Planning Obligations (Section 106 Agreements)

What are planning obligations?

Planning obligations – sometimes known as section 106 agreements – are legally enforceable obligations made under section 106 of the Town and Country Planning Act 1990 (as amended). They are negotiated and made between a developer and the Local Planning Authority (LPA), to meet the concerns the LPA may have about meeting the cost of providing new infrastructure for an area.

When can planning obligations be used?

For planning obligations to be used, they must meet three legal tests set out in part 11 of the Community Infrastructure Levy Regulations 2010. A planning obligation may only constitute a reason for granting planning permission if it is

• necessary to make the development acceptable in planning terms
• directly related to the development and
• fairly and reasonably related in scale and kind to the development.

In 2014, the Government exempted developments of 10 units or fewer and developments with less than 1,000 square metres of floor space from the requirement to contribute towards affordable housing section 106 agreements. The policy was then withdrawn following a legal challenge to it, but was then reinstated in amended Planning Practice Guidance from 19 May 2016, following successful appeal by the Government.

LPAs must not double-charge developers for the same infrastructure projects.

Two areas of concern about planning obligations have been the restrictions on pooling contributions and the (alleged) lack of transparency about the viability assessments on which they often depend.

Pooling of planning obligations

The former Coalition Government made changes to how planning obligations interact with the Community Infrastructure Levy (CIL). Restrictions on pooling were introduced from April 2015 and are to be lifted from September 2019.

From 6 April 2015, the use of pooled contributions toward infrastructure projects was restricted. Previously, LPAs had been able to combine planning obligation contributions towards a single item or infrastructure ‘pot’, but under the Community Infrastructure Levy Regulations 2010, LPAs were no longer able to pool more than five planning obligations together if they were entered into after 6 April 2010, and if it was for a type of infrastructure capable of being funded by the CIL. These restrictions applied even where an LPA did not yet have a CIL charging schedule in place. Affordable housing provision was not bound by these restrictions.

These regulations were designed to encourage LPAs to use the CIL rather than planning obligations to pay for local projects, but there were some issues with the restriction on pooling, with some in the planning industry arguing that this might result in developments stalling, and others suggesting that LPAs might have to become more creative in how they applied planning obligations, perhaps by splitting infrastructure projects up into several smaller ones, thereby enabling them to pool more contributions.

Through a series of consultation documents and responses in 2018-19 the Government proposed to lift pooling restrictions. Initially this was only in specified circumstances, but the Government subsequently changed its position to lift pooling restrictions in all areas.

A technical consultation on draft regulations to reform developer contributions ran from December 2018 to January 2019. In it, the Government confirmed that it now proposed to lift it in all areas and arguing that this and other changes would provide greater flexibility for funding infrastructure. The summary of responses to this consultation and the Government’s view of the way forward was published in June 2019. Here, the Government reiterated the argument for removing pooling restrictions, saying that “removing existing restrictions on the pooling of planning obligations towards a single piece of infrastructure will address barriers that could otherwise prevent development”.

The regulations are the Community Infrastructure Levy (Amendment) (England) (No. 2) Regulations 2019, which came into force on 1 September 2019.

Disclosure of viability assessments

When seeking planning permission for developments including residential uses, developers will routinely submit viability assessments. Viability assessments are used by developers to help demonstrate to the LPA that an existing affordable housing obligation is economically unviable and should be overturned. Developers have often argued that viability assessments should be confidential because they contain commercially sensitive information, this confidentiality limits transparency and accountability.

MHCLG launched a consultation on planning for the right homes in the right places in September 2017. In the consultation paper, MHCLG argued that making viability assessments simpler, quicker and more transparent could lead to better use of section 106 agreements.

The NPPF consultation proposals document in March 2018 argued (amongst other things) that viability assessments should be publicly available. The amended policies were set out in the draft text for consultation. The draft Planning Practice Guidance published with the draft revised NPPF expanded on MHCLG’s proposed new approach.

The revised and updated NPPF was published in July 2018, with some further minor amendment in February 2019. On viability, it now says that “all viability assessments, including any undertaken at the plan-making stage … should be made publicly available.” The more detailed Planning Practice Guidance on viability was updated in May 2019. Under the heading of accountability, it says that any viability assessment should be prepared on the basis that it will be publicly available – even in those exceptional circumstances where it is not, an executive summary should be.

Section 13.3 of the Commons Library briefing What next for planning in England? The National Planning Policy Framework looks in detail at concerns about viability and viability assessment.

Other Commons Library briefings on various matters to do with planning are available on the topic page for housing and planning.