Following the Spending Review earlier this summer, the affordable housing sector has been invigorated by a sense of security, which has allowed us to look more confidently towards future investments and our commitment to tackling the housing crisis. This, in turn, has reopened discussions around Section 106 agreements (S106) and their key role in ensuring that the Government meets its ambitious target of delivering 1.5m new homes this Parliament.
However, the question we should be asking is not ‘when will housing associations (HAs) start bidding for S106 again?’ but rather ‘are the S106 currently on the market suitable for the communities we want to help build?’
S106 has, indeed, historically been one of the main ways of delivering affordable housing across the UK, while also securing significant investment from developers for infrastructure funding, environmental protection, local jobs and training opportunities. HAs have been called upon to support housing delivery targets through S106 and we have effectively answered the call for a long time now, even when conditions weren’t great.
However, as our sector’s finances have been taking repeated hits in the last few years, we have become much more selective in the contracts we are taking on, this resulting in a notable decrease in S106. The Housebuilders Federation (HBF) has reported record figures of 17,400 affordable homes not being under contract at the end of 2024. And more recently flagged that 8,500 homes due in the next 12 months are at risk of not being built or being kept empty because of lack of interest from HAs.
While these figures are alarming, the onus shouldn’t be placed solely on housing associations to get us out of this mess.
Rethinking S106 contracts
I was personally encouraged by the Government’s commitment to tackling the S106 problem and setting up the Clearing Service under Homes England. Despite its low initial take-up (reportedly only 10% of contracts were registered six months after it was launched) this is an essential tool for exploring why S106 contracts are being declined. And while it’s easy to point at HA finances as sole culprit, results so far are pointing towards tenure mix, location, as well as issues with management agreements.
This is something we’ve explored earlier this year, when the G15 launched a guidance document, supported by HAs, local authorities and developers alike. Building Together, Building Better: Rethinking S106 for Affordable Housing Delivery has voiced our concerns over the quality and design of some of the homes acquired through these agreements, as well as the timing in which these are currently being built.
The fact is that, when bidding for these homes, we are often faced with a ‘take it or leave it’ deal, rather than being brought in early on, when we can influence the planning process. Critical factors like the design and quality of properties, the way that places are managed, and the terms of the deals themselves. Building new homes isn’t enough. They must genuinely meet the needs of the people who live in them and be sustainably manageable by housing associations for decades to come.
This means that service charges, which are a major issue residents raise with us, should be affordable, transparent and offer value for money. The development conditions and management arrangements should reflect that commitment, especially considering many HA residents are low-income families, or marginal buyers through shared ownership.
Complex management structures also make for difficult arrangements, with additional costs, and often conflicting standards and priorities amongst the partners. Where possible, HAs prefer to be able to control the whole block of flats, particularly in urban areas, including the homes, communal areas and structure, as a Freeholder or Head Lessee. On larger developments, where that isn’t possible, simple and clear management arrangements must be agreed, with HAs being able to influence control over cost and quality of the service provision.
The G15 report, led by L&Q, talks about early engagement and collaboration as leading principles for any viable S106 agreement. It provides a practical framework for developers going forward to unlock the large volume of affordable housing and details principles around affordability, planning, design and management structures. These need to be seriously considered to make S106 contracts attractive and viable for the sector again.
In the meantime, housing associations are doing it for themselves. We are playing our part in tackling the housing crisis. Together, the G15’s members own or manage more than 770,000 homes across the country and they house around one in ten Londoners. We also build around 15% of all affordable homes across England and, in the last financial year, L&Q was solely responsible for 10% of all affordable housing handovers in London.
Given HAs’ social mission, we respond to residents’ and communities’ genuine needs, which is why we want to build the right type of homes in the right areas. And that is why it is essential that both HAs and local authorities are involved in the planning process early on and transparency is maintained throughout delivery.
Collectively housing associations are the largest providers of affordable housing in the country. However, if we are to reach the ambitious targets the Government has set out, we need partnership structures where we are considered equal, involved early-on and maintain transparency throughout the project.
With over a million people on housing waiting lists, and local authorities spending over £5m every day on temporary accommodation, we urgently need to build together – and build better.