Section 106 exemption ruled unlawful

The High Court has ruled against the government’s policy of exempting developers of small sites from paying affordable housing contributions…

The Department for Communities and Local Government (DCLG) has lost its battle to implement a policy that prevents small developers from paying towards affordable housing. The case, which was brought to the High Court, was ruled unlawful.

The section 106 agreement, which is a mechanism set up to make a development proposal acceptable in planning terms, often includes provision for affordable housing commitments and other schemes aimed at benefiting the local area.

However, in November 2014 the government implemented changes to the National Planning Policy Framework, which meant developers constructing fewer than 10 properties in urban areas and five in rural areas were exempt from paying section 106 agreements.

The policy may have helped the construction sector to build more properties, but it had a detrimental impact on affordable housing provision. Research from the Local Government Association carried out last month revealed the introduction of the policy hindered 80 per cent of councils across England and Wales from building affordable homes.

The challenge to the policy was brought by a cross-party coalition of Labour-led Reading Borough Council and Conservative-controlled West Berkshire Council.

The case was heard by Justice David Holgate, who ruled against the DCLG’s policy. The judge said it was “incompatible” with the Town and Country Planning Act 1990 and the Planning and Compulsory Purchase Act 2004—the latter sets out requirements for councils to adopt local plans.

Justice Holgate said the policy change was not only “unlawful”, he also ruled the consultation on changes to planning policy was “unfair” as not all the information relating to the changes were made available to councils.

He also warned the change to the policy could see a reduction in the amount of land available for affordable housing. Additionally, he said councils might need to submit new local plans to ensure affordable housing shortfalls are met.

Court papers said it was “surprising” ministers had been “silent” on the impact of the policy as they had been told four months before it was implemented that it would result in an annual loss of £693m in developer contributions.

Reading’s Deputy Leader and Lead Councillor for Strategic Environment, Planning and Transport Tony Page said: “There is an acute and increasing need for affordable homes in Reading, which is demonstrated by the fact there are around 10,000 people on our housing waiting list, and the changes to the planning system would have made matters worse.

“The judge’s decision also means an estimated £650,000 per year will be saved for community benefit, including improvements to local roads, schools and playgrounds.”

A spokesperson for the DCLG said: “We are disappointed by the outcome of the judgement and will be seeking permission to appeal against the judge’s decision.

“This will have a disproportionate impact on smaller builders [which] are important in providing homes for local communities.”