greater consistency and guidance for local authorities (question 68). However, the cascade mechanism proposed should be strengthened to better protect the delivery of social housing where possible, as outlined below (question 69).

The consultation is clear that a cascade mechanism is “intended to be used at the discretion of the LPA, where appropriate to local circumstances”. We believe this is the right approach, to ensure that local authorities can shape housing delivery to meet local needs. However, this same intention must be reflected consistently throughout the template.

While payment in lieu may be necessary in exceptional circumstances, all parties should aim to deliver on-site affordable housing where possible, in line with the policies of the relevant local plan. The template should therefore be more explicit in the expectation that affordable housing should be delivered on-site. This reflects recent changes to the NPPF, in which the government reflected on sector concerns that “commuted sums could become a routine alternative to on-site provision”. The housing sector welcomed the government’s recognition of these concerns, and the removal of applicant discretion to deliver payments in lieu of on-site delivery, and we believe this intention should be consistently reflected in the template agreement.

The template outlines that payment contributions in lieu (or commuted sums) of affordable housing provision are compliant “if the Owner elects to pay”. The template should be explicitly clear that the decision for payment as an Affordable Housing Contribution should be subject to the LPA’s agreement and is not the automatic right of the developer. The wording is currently ambiguous to this meaning. We therefore recommend amending this to “the Owner may agree with the Council in writing to pay the Affordable Housing Contribution in lieu of the provision…”. 

The template outlines a timeline of six months with no contract before a cascade mechanism is triggered. However, the template is not clear at what stage this period begins, which could cause confusion and ambiguity for both LPAs and developers. Developers should be encouraged to engage with affordable housing providers as early as possible, as outlined in the S106 engagement guidance, to allow for sufficient time for providers to assess the proposal and ensure the homes built will meet their needs. We suggest the six-month period should commence from either the granting of planning permission, or the developer’s first approach to an affordable housing provider. This will provide greater clarity within the S106 process and allow for an accurate measurement of time before the cascade mechanism is triggered.

We believe that for the timeframes in the template to be fair and reasonable, there must be an expectation that developers allow housing providers the opportunity to assess opportunities, as part of their ‘reasonable endeavours’ (outlined further below). There must be sufficient time for housing providers to consider and respond to opportunities, and it would be helpful to outline a minimum length of time within the template. This ensures that the process continues to move forward in a timely manner, but also that housing providers have had the chance to practically engage with S106 opportunities, and that developers have fully engaged with providers who could purchase the S106 homes.

Whilst we agree that the LPA should be able to assess if a developer has engaged fully to deliver S106 homes before the cascade mechanism is triggered, further clarity is required to ensure consistency and to protect the delivery of affordable housing.

Our members have been clear that further guidance on what would be expected within ‘reasonable endeavours’ and ‘reasonable commercial terms’ would be welcomed, as these are subjective. Early and collaborative engagement with housing providers should be encouraged and expected within the process under which ‘reasonable endeavours’ is calculated, as highlighted in the S106 engagement guidance. All additional guidance should be created in consultation with housing providers, LPAs and developers to clarify expectations. This includes supporting LPAs in assessing whether ‘reasonable’ bids have been received from housing providers, before moving towards a cascade mechanism.

Local authorities are often required to make decisions within constrained circumstances, with limited resources and capacity, as well as meeting local political priorities. Additional guidance would provide assurance for local authorities in their decision-making processes but also provide clarity for developers and housing providers about what is expected within the S106 process. This includes advice for smaller housing providers who may not currently be engaged with the S106 process, but are looking to acquire S106 homes, to encourage a diverse range of providers to bid for S106 homes and increase the likelihood of the homes being contracted.

We also welcome the proposed approach to include local authorities as potential purchasers of S106 affordable homes (question 70). Providing more opportunities for local authorities to acquire S106 homes aligns with the government’s clear ambition to support the delivery of more council homes. 

In Schedule 3, the template outlines the expectation for any payment by the developer to the LPA should be spent within five years from date of receipt or repaid back to the developer. We believe this requirement should be removed from S106 agreements.

Payments in-lieu of provision are the Affordable Housing Contributions of S106 agreements, which were created as planning obligations to mitigate impacts from a development under the Town and Country Planning Act 1990. This contribution towards the provision of affordable housing, and the obligation, is not removed because the payments are not spent within a specified timeframe. All Affordable Housing Contributions through S106 agreements should be ringfenced for affordable housing delivery.

We understand the need to provide timeframes to spend S106 contributions, to encourage LPAs to deliver the affordable housing required. These timeframes should be determined in consultation with LPAs, to determine a practical and reasonable approach. However, it is important to note that unspent funds are different to unallocated funds. Our members have shared that they are committed to spending S106 contributions, and often these are allocated to larger projects within a pool of other contributions. This does not mean these will be unspent, but that local authorities are operating within a complex and difficult financial environment, where they must bring together various contributions to deliver affordable housing schemes. The template should be clearer on the difference between unspent and unallocated funds.

The government should also provide guidance and support for local authorities to spend these funds. Whilst some local authorities have ambitious delivery programmes, this has been limited for others, and they may require additional skills or training to deliver affordable homes directly with S106 funds. The government should encourage the use of partnerships with affordable housing providers, in order to deliver affordable homes that meet local needs and would be suitable for management by the local authority or a housing provider.

If an LPA is unable to allocate or spend S106 contributions within an agreed and practical timeframe, this money should remain ringfenced to be spent on affordable housing, for the benefit of the local community. Rather than losing this essential route to delivery outside of government grant funding, all efforts should be taken to ensure these funds can be spent to build much-needed affordable homes. The funds should not be returned to the developer, to remain within the intention of the S106 agreement. There are two proposed approaches for this, which have been reflected by others in the sector:

• If an LPA sits within a strategic authority area, funds should be transferred to the strategic authority as ringfenced money to be spent on affordable housing delivery. This would protect the delivery of affordable housing, and ensure that this will be spent in, or close to, the local geographical area of the original development, as should be the primary intention. The government’s commitment to devolution should be considered within this arrangement, to provide an additional regional authority the opportunity to deliver the housing needs for the local area and ensure affordable housing contributions are not lost or paid back to developers.
• If an LPA does not sit within a strategic authority area, funds should be transferred to Homes England to create a ringfenced pool of funding available for housing providers to deliver affordable housing. This would allow for providers to work collaboratively with Homes England within existing working relationships to ensure that affordable homes are delivered using S106 funds.

If you have any questions about our response, please contact Megan Hinch, policy manager, megan.hinch@cih.org