S106 Agreements, Affordable Housing and CILs

In a recent case, the High Court decided in favour of Wealdon District Council costing Stonewater, a registered provider of social housing over a £3m bill for Community Infrastructure Levy (CIL).

The Section 106 Agreement and Planning Permission required that 35% of the 169 homes be affordable housing but instead Stonewater intended to deliver all 169 homes as affordable, making them eligible for CIL relief.

The Council’s refused Stonewater’s application on the basis that it did not accord with the Section 106 Agreement or the Planning Permission. The High Court agreed with the Council and ruled that although a Section 106 Agreement securing the units as affordable was not a requirement for the CIL relief to be granted, it was a material consideration.

It is worth pointing that the Court made it clear that a Section 106 agreement is not a requirement for CIL relief to be granted. Therefore, Councils would only be justified in denying CIL relief if the applicant cannot provide sufficient evidence that the homes will be used as affordable housing units.

In this case, it was concluded that there was no evidence that all the units would be secured for affordable housing use other than the assertion, which was contrary to the Section 106 Agreement and Planning Permission. This was not sufficient.

The Court’s interpretation of the Section 106 Agreements creates a concern for clients and practitioners working on transactions.

At present, registered proprietors and developers operate on the assumption that, absent any specific wording to the contrary, Section 106 Agreements that impose a requirement to provide to a specific percentage or number of affordable housing units, do not also provide, implicitly, a cap on the number of affordable housing units being provided within a given development.

The judgment, therefore, does not appear to mirror common practice, and the effect of such is that Councils could take action against registered providers for voluntarily providing additional affordable units.

Albeit, it is unlikely that the Council would do so, and perhaps a more likely consequence is that Councils may follow the scenario as presented in this case and refuse CIL relief applications unless it has been declared in the Section 106 Agreement and Planning Permission that the voluntary affordable housing units are to be affordable.

Therefore, this interpretation has the potential to cause difficulty for registered providers and developers. However, there are a few steps that can be taken to ensure problems as such are avoided.

For instance, if you are in a position of negotiating the planning documents, you can ensure there is a clear understanding of the number of affordable homes and the units are not restricted so specifically in the planning documents.

If you have any queries and for any advice or assistance please contact our Social Housing Team and we’d be happy to help.

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