Planning for The Future – The End of s106?
The Government’s White Paper “Planning For The Future” closes for consultation on 29 October. It covers an extremely wide range of changes to the planning system, most famously the proposal to strip back local plans, zoning all land for either “growth”, “renewal” or “protection” and centring all planning policy on a national basis – with local plans restricted to development allocation and standards to be applied. But one of the most interesting parts of the White Paper is the suggestion that the existing parallel schemes of section 106 agreements and community infrastructure Levy (CIL) will be replaced with a single infrastructure tariff. That would be a very significant change to the whole development industry. Trying to set any of this out exhaustively is fraught with risk and is probably pointless anyway because much of the White Paper is rather rambling and vague with much further detail to follow. But the changes flow from habitual criticisms of the section 106 regime which will be familiar to anyone who works in development (that s106 is complex, uncertain, opaque, lacking accountability) as well as CIL (which a number of exemptions have made extremely complex as well as inflexible).
Planning for the Future – The Proposal
The White Paper imagines both s106 and CIL being merged into a single tariff regime. It is not exactly clear right now how that tariff will be set. But what we do know is that it would not be collected on commencement of a development – as CIL and many section 106 obligations are. Instead it would be collected on the sale/disposal of the property as a nationally-set proportion of value. Is this such a bad idea after all? The timings at least seem sensible (in a way) because this may help to address a particular cash flow problem. The developer would not be obliged to make a payment until he had made a sale; and he would always pay the same proportion of the sale value – whatever value is achieved. So the extent of his profit would be reduced as the market rose but his loss limited in a poor market. All of this might bring a greater sense of fairness/equity to the process and it would help developers to predict outcomes. The most obvious problem with this however is that local authorities need the receipts from developer contributions in order to prepare all the infrastructure and schemes needed to accommodate that new development well in advance. For funding only to appear at the point at which people are occupying new dwellings is going to be very difficult for councils to deal with. In the White Paper the solution to this is that local planning authorities can borrow against anticipated receipts. That sounds more attractive than it might be in practice. If councils are relying on a proportion of future sales value being received per dwelling then the security against which they are borrowing may be quite volatile.
Will the White Paper, ‘Planning for the Future’ work?
Is abolition of s106 likely to be a silver bullet? That seems rather unlikely, for a number of reasons.
Firstly the combined infrastructure levy does not even attempt to do the three most important things a 106 agreement can do in terms of mitigation – restricting the development or use of land; requiring operations or activities to be carried out over land; requiring the use of land in the specified way. It is purely a funding mechanism: it does not even purport to address delivery.
Secondly, the combined infrastructure levy has CIL as its immediate forebear. The experience with CIL has not, on the whole, been a happy one. The complexity of CIL system from the moment it came into being together with an ever-expanding number of modifications to the regulations have rendered CIL a minefield: over-complex, over-legalistic, rigid, opaque and difficult to trace back in terms of benefit to the local community.
Thirdly, section 106 agreements are much-maligned. There is much wrong with the planning system, of course, but there is not a lot wrong with s106 (except that the statute is very narrowly drafted and so easy to fall foul of). Although they are said to be complex and the reason for much of the delay in the planning system, there is very little hard evidence to support that. Delay certainly occurs – but it has far more to do with under-resourced local planning authorities, inexperienced planning officers, developers with other schemes which are of greater importance, and land-banking. When there is a clear officer report setting out agreed heads of terms for a 106 agreement, even in major development I have known an agreed document to have been produced within five weeks of a committee resolution. As for the idea that the 106 process is opaque or lacking public accountability, that is simply not true. Section 106 agreements are publicly accessible documents: local planning authorities are obliged to keep copies of them on the planning register for inspection by members of the public. Section 106 agreements are mandated through proceedings at planning committee (not glamorous but it is all there for you to review on a webcast and read in documents published online) so their benefit and connection to the local community are in plain sight.
Fourthly, a section 106 agreement encompasses a very wide range of controls which help mitigate the dis-benefits of development. You can provide affordable housing within an estate of market housing thereby ensuring a healthy mixed community; you can require the use of local labour in employment during development; you can mandate the provision of specific areas of open space and other areas; you can, should you wish to do so, oblige a developer to arrange the transshipment of thousands of tons of aggregate to shore up sea defences, or install a dredger to move quantities of aggregate without causing traffic problems; or construct and maintain a bund to shield nearby houses from development. I have negotiated s106 agreements doing all these things and more over the years. None of them can be achieved with an algorithm.
Fifthly, section 106 agreements are not routinely despised by developers as many in Government imagine them to be. Whereas levies take in money centrally and disburse some of that for the benefit of the locality, the actuall benefit to a developer’s scheme is often pretty remote. A section 106 agreement is a deed setting out obligations between the local planning authority and the developer. So, yes, it obliges the developer to pay for the school. But it also obliges the education authority to build and operate that school – because by default if the money has not been spent within a certain period of time it must be returned to the developer. Not only is this an inherently good thing for the local community, it is also vital for the marketability of the new dwellings.
The White Paper came to bury section 106, not to praise it. I suspect that – whether new legislation attempts this or not – the chimera of another development tax may not be adequate, even combined with the other measures proposed in the White Paper. It is only likely to highlight the many advantages of s106 planning agreements. I suspect there will be a significant role for these agreements, or something like them under a different name, for as long as we have a planning system.
Oliver Bussell is an experienced planning and s106 lawyer based in Rix & Kay’s Sevenoaks office. For an informal chat about any planning or development issues email firstname.lastname@example.org, Partner in Rix & Kay’s Commercial Property and Planning Team.