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Section 106, Planning Gain and the CIL

A Section 106 agreement requires a developer to make a financial contribution to the community or provide affordable housing or infrastructure as part of obtaining planning permission for a development.

A Section 106 agreement determines what will be paid by a developer to a Local Planning Authority in order to offset the costs of the external effects of a development. For example, if a developer were to build 100 new houses, there would be effects on local schools, roads etc., which the Local Authority would have to deal with. In that situation, there might be a Section 106 agreement as part of the granting of planning permission. The developer might agree to build a percentage of those houses as affordable housing or make a contribution towards the provision of new schools or traffic calming on local roads.

Planning Gain refers to the increase in the value of land which results from planning permission being granted for that land. This increase in land value mainly benefits the owner of the land, but a levy or tax may be applied to divert some of the planning gain to the public sector. Such arrangements are currently negotiated privately between developers and local authorities, and take place under the terms of Section 106 of the Town and Country Planning Act 1990, but this will cease in April 2014.

The Community Infrastructure Levy (CIL) is a new levy that local authorities can choose to charge on new developments in their area. The money can be used to support development by funding infrastructure that the council, local community and neighbourhoods want. From 2014 the CIL will replace Section 106 as the mechanism for securing, for example, the provision of affordable housing as part of a planning application. The intention is that it will result a more transparent process, based on a published charging structure rather than behind-closed-doors negotiation.

This change has been precipitated partly as a result of developers claiming they cannot afford to fulfil their Section 106 obligations in the current financial climate. In relation to Section 106 agreements negotiated in recent years the Government has said 'It is vital that the affordable housing element of Section 106 agreements negotiated during different economic conditions is not allowed to undermine the viability of sites and prevent any construction of new housing. This results in no development, no regeneration and no community benefits at all when agreements are no longer economically viable. The Government estimates that up to 75,000 new homes are currently stalled due to site viability. S106 is an important tool to provide affordable housing and we welcome the flexible approach that many councils have already taken to renegotiating these agreements where necessary'.

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