Changes to use of s.106

December 11, 2014

Philippa Plumtree-Varley considers the newly-introduced s. 106 exemptions and allowances, which offer the opportunity for small-scale developers, custom-builds and self-builds to avoid incurring certain planning obligations.

New thresholds

A number of new paragraphs have been inserted into the ‘Planning Obligations’ section of the National Planning Practice Guidance (the NPPG), outlining when infrastructure contributions through planning obligations should not be sought from developers. Going forward, contributions for affordable housing and tariff-style planning obligations (s. 106 obligations) are not to be sought from small-scale and self-build developments.

More specifically, Paragraph 12 of the NPPG states that contributions should not be sought:

in all areas – from developments of 10-units or less + which have a maximum combined gross floorspace of up to 1000sqm;
in designated rural areas (that is, as described under s157(1) of the Housing Act 1985, including National Parks and AONBs) where the Local Planning Authority (the LPA) chooses to apply a lower threshold – from developments of 5-units or less (no floorspace limit); and / or
from any development involving only the construction of a residential annex or extension to an existing home.

In addition, in a rural area where the LPA applies the lower threshold, affordable housing and tariff-style contributions are to be sought from developments of 6-10 units:

in the form of cash payments / financial contributions;
not as affordable housing units on the site; and
with the payments commuted until after the units within the development have been completed.

The only exception allowed to the 10-unit threshold is where LPAs have chosen to apply the lower threshold already noted – that is, in designated rural areas. The restrictions do not apply to development on Rural Exception Sites, again unless the development consists only of an annex or extension being constructed to an existing home, in which case no contributions are to be sought (Paragraph 13, NPPG).

The 10-unit threshold has been introduced purely in relation to s106 planning obligations – so it does not impact on the definition of ‘major development’ in other planning legislation. Correspondingly, where development takes place under the 5-unit or 10-unit threshold (as appropriate), it is acknowledged that some planning obligations may still be needed for the development to be acceptable in planning terms. So while obligations should not be sought to contribute to affordable housing or pooled funding ‘pots’, LPAs can still require:

obligations for site-specific infrastructure to make the site acceptable; and
contributions to fund measures facilitating development that could otherwise not go ahead due to regulatory or EU requirements (Paragraph 20, NPPG).

Vacant building credit (VBC)

Further changes have been made for obligations where vacant buildings form part of a development. It appears this is to incentivise brownfield development as per wider national policy. Going forward, it is therefore noted that LPAs “should not apply s. 106 affordable housing contributions to buildings brought back into any use, other than proportionately for any increase in floor space”.

The key points to note relating to this change are:

VBC is a financial credit for developers where a vacant building is either (1) brought back into any lawful use or (2) is demolished to be replaced by a new building.
The financial credit is to be equivalent to the existing gross floorspace of relevant vacant buildings – as established when the LPA calculates any affordable housing contribution. Affordable housing contributions would be required where there is to be any increase in floorspace as a result of the development.
So once the amount of affordable housing contributions to be made by the developer has been confirmed, a ‘credit’ will then be applied equivalent to the gross floorspace of any relevant vacant buildings being brought back into use or demolished in the scheme. This ‘credit’ is then deducted from the overall affordable housing contribution calculated.
The credit applies provided the building is vacant, unless it has been abandoned.

Background to the changes

In March 2014, the Department for Communities and Local Government (DCLG) consulted on the new 10-unit threshold for s. 106 affordable housing contributions as part of their consideration into ways to reduce planning costs to developers. The consultation closed on 4 May 2014, with 325 organisations and individuals having responded. The subsequent report forms a background to the above policy changes.

While the original 10-unit threshold is as suggested in the consultation, the lower threshold for designated rural areas has been a later introduction. This responds to concerns regarding the greater impact a 10-unit threshold could have on rural areas, National Parks and AONBs. The National Parks’ Authority had previously requested an exemption from the proposals.

In addition, there is the allowance so that developments of 6-10 units in rural areas etc. will be able to pay contributions in cash and defer until after completion. DCLG’s report indicates that this means:

provision of actual units will not be expected in such situations; and
small builders will potentially be able to meet contributions via sale receipts rather than borrowing – as they can defer until after completion.

It appears the main intention here is to encourage small-scale developers, self-builds and custom-build developments, so smaller builders are not dissuaded by large charges. However, there is some concern that it will have an adverse impact in terms of reducing the number of rural affordable housing-units. It also remains to be seen whether there will be an increased burden on larger schemes, in terms of them ‘picking-up’ some of the deficit made by falling contributions elsewhere.

This certainly does not mean the complete end to s. 106 agreements for smaller sites. As reinforced in the amended NPPG, securing mitigation to site-specific harms (such as highways, access arrangements and environmental protection) may still be required. If these cannot not be dealt with via planning conditions, s106 obligations may be needed.

Philippa Plumtree-Varley is at Walker Morris. She can be contacted on 0113 399 1836 or This email address is being protected from spambots. You need JavaScript enabled to view it..