The reality of a Section 106 negotiation, from the inside

A Section 106 agreement must translate a contract into policy with specific obligations, triggers, payment schedules, review mechanisms and routes for enforcement and clawback. Every detail reduces ambiguity but increases negotiation time, especially when multiple land interests, funders and delivery partners are involved.

Affordable housing adds a further layer because it is both political and commercially sensitive. The starting point is usually a policy target, but deliverability includes tenure mix, transfer values, specification, phasing and registered provider appetite. If one element changes, the agreement can need re-engineering.

“Viability testing should be a tool, not a battleground, but can be both when costs and values are uncertain”

The detail is assembled through a sequence of judgements. The local plan and any supplementary planning guidance set the baseline, including affordable housing percentages, tenure expectations and local infrastructure priorities.

Applicants then translate a proposal into impacts such as school capacity requirements, junction works, open spaces, biodiversity and drainage measures. Councils’ formulae or standard schedules create consistency, but they need tailoring to a specific site.

The negotiation is invariably the hardest part. Viability testing should be a tool, not a battleground, but can be both when costs and values are uncertain. Some obligations sit inside the authority, others sit with partners (education or health bodies), while affordable housing sits partly in the planning system and partly in the wider housing delivery ecosystem.

The challenge is to agree what matters most, what will unlock delivery and what will survive scrutiny.

Carter Jonas has advised the Royal Borough of Kensington and Chelsea on the viability and deliverability of developing across a number of sites, with capacity for around 5,000 homes. Since 2016, the cost of building has risen while the London market has been relatively subdued, leading to viability challenges.

On large sites such as these, the Section 106 agreement is not so much a one-off transaction but a living delivery plan: it sets out how affordable housing is phased, how infrastructure is triggered and how the scheme can cope with change without constant re-litigation of the same points, which requires flexibility designed into the agreement.

Too much flexibility makes it slow, vague and difficult to enforce; too little makes it brittle. The art is to build “flexibility by design” through clear review mechanisms and practical triggers so the agreement can respond to change without reopening all points.

“Many planning permissions are time-limited and have been known to expire before Section 106 negotiations are complete. The longer the delay, the more the costs escalate and market conditions change”

Section 106 must be considered at an earlier stage in the planning decision process. The earlier affordable housing is shaped around realistic tenure, specification and registered provider requirements, the less time is lost later.

Second, timing must be more realistic. For large schemes, Section 106 negotiations may go on for 18 months following planning consent. Many planning permissions are time-limited and have been known to expire before Section 106 negotiations are complete. The longer the delay, the more the costs escalate and market conditions change.

Third, we need review mechanisms which are clear on inputs and outcomes and focused on the policy objective rather than a theoretical ‘perfect’ appraisal.

The government’s roadmap for S106 delivery in England contains practical steps that should encourage standardisation and the development of a template agreement.

While this is welcome, it would be difficult to replicate for large sites: I cannot imagine a template benefitting an education contribution on a mixed-use site with multiple landowners, a long programme and divergent views on matters such as the ‘pupil yield’ from developments.

Similarly, it cannot decide the right balance between on-site affordable homes and commuted sums in a market where registered provider demand is uncertain. Large schemes still need bespoke agreements, informed by a clear view of how obligations will operate in practice over time.

LPAs will continue to require external advice, mostly providing guidance and modelling how assumptions will be stress-tested and triggers and phasing will work, bringing experience from other contexts.

Section 106 is not broken, but it is under strain. The answer is not less but better planning gain: clearer priorities, stronger delivery logic and greater flexibility.

Francis Truss, partner, Carter Jonas