Published: 03 August 2006
Obligated to Fund Affordable Housing
Planning Minister, Yvette Cooper, has urged local authorities to make better use of "section 106" agreements to deliver more affordable housing and infrastructure.
A planning obligation is a legally binding contract between a developer and a local planning authority and usually operates alongside statutory planning permission.
Through planning obligations, developers are required to carry out specified actions or make contributions when implementing planning permissions as a result of negotiations on these matters between the two parties.
The call to action came as the Government published new guidance for local authorities & developers on how better to use planning obligations.
The guide offers practical advice on how to improve the development, negotiation & implementation of section 106 agreements.
It also provides real life examples of how to make the process quicker, whilst providing more certainty, and includes a model legal agreement prepared by the Law Society.
A recent study by Sheffield University showed that there is still a great deal of inconsistency between local authorities in the use of planning obligations.
The research showed that 60% of medium & large and 90% of minor residential planning permissions do not include s106 agreements at all.
Yvette Cooper said:
"We all know that land values can rise dramatically once planning permission has been given.
Yet in the majority of cases developers pay nothing towards infrastructure and affordable housing.
That is why we are looking at new ways to raise more from planning gain.
And in the meantime we are urging local authorities to make more use of section 106 agreements to provide the affordable homes we need."
The guidance is aimed at improving the use of the current planning obligations system.
The Government has also consulted on proposals for a Planning-gain Supplement (PGS), to capture a modest portion of the land value increase resulting from planning permission and it will make further announcements on PGS by the end of 2006.
The Valuation Office Agency Property Market Report, January 2005, showed that the average value of agricultural land in England was £9,287 and the average value of land for residential use was £2,460,000.
While one might think it reasonable for a higher percentage of medium & large applications to include an s106 agreement, surely it would be unreasonable to expect the same of all minor ones?
While s106 agreements have previously been ‘aimed’ at developers, it now seems that the government is also classing any individual householder who wants to do an extension, etc. in the same group.
The government already gets 17.5% VAT of the cost of building work from householders for minor works and now it appears to want a ‘cut’ of the increased value of an individual property that arises from that building work – effectively a tax on a tax payment.
Further information
Planning Obligations: Practice Guidance and Model Agreement
Circular 05/05: Planning Obligations
Valuing Planning Obligations in England
Previous consultation on Planning Gain Supplement
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