Councils reduce s106 contributions to help stalled development

Bristol City Council has been able to restart a stalled regeneration project by agreeing to reduce the affordable housing contributions it originally requested from the developer, whilst Bradford is to benefit from a new development under which the developer is not required to provide any section 106 contributions.

Section 106 of the Town and Country Planning Act allows authorities to ask for measures in 'mitigation' of upheaval caused by developments.

Bradford Council granted planning permission for a retail-led scheme without requiring any section 106 contributions from the developer. The Council has said that it recognises the scheme could prove unviable if it requested such payments.

The officer's report on the scheme said it is considered to be one where "special circumstances" would apply. "On this basis it is recommended that it is fully justified that planning permission should be granted without any section 106 contributions as sought by relevant consultees," the report said.

“Throughout the economic downturn, Bradford Council has repeatedly shown its commerciality, recognising the new realities of development finance and taking a pragmatic stance on viability," said Jonathan Riley, planning expert at Pinsent Masons and Vice-Chair of the Bradford Property Forum.

"Like the short term £6m loan to McAleer & Rushe to help deliver Provident Financial’s new city centre HQ and the Council’s direct investment in the new City Park, this is clear evidence of a Council determined to make things happen. Their RGF (regional growth fund) success earlier this week should give an extra boost to delivery,” Riley said.

Bristol City Council has also reaped rewards by relaxing the section 106 contributions requested from developers. The central area development control committee last week agreed to drop the requirement to build 37 affordable homes in an agreement with developer HDG Mansur, to allow a mixed-use scheme in the city centre to restart.

An officer's report said that a viability study of the redevelopment of the former Courage Brewery site had concluded that cutting the obligations package would "make a significant contribution towards bridging the viability gap".

This is a trend that was advocated by decentralisation minister Greg Clark, who in a written ministerial statement in March encouraged councils to renegotiate section 106 agreements with an aim to restarting stalled schemes.

Although this trend is favourable for developers and helps to boost new and stalled schemes, there is growing concern that the relaxation of section 106 contributions by Councils could prove damaging for the affordable housing market.

"In limited circumstances, some degree of renegotiation of section 106 agreements might be necessary. But we have major concerns that the cumulative effect of a large number of renegotiations could be a reduction in the amount of affordable homes being built," said Cameron Watt of the National Housing Federation.

Unpublished figures show that 56 per cent of affordable homes in England were partly or wholly built using section 106 money in 2009/10, said Tony Crook, professor of housing studies at the University of Sheffield, who prepared the figures.