Labour's ambitions to build 1.5 million homes by the end of the Parliament and unlock major energy and transport projects have meant planning reform has become a central plank of the Government's drive for economic growth.

But new housing developments require transport links, schools, and health services, and are expected to help meet the often dire need for more affordable homes.

Against this backdrop, the NAO has launched a study examining whether the Ministry of Housing, Communities and Local Government is overseeing a system of developer contributions that works and delivers the intended benefits.

Section 106 agreements, negotiated between local planning authorities and developers during the planning process, have been long established as a means of securing funding for improving local areas. But delegates present at the round table said councils had to invest their own resources to ensure they get the best out of the system.

Dedicated officers

One said after their council had carried out some ‘forensic work' they decided to appoint a dedicated officer to ‘negotiate and administer' s106 agreements, and it now sees itself as ‘one of the most successful authorities' in the field. They now charge an administration fee in all s106 agreements, which covers the cost of the post.

‘We've been able to redevelop our schools with s106 money – that wouldn't have happened otherwise,' they added.

Another said following investments in new software and a dedicated officer for ‘tracking and chasing the money' they had seen funds ‘increase massively'.

In the news

Some spoke of frustration over media reports about the levels of s106 funds held in councils' reserves. One admitted they had been singled out as ‘levering in tens of millions of contributions' but much was earmarked, such as for future maintenance.

They said: ‘The reality is it was pipelined for projects. Money doesn't just come in and go straight out, it's ensuring we have future sustainability.'

A fellow delegate was in a similar situation, pointing out some funding ‘has got to last us for 125 years'.

Community Infrastructure Levy

More recently, the Community Infrastructure Levy (CIL) has been adopted by many authorities whereby a fixed fee is paid based on the size of the development. Experience with CILs varied among those taking part in the discussion.

One said the CIL provided the council with ‘a flexible corporate pot' of funds. They added: ‘We are quite a proactive authority and had a plan in place. The rates at the time were quite good. I'm not sure we would like to do one now – because of the rates we wouldn't get a return.'

However, another said their councillors had decided against adopting CIL: ‘The view was to put it on a shelf. The members probably rue that decision now.'

A third delegate said: ‘The complexity of setting up CIL can seem to be too challenging. Having the two systems in parallel can be complicated.'

Another agreed: ‘Developers will try to trade off the two. CIL is not consistent across the country.'

They said there were two instances of neighbouring authorities having even gone against regulations and returned money to developers.

Collecting versus spending

The attendee expressed a fear, however, that with the planned introduction of another charge, the building safety levy, councils could ‘become collecting agents', adding: ‘We are going to be collecting money and giving it away.'

Another said: ‘We are good at collecting, perhaps not as good at spending it.'

One of the attendees said they were ‘struggling to hit housing targets' in their area: ‘A lot of the s106s agreed haven't come through the door yet because development hasn't started,' they added.

‘People buy land with hope value; construction costs increase so they just sit on it. We are looking at how we work with developers, but haven't found a magic bullet.'

Viability and affordable housing

Another agreed: ‘It's a tough world out there for the development industry, viability is a real issue and developers will build only if it's viable. Affordable housing is also a big issue and I can't see that getting any better in terms of viability.'

Someone else said: ‘We hear lots of headlines about thousands of permissions not being built, but they would if the money was there.'

A delegate added: ‘Big volume developers are there to get the most return for their shareholders. If viability improves, you can claw back s106 contributions. But developers like to know where they stand and what their bottom line is – if three years down the line you do a review and reduce their profits they won't be happy.'

In another case, an attendee said they were able to secure more affordable housing in rural areas where demand is lower, but not where need is at its greatest in urban areas.

They added: ‘If we are serious about getting growth where it's needed, we need to look beyond viability. If the housing market continues to be volume housebuilder-led, they will all go where demand is greatest and they can sell houses.

‘If the Government is serious about quality housebuilding there has to be more of an intervention, controlling what can be done with land for the common good.'

Planning policy

But there were concerns raised about the Government's planning policy thus far.

One delegate said: ‘The new Government has come in and is taking stock of all its projects. The left hand doesn't know what the right hand is doing.

‘There's a bit of concern in terms of what's going on with the Government in terms of nature.'

Another added: ‘The Government is pushing for faster timelines, you can't do that in the planning process – there have to be checks and balances.

‘We are all doing our own thing, reinventing the wheel continuously. We need some consistency from central government.'

One delegate complained of ‘a lack of regulation and overregulation at the same time', while another said ‘prevention rather than cure isn't getting any traction'.

Homes England was also described as having been ‘pushed from pillar to post'.

‘At one point they have been a bank, now they seem to be more of a regeneration agency,' said the delegate. ‘It's a complex, unwieldy organisation, they could be more targeted.'

But another attendee said: ‘We are the ones having to draw things together at the lowest level. It's hard work, but we do it to deliver what's right for our communities.'

NAO director, Helen Hodgson, thanked attendees for their contributions to the discussion, which will help inform their report publishing in June.

 

Comment

Helen Hodgson – director, National Audit Office

The round table was thoroughly engaging with coverage of topics such as asymmetric information in the system, meaning that local planning authorities are playing catch up.

Attendees spoke about the lack of transparency in section 106 negotiations, including how much developers paid for land, how this affects local planning authorities' (LPA) negotiating position and can ultimately lead to lower developer contributions. We were told that sometimes developers will overpay for land and use these negotiations to reduce the amount they contribute, as an effective way to reduce their overall expenditure.

Attendees noted it was expensive for LPAs to seek expert advice whereas developers generally have specialists in-house. One suggestion was to introduce national standards and templates for s106 negotiations.

There is a lack of geographic consistency within the planning system. Land viability varies between places affecting whether an LPA charges the Community Infrastructure Levy and whether the land gets developed. This impacts the levels of housing and infrastructure delivered and attendees told us that often areas with the greatest need for infrastructure do not get it.

We heard examples of LPAs trying to deal with this by taking payments from developers, rather than asking for the infrastructure to be provided directly, and redirecting this to areas that need it most.

Attendees also noted how new requirements, such as the Building Safety Levy and the Nature Recovery Fund, add to their burden, particularly in areas where the money is collected locally but spent elsewhere.

There was a discussion around the lack of cross-government coordination with attendees saying local government departments do not appear to work together. This puts the onus on local areas to bring everyone together.

Attendees said there is a lack of communication from central government, but feel officers are helpful when do they engage.

 

Participants at The MJ/ NAO round table

Helen Hodgson – director, National Audit Office

Sophie McCammond – analyst, National Audit Office

Mark Baigent – corporate director, Redbridge LBC

Simon Cridland – team manager, implementation and infrastructure, Bracknell Forest BC

Richard Marsh – director of place, Mid Devon DC

Jonathan Moore – senior infrastructure officer, Bracknell Forest BC

Dave Tasker – head of community and leisure, Test Valley BC

Nic Thomas – director, planning, Wiltshire Council

Rob Thomas – chief executive, Vale of Glamorgan Council

Paul Marinko – deputy editor, The MJ (chair)

Martin Ford – reporter, The MJ