JV North calls for inclusion in developer ratings system as Section 106 acquisitions fall by 69%

JV North maintains that registered providers (RPs) experience a lower level of service as a result of being excluded from this process.

This comes as the government has this week announced a new roadmap to strengthen the Section 106 market, including a “time-limited, emergency measure” whereby councils can attract buyers for developers’ unsold affordable homes by turning them into private sale or rent.

Unsold Section 106 homes, which are secured through a legally binding agreement between a developer and a council, has been a growing issue in the past couple of years. According to the HBF, there are 8,500 uncontracted Section 106 homes across England and Wales.

Private buyers receive a ‘national new homes survey’ eight weeks after completion from the National House Building Council (NHBC), Premier Guarantee or the Local Authority Building Control (LABC) Warranty.

These survey results are then collated by the HBF in order to award a star rating to developers. Currently, housing associations are not able to provide feedback that informs the star rating.

“As a result, JV North members experience developers giving private buyers a better level of service to ensure they get the highest possible rating to help them stand out in the market place, with staff such as project managers incentivised with bonuses if they get five stars,” the consortium said.

JV North has warned that Section 106 acquisitions would continue to drop among its members unless housing associations are included in these surveys and the star rating system.

John Bowker, chair of JV North, said: “Being excluded from customer satisfaction surveys for Section 106 properties means the sector is not getting the quality we want at handover.”

He explained housing associations are “treated differently to private buyers”, despite the fact that they are “also customers and always the biggest on any given scheme”.

Mr Bowker added: “Poor quality equals unhappy tenants which can affect regulatory ratings, and ultimately we are built on customer service.

“It also means repairs have to be carried out far earlier than a new home should need, with too many falling in the warranty period.

“We factor this into our business plans when assessing schemes; Section 106 homes are not always as financially attractive as they first appear on paper.”

Mr Bowker said JV North members recognise the role that Section 106 homes will play in reaching the government’s target of 1.5 million homes.

“Demand in the consortium is there and we have some really positive experiences with developers, but we can’t justify acquisitions at the level we would like because it would be irresponsible to accept homes of poor quality,” he added.

Saffer Cooper Consultancy, which manages JV North’s development programme, said including social landlords in the rating system would also bring important benefits for warranty providers and developers.

Sean Stafford, director at the consultancy, said reviews from housing associations would give warranty providers “greater visibility of the issues they will have to manage in the future”.

Currently, he said, warranty providers are “underwriting properties that have not been fully assessed”.

Mr Stafford added: “By doing so a comprehensive, more reliable rating system would be created that could see [fewer] claims made resulting in fewer payouts for warranty providers.

“There is an incentive for developers too, as they are responsible for rectifying problems for the first two years, and this comes at a cost, especially if they have to appoint subcontractors.”

The HBF explained that the Section 106 cross-subsidy model is responsible for providing around half of the country’s affordable homes, but is “reliant on a functioning market” for all tenures.

A spokesperson for the HBF said: “Registered providers are grappling with several financial and policy-based challenges, but if this retrenchment from the Section 106 market continues, ministers need to assess the sustainability of the current model.

“New homes are built to exacting standards and benefit from exceptional energy performance, saving RPs and residents money in the long run.

“There will always be a balance to be struck between earlier engagement around specification and shifting regulatory requirements.”

The HBF said the customer satisfaction survey was initially designed in response to the 2004 Barker Review of Housing Supply, which set the industry challenging targets to improve consumer satisfaction ratings.

This survey was designed for private sales, and therefore includes questions which are “not necessarily relevant” for the affordable housing sales process.

“We would welcome discussions to explore how the survey could be tailored for affordable housing occupants,” a HBF spokesperson added.

Premier Guarantee told Inside Housing that its new homes survey is available to all customers regardless of tenure.

“While only completions from owner‑occupiers are counted by the HBF when calculating a star rating, responses from tenants of affordable homes can still provide valuable insight into property condition and post‑move‑in service,” the warranty provider said.

David Swigciski, managing director at Premier Guarantee, said: “We recognise the sector’s concerns about variable outcomes on Section 106 delivery.

"Our trusted inspection‑led approach is designed to help maintain consistency and raise confidence across the industry, including social housing schemes.”

NHBC said it is “committed to raising standards” in house building, and that while some tenure types are finished to different specifications, this “should not impact build quality”.

The warranty provider continued: “We work as a partner with housing associations to help manage development risk throughout the construction process, from the earliest stages of land acquisition through to completion. 

“As a direct insurer underwriting its own policies, we have a vested interest in ensuring build quality and the prevention of structural defects. Regardless of tenure, all homes insured with us undergo inspections at key stages of construction.”

LABC Warranty has also been contacted for a response.