The Secretary of State for Levelling Up, Michael Gove, is reportedly set to axe Section 106 contributions, replacing them with a new ‘Consolidated Infrastructure Levy’ in the hope of cutting red tape whilst raising around £7 billion for councils to initiate their own projects, including affordable housing.
Section 106 has been criticised over the years by both developers and councils for being cumbersome and bureaucratic, causing unnecessary and often lengthy project delays.
However, under the Government’s new plans, which are expected to appear in the Queens Speech next month if approved by Cabinet, developers would be charged a set fee, calculated as a proportion of the value of their housing project. This money would contribute towards an infrastructure fund designed to provide councils with the capital necessary to build their own affordable homes. Speaking to a conference hosted by the charity Shelter, Mr Gove said that “a well-designed levy can secure from the developer, or from the promotion of the development at the right time and in the right way, money that can be given to local authorities and to others to contribute to a more ambitious and a more sustainable social housing programme”, adding that “even the most Thatcher-worshipping, homeownership-fetishising, capital-accumulating members of this audience want more social housing, because you want people to be in decent homes where they can peruse the jobs they love and save for a home.”
It is not yet clear whether councils will be compelled to designate funding raised by the new infrastructure levy to specific projects such as housing, roads, schools and GP surgeries, or simply utilise the money in any way they see fit.
Yet the plans will still likely be received with mixed reactions. On the one hand, the introduction of a set fee system aimed at replacing Section 106 contributions will give an element of certainty to developers regarding how much money they will be required to pay towards affordable housing. It could also put an end to wrangling over viability assessments, which will be popular with councillors who often view viability as a ruse to avoid providing affordable housing. This may well have an impact on land values and how the land market functions if the cost of a fixed levy needs to be factored in.
On the other hand, although the current system has for years been subject to countless complaints regarding its inefficiency, some would argue that it does deliver affordable housing and infrastructure, albeit not always as quickly or to the levels required. Under these proposals, local authorities would have to become housebuilders once more. With the almost universal issues with under-resourced planning departments across the country, there is a possibility that while councils will have the money to build houses, they may not have the expertise or staff to actually put it to use. One property investor illustrated this point in a comment to the Telegraph on Saturday, claiming that under Mr Gove’s plan, ‘the overall number of properties built is likely to be lower than under current rules’ because developers can move more quickly than local government.
Mr Gove will probably seek to frame these changes in the context of putting local authorities back in the driving seat, giving them the cash and powers to build affordable housing themselves with a simplified system which will guarantee funding. The big test will ultimately be whether councils can step up to the plate and ramp up delivery of affordable housing. Given that a number of councils struggle to even allocate housing numbers through a Local Plan, it will be interesting to see how many will have the political mettle to actually be developers themselves.