What does Section 76 mean for housebuilders and developers in Northern Ireland?

May 3, 2022

850

Northern Ireland’s equivalent to Section 106 planning agreements, Section 76, designed to secure affordable housing in developments are set to become much more frequently used from next year. Chris Bryson of Gravis Planning and Drew Nesbitt of Wilson Nesbitt examine the likely impact

This year marks 30 years since the start of Section 106 in England and Wales. It’s now a firm part of how development and planning take place and it’s hard to imagine the planning process without Section 106 discussions. Its equivalent in Northern Ireland, Section 76, is 23 years younger and less frequently used, but that is about to change next year.

Following the preparation of new Local Development Plans across all of its 11 boroughs, Northern Ireland will experience a substantial increase in the use of Section 76 agreements, coinciding with the maturing of Northern Ireland’s development market.

The emerging policies in the new Local Development Plans will mean that all housing development schemes of a certain size will need a planning agreement that adheres to affordable housing policy requirements. This considerable change will likely bring teething problems but it is essential to ensure continued local economic success.

Once in place, Northern Ireland’s housing market could experience a significant impact, potentially even up to a 20% increase on existing schemes and costs, leaving many developers having to decide who takes the hit of the costs, them or homebuyers?

It may also become a double-edged sword for homebuyers, with first-time buyers, key workers and low-income families predicted to reap its benefits, and other homebuyers absorbing the predicted house price increase.

How will Section 76 work in practice?

Once the policy is fully implemented, each council will set their own requirements and thresholds, but they will likely work in a similar way to Belfast City Council, which is adhering to the HOU5 policy.

Belfast’s threshold is that developments with over five units will need a planning agreement where 20% of those houses offer affordable housing options, giving more opportunities to first-time buyers, key workers and low-income families. The HOU5 policy also outlines that affordable housing will be secured by way of a Section 76 agreement, which should be in place in advance of planning permission being granted.

While some larger housebuilders and developers may be used to some financial commitment to the local government, the real pressure will be added to the smaller and medium-sized developers as they may have not previously had to consider affordable housing costs or financial pushback from the local council.

When is the change officially coming into place?

While the change doesn’t come fully into effect until 2023, some developers are already experiencing pushback from the local council due to Section 76, especially in Belfast, where the council are operating Section 76 as a draft policy.

This is why it’s vital for any housebuilder or developer of any residential scheme to be aware of the changes so that they can meet the new requirements, factor in additional costs and plan accordingly, as even those just in the process of either planning or submitting from here on in are likely to be assessed against new affordable housing policies and the need for Section 76 agreements.

In fact, we’re already witnessing cases of housing developers who have been forced to reconsider their plans to be in line with affordable housing policies and meet Section 76 requirements, despite their planning applications being well advanced. The result of this has left developers facing higher costs, in some cases up to a six-figure increase, and in worst-case scenarios, they’ve chosen to pull out of their plans altogether as a result of this.

This is why it’s important for housebuilders and developers to be conscious of the change, as they may need to revisit their plans if they are due to start developing this year and in the years to come. By factoring in the additional requirements and costs, they will still be able to make the most of the current blossoming opportunities that Northern Ireland has to offer.

Since the pandemic, Northern Ireland has been experiencing a once in a generational opportunity for both businesses and housebuilders. Due to the travel restrictions as a result of coronavirus, young people who finished university in Northern Ireland stayed put and have been encouraged to put their roots down there, establishing their careers, enjoying being close to family and taking advantage of the work-life balance that Northern Ireland boasts.

Unlike previous years, there are now also more than ever more job opportunities available in Northern Ireland, particularly in Belfast, which has welcomed the expansion of global firms such as PwC. Northern Ireland has also been named the number one cybersecurity destination in Europe, with international companies including Black Duck Software, WhiteHat Security, Rapid 7, Proofpoint and Alert Logic establishing operations around the city.

On top of this, the city is experiencing a huge investment from both of Belfast’s major universities, who are planning to revitalise Belfast with student accommodation, making Northern Ireland’s appeal to younger, educated people even more attractive.

Chris Bryson