Government’s ‘emergency’ Section 106 plan could see unsold affordable homes flipped to private sale

Homes England set up the Section 106 Affordable Housing Clearing Service in December 2024, which allows house builders to list details of planned affordable homes with no buyer. But last summer, it emerged that just 1,500 homes had registered with the scheme. 

According to the new roadmap, to be eligible for the “time-limited” route, developers must list uncontracted Section 106 homes on the clearing service by 1 June 2026 to give a final opportunity for RPs to bid to purchase these properties.

Any homes not uploaded to the clearing service by this point will be outside of this process. 

For schemes where developers have “exhausted all approaches” to finding an RP buyer, councils should use a ‘deed of variation’ to make changes to existing Section 106 agreements and alter the tenure.

Councils should seek alternative affordable housing or discounted market tenures in the first instance “where possible”, and if there is no buyer then move to private market rent or sale, the roadmap said.

If the homes are converted to private sale, an equivalent form of affordable housing should be provided on an alternative site within the borough, or where this is not feasible then a financial payment should be made in lieu of on-site affordable housing.

Officials also said that councils should seek to avoid tenure renegotiations for uncontracted homes that have received “reasonable offers” from willing and suitable RP buyers, to avoid the loss of social and affordable housing to private sale.

The government: “This emergency route will be strictly time-limited, in order to target only those Section 106 units already built or very close to completion where a suitable and willing RP buyer cannot be found.

“We anticipate the stock of homes to be unlocked through this intervention will include those built in parts of the country without active RP buyers, or alternatively, those that have not been constructed to a physical specification that meet RPs’ needs and business plans.”

According to the roadmap, there have been “tentative signs” of an improvement in appetite for acquiring Section 106 homes since the Spending Review, but there are still stalled housing schemes where developers remain unable to secure an RP buyer.

Alongside the emergency measures, the government has also set out longer-term plans for a "simpler, more transparent and more resilient" Section 106 system.

This includes plans to use a standardised template agreement to help speed up the process of drafting and agreeing new Section 106 agreements. 

The government said it also wants to provide “greater clarity” on the standards that Section 106 homes must meet and the role of RPs in ensuring the properties meet them. The sector has previously raised concerns about the quality of housing being built under Section 106 deals.

To tackle this, the government is proposing a framework setting out how the sector will work together to deliver Section 106 agreements, as well as standardisation on how pricing is negotiated to provide more certainty.

To allow greater investment in Section 106 homes, 10% of the £2.5bn low-interest loan scheme for private RPs will be available.

“This roadmap sets out a clear plan to address the legacy of declining demand for S106 [Section 106] units over recent years and to provide for a simpler, more transparent and more resilient S106 system that will secure the supply and affordability outcomes we seek in the years ahead,” the government said.

It add: “The government is now calling on all parts of the sector to help us deliver this plan. Section 106 agreements are, will remain, an essential mechanism for delivering social and affordable housing. We have a collective responsibility to ensure the systems work effectively on an ongoing basis.”