Could review spell the end of Section 106?

A long-awaited review into the UK’s private rented housing market could spell the end of many council Section 106 agreements, it has been claimed.

The review, carried out by Sir Adrian Montague, chairman of private equity group 3i, is expected to be released next week and was commissioned by the Government to find ways of encouraging investment in the private rented sector.

Reports in the Financial Times this morning suggest it is likely to urge ministers to drop the requirement for developers to build ‘affordable homes’ as part of their planning permission, under Section 106 agreements.

In exchange developers would guarantee new properties would be let rather than sold, so as to increase the number of rental homes on the market.

If the move goes ahead it is likely to have a large impact on the social housing stock in the country and prove unpopular with some councils.

This week the Local Government Association (LGA) slammed the Government for taking a ‘hugely counterproductive’ approach to kickstarting stalled housing projects by encouraging councils to renegotiate Section 106 commitment with developers.

Cllr Mike Jones, chairman of the LGA environment board, said: ‘These [Section 106] agreements ensure developers provide vital infrastructure for local communities, from roads and street lighting to parks and community centres. In most cases, negotiating away benefits is not the answer to stalled development

‘Lack of liquidity in the finance market and limited availability of mortgages stagnating demand are the real hurdles to viability not the cost of providing much needed Section 106 infrastructure.’

Sir Adrian is expected to make five recommendations aimed at encouraging financial institutions to boost their investments in the sector, increasing the number of rental properties available.

These could also include a call for the Government to make more public sector land available for private rented homes, and for a ‘housing taskforce’ made up of developers to be established to advise ministers.

According to a recent English housing survey by the Department for Communities and Local Government about 3.6m homes are rented in the UK, out of 21.9m homes in total.