Developer contributions

Planning is a devolved matter. This briefing focuses on England.

Types of developer contributions

Local planning authorities (LPAs) have two ways to secure contributions from developers to mitigate the impact of new development on local infrastructure and to deliver affordable housing:

• LPAs can negotiate section 106 agreements with developers, requiring them to deliver certain ‘planning obligations’. The specifics of a section 106 agreement and the obligations set out within it are negotiable.
• LPAs can also choose to (but are not required to) impose a community infrastructure levy (CIL) on development in their area. Developers must pay the CIL in those areas where it is in force (subject to exemptions).

Use of developer contributions

Affordable housing

Only planning obligations agreed in section 106 agreements can be used to deliver affordable homes, not developer contributions collected through the CIL. In 2022/23, 47% of all affordable homes that were delivered in England were at least partially funded through section 106 agreements.

Local infrastructure

LPAs can use CIL receipts to fund new local infrastructure that development creates a need for. A section 106 agreement may also require a developer to contribute financially towards the maintenance of existing, or the provision of new, infrastructure in an area (for example, to fund more school places or a new GP surgery).

Instead of making financial contributions to the LPA to fund infrastructure, under a section 106 agreement, a developer may also agree to deliver the infrastructure themselves.

LPAs can ‘pool’ developer contributions collected through the CIL and section 106 agreements to fund the same infrastructure project. Since 2019, there has been no limit on the amount of contributions that LPAs can ‘pool’ to fund the same infrastructure project.

There is no national database on the total amount of developer contributions that LPAs have collected or how they spent these contributions. However, since 2020, LPAs have had to produce an ‘infrastructure funding statement’ providing this information for their local area..

Proposals for a new infrastructure levy

The Levelling Up and Regeneration Act 2023 contains provisions for a new infrastructure levy (IL). Once brought into force, they would require LPAs to introduce the new IL. However, LPAs would be able to decide its level.

The IL would replace the CIL and, in March 2023, the government said the IL would “largely” eliminate the need for section 106 agreements. LPAs could use IL receipts to fund affordable housing as well as local infrastructure (such as schools and GP surgeries) that new development creates a need for.

The 2023 Act sets out a general framework for the IL, but its detailed design would be set out in regulations. The government consulted on the technical design of the IL between March and June 2023.

Response to the proposals

In March 2023, the government said the new IL would be “more efficient, more transparent and more consistent” than the current approach.

The Levelling Up, Housing and Communities Select Committee noted in its report on reforms to national planning policy (July 2023) that stakeholders had “raised concerns with us that the new IL would not, or could not, deliver the same or higher levels of affordable housing as the current regime”. During the passage of the Levelling Up and Regeneration Bill through Parliament, the Labour Party also questioned whether the IL would “lead to less infrastructure and less affordable housing”.