The Government have a manifesto commitment to deliver the biggest increase in social and affordable house building in a generation, and to strengthen planning obligations to ensure new developments provide more affordable homes.
Section 106 agreements are, and will remain, an essential mechanism for delivering social and affordable housing. They account not only for a significant proportion of affordable home completions, but also a significant share of total new home delivery. Without them, the development pipeline as a whole is at risk of contracting sharply.
However, in recent years, the negotiation of section 106 agreements has become synonymous with inefficiency and delay. To ensure the developer contributions system secures the supply and affordability outcomes we seek in the years ahead, we need to reduce its complexity and minimise negotiation friction.
In the short term, we also need to act to deal with the detrimental consequences of a declining market for section 106 affordable homes. A complex range of factors has led to the sharp drop-off in demand for section 106 units over recent years, with the result that thousands of constructed or consented section 106 units are currently uncontracted. This state of affairs is delaying the build-out of development sites across England, and disrupting both affordable and wider housing supply.
To this end, today the Government are announcing a comprehensive policy package that will lay the foundations for a simpler, more transparent and more resilient section 106 system, and deal with the legacy problem of existing unsold and uncontracted section 106 units.
Immediate action to unlock unsold and uncontracted section 106 homes
Estimates vary, but it is not in dispute that thousands of unsold and uncontracted section 106 affordable homes have built up over recent years. They have done so as a result of the complex interplay between a range of factors. These include:
Registered providers of social housing facing mounting pressures from severely constrained financial capacity, higher costs of finance, rising building costs and commitments to remediate existing stock to meet building safety and decarbonisation requirements, all of which have led to a scaling back of section 106 acquisitions.
Concerns among RPs that some section 106 homes do not meet the quality and other standards required. Examples include section 106 homes not meeting described space standards or not being in conformity with the, now updated, decent homes standard and minimum energy efficiency standard, as well as anticipated higher new standards (e.g. changes to building regulations, future homes standard).
Negotiations on section 106 agreements can create delays in the planning process and increase costs for local authorities and developers, which can disproportionately impact small and medium-sized enterprise developers. A lack of capacity and capability at the local authority level in terms of legal resource, in comparison to larger developers, often means that local authorities are at a disadvantage when negotiating contributions at the planning application stage.
RPs deciding to prioritise other routes to development, mainly land-led grant funded development, where they can have greater influence over specification and design and avoid management challenges stemming from their more limited control as an intermediate leaseholder of small numbers of homes in blocks managed by an external managing agent or freeholder (e.g. service charges for tenants can pose barriers to managing these homes as social housing); and
RPs and developers being unable to agree on section 106 unit pricing.
The Government have already taken a number of steps to support demand for section 106 units, not least spending review measures designed to rebuild the capacity of RPs. As a result, we are seeing tentative signs of an improvement in appetite for acquiring section 106 homes. However, despite this positive shift in sentiment post spending review, we know that there are still housing schemes where developers remain unable to secure an RP buyer for the affordable homes set out in the original section 106 agreement, and where local planning authorities and developers have not discussed or reached agreement on variations to planning obligations, with the result that many of these sites are stalling.
For this reason, as of today, we expect all LPAs to take advantage of existing planning flexibilities to renegotiate section 106 agreements, and to allow the tenure of homes to be varied in order to secure a buyer where affordable homes secured in section 106 agreements remain uncontracted or unsold. This can be effected by a deed of variation—making amendments/revisions to existing section 106 agreements—either by agreement of the parties to the section 106 or by formal application under section 106A of the Town and Country Planning Act 1990.
To ensure we target sites that are genuinely stalled, the following section sets out the conditions that LPAs should ensure are met, and the approach to negotiation they should take, where it is necessary to agree a deed of variation with developers holding uncontracted section 106 units that have not found any suitable RP buyer.
This measure is intended to support LPAs in exercising their ability to renegotiate planning obligations. It will be strictly time-limited, in order to target those section 106 homes already built or very close to completion but unable to find an RP buyer. This policy is also laid out in the section 106 road map published on gov.uk.
Conditions for accessing this time-limited process
LPAs are expected to consider renegotiating section 106 agreements when the following conditions are met:
Developers should have exhausted all reasonable endeavours to find an RP buyer based on the affordable housing marketing, and any other relevant requirements set out in the original section 106 agreement.
Developers should have uploaded any uncontracted section 106 homes onto the Homes England clearing service by 1 June 2026 to give a final opportunity for RPs to bid to purchase these homes. Any homes not uploaded onto the clearing service by this point will be outside of this process.
Homes should be live on the clearing service for a period of six weeks from the date of the unit being uploaded.
The section 106 homes should be due for completion on or before 1 December 2027, to be eligible for this time-limited approach; completion defined as when a home is ready for occupation or when a completion certificate is issued. Expected completion dates should be registered on the clearing service to guide LPAs on whether all above conditions are met.
LPAs should seek to avoid tenure renegotiations for uncontracted section 106 homes that have received reasonable offers from willing and suitable RP buyers, as is current practice, to avoid the loss of social and affordable housing to private sale.
As is currently expected, developers should inform LPAs of any, and all, bids they receive from RPs seeking to buy uncontracted section 106 units. LPAs are actively encouraged to request that these details are provided.
Assessing the reasonableness of bids is ultimately a matter for individual LPAs but, where available, they are encouraged to consider the following evidential sources: site level viability evidence; published commuted sums policies; grant rates; surveyor data; and recent section 106 purchases in the locality.
Given the clearing service will have provided an opportunity for RPs to identify and bid for unsold and uncontracted section 106 homes, LPAs are encouraged for this temporary period to take a pragmatic, time-limited, and light-touch approach to assessing bids, and any further information requests, for example evidence of marketing efforts or details of contact with prospective buyers in the locality. In instances where there is a dispute between the LPA and developer over whether bids received are reasonable, they may also wish to seek a third-party view to support a resolution, as per an existing alternative dispute resolution procedure.
Guidance for LPAs on proceeding with a deed of variation
LPAs should confirm their decision on proceeding to renegotiate the section 106 agreement as quickly as possible—with a guideline of no more than twelve weeks from the end of the six week period on the clearing service, and consider the following in negotiating to alter the tenure of eligible homes:
LPAs are encouraged to take the following approach:
(i) seek alternative affordable housing or discounted market tenures in the first instance where possible;
(ii) if there is no buyer for such tenures, proceed through to private market rent or sale—with an equivalent form of affordable housing provided on an alternative site within the LPA s area or, where this is not feasible, a financial payment made in lieu of onsite affordable housing.
LPAs should include stipulations that make clear that if homes are not completed on time and by the deadline of 1 December 2027, schemes will revert to the tenure mix set out in the original section 106 agreement. Renegotiated section 106 agreements should provide for this without the need for a further deed of variation to be made.
When considering phased development, LPAs and developers should agree a tailored approach with regard to the circumstances of the specific phases i.e. if the first phase will be completed by 1 December 2027, then a deed of variation should be considered in line with the policy set out in this statement. However, where phases contain units that are not expected to complete by this point, the terms set out in the original section 106 should continue to be expected to apply.
Laying the foundations for a more effective section 106 system
While this immediate action is necessary to overcome current challenges facing the section 106 market in order to reduce disruption to house building and sustain supply, we are clear that this is a time limited, emergency intervention. The Government’s primary focus remains on long-term reform to reset the section 106 market and support effective section 106 delivery of social and affordable homes, and thereby honour our manifesto commitments.
We intend to work closely with LPAs, RPs and developers to deliver a series of measures that will provide for a simpler, more transparent and more resilient section 106 system, including:
Supporting LPAs to negotiate section 106 agreements. We want to simplify and strengthen the process for agreeing developer contributions through section 106 agreements at the application stage of new developments. It is our intention to publish a template section 106 agreement to speed up the process of drafting and concluding new section 106 agreements.
Setting clear sector expectations to guide section 106 delivery. We want to provide greater clarity and certainty to facilitate the more effective delivery of section 106 homes. Through new guidance we will seek to foster early engagement and collaboration between developers and RPs; provide greater clarity on the standards section 106 homes must meet and the role that should be afforded to RPs in ensuring section 106 homes meet the standards required of social and affordable housing; and encourage standardisation across the market in respect of how pricing is negotiated so as to provide more certainty for RPs and developers on what they can expect to pay and accept for section 106 units.
Expanding financial capacity to revive the market for section 106 homes. Low-interest loans will be made available to private registered providers of social housing. They will be administered by the national housing bank outside London and the Greater London Authority in London. Up to 10% of the £2.5 billion low-interest loan scheme for private registered providers will be available to support the delivery of social and affordable homes via section 106. Further detail on low-interest loans is set out in our decade of renewal update. We will also build on the recently extended affordable homes guarantee scheme 2020, and confirmation of its use for section 106s. We will continue to explore how Government can crowd in additional private investment to enable the purchase of unsold section 106 units. This is with the aim of bringing them into use while retaining them as regulated affordable housing, for example through an affordable housing acquisition vehicle supported by debt guarantees which is able to buy section 106 homes.
We will set out further detail in due course with the intention of this full reset being in force in spring 2026. The Government’s full policy statement has also been published today.
[HCWS1286]