Developers used to have to pay Section 106 contributions - but times are changing
Councils typically grant planning permission to developers on the proviso they contribute financially to affordable housing and local education, employment and infrastructure opportunities in a bid to reduce the impact of a scheme. However, fewer and fewer developers are being obligated to provide money under these ‘Section 106’ agreements, with assessments ruling their plans would be financially unfeasible if made to do so. It has become a contentious issue.
Consequently, council officers said “hands were tied” by legislation set by the Government. Any refusal of the scheme could result in the developer appealing, resulting in a cost to the council if it lost. “The Nottingham situation is construction costs went through the roof in recent years. Inevitably that has an impact on how much it is to build anything.
The issue has become so contentious that councillors have started to question the effectiveness of the independent reviews of developer viability assessments. West Yorkshire-based CP Viability is the firm that independently reviews viability assessments on behalf of the council. “In some cases we may feel, for example, that a profit below 15 per cent on revenue could be justifiable in the open market. Our views on this, though, are irrelevant because the PPG states the profit has to be between 15 per cent and 20 per cent on revenue.
“Equally, though, there are circumstances where developers submit viability appraisals speculatively, simply as a means of maximising profits. Where this is the case our role is to advise the local authority to retain its planning policies.” “I know it is a frustration for councillors. But we don’t have the ability to negotiate on-the-hoof because of that need for consistency, and the evidenced-approach for what we ask for.”
“You can introduce a CIL, that is the most consistent and the best way to try and grab a contribution, the problem being if you set that everything has to pay a contribution. It comes after the Labour Party said in October a future government would strengthen rules “to prevent developers wriggling out of their responsibilities, speeding up new social and affordable housing.”
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