Social landlords rely increasingly on the planning system to deliver sites for affordable homes

Research for the Joseph Rowntree Foundation and the Housing Corporation shows that between 2000/01 and 2002/03, the annual output of new affordable homes in England fell by more than a third. But the proportion built as a result of S106 agreements – where developers agree to include affordable homes as a condition of planning permission – rose rapidly from below a third to almost half.

Data on planning permissions granted in recent years suggests that the number of new affordable homes being built should now be starting to rise. At the same time S106 will become even more important as a source of land for housing associations, while sites bought and controlled by social housing landlords can prove more elusive.

Land and finance for affordable housing by researchers at the Universities of Cambridge and Sheffield combines data analysis with results from a questionnaire survey of 380 housing associations undertaking development work, as well as interviews with developers and officials from local authorities and housing associations. It finds that:

• The overall number of new affordable homes (including through renovations and acquisitions of existing properties) fell from around 45,000 in 2000/01 to 29,000 in 2002/03. Data on the number of new, affordable homes being completed also points to a decline.
• The proportion of completed affordable homes built through S106 planning agreements increased from 30 per cent in 2000/01 to 47 per cent in 2002/03. Over the same period, completions of affordable homes on land that housing associations had acquired themselves for development fell from 21,451 to 13,949.
• Planning approvals that include provision for affordable homes under S106 agreements are rising rapidly. Although in 2002/03 only 12,600 newly built affordable homes were completed, 23,727 were granted planning permission.
• Housing associations in the survey reported that it was increasingly difficult and expensive to obtain sites themselves for new social housing. The most common 'non-S106' developments were on small infill sites of recycled 'brownfield' land and former local authority sites.
• Public subsidies were very important for S106 provision, with more than three out of four completions requiring some level of Social Housing Grant.
• Contributions from private developers were important in reducing land costs and bringing development costs within the limits where they qualified for public subsidy. There were only minor differences in the amount of Social Housing Grant required on S106 sites and other sites – even though the land costs on the S106 sites were generally higher.
• Housing associations, private developers and local authorities all appeared more comfortable with the use of S106 to secure affordable homes than five years ago when the researchers conducted a similar study. However, problems remained with the length of negotiations.
• Most S106 homes are being built alongside properties for sale on the open market – contributing directly to the Government's policy of encouraging mixed communities.
• Developers were broadly in favour of Government proposals for an 'optional charge' they could pay in place of a negotiated planning agreement. However, housing associations and other interviewees argued it would make it even more difficult to provide extra social housing.

Sarah Monk, Deputy Director of the Cambridge Centre for Housing and Planning Research and a co-author of the report, said: "Section 106 has become increasingly important in delivering affordable homes because housing associations find it more and more difficult to secure suitable new sites by other methods. From that point of view, it is encouraging that stakeholders seem largely happy with the operation of the policy.

"It is also encouraging that the Government's plans for revised Planning Policy Guidance this year include changes to improve the system for negotiating planning agreements. But plans for an optional charge or tariff could frustrate this by making it harder to build affordable homes as part of private developments. This would also undermine the mixed communities agenda."

Lord Richard Best, Director of the Joseph Rowntree Foundation, said: "This research suggests that Section 106 agreements are now vital to sustaining a supply of affordable homes. For all their imperfections, the arrangements for these agreements are beginning to settle down.

"Planning Gain Supplements – the predetermined payments from developers proposed last year by the Barker review of housing supply issues – could simplify negotiations on matters other than social housing. However, this research indicates strongly that the affordable housing element has to be the subject of separate, specific planning requirements using the Section 106 system."