Ministry will also explore the option of bringing RPs together as consortia to pool their buying power
The government has set out more details of its “emergency” plan to ensure the sale of uncontracted section 106 affordable homes alongside measures to make the system more efficient going forward.
Section 106 agreements, which are struck between developers and local councils at the planning stage, are one of the main ways that affordable housing is built in the UK.
However, the system relies on builders being able to find buyers within the registered provider sector. In recent years, demand has declined due to the weakened financial position of the social housing sector, as well as criticisms over the alleged quality of section 106 homes.
Last year, the government took steps to boost the financial position of the registered provider sector and introduced a clearing system for unsold S106, run through Homes England.
However, in a policy paper published by the Ministry of Housing, Communities and Local Government (MHCLG) this week, the government acknowledged that despite a “positive shift”, there were still schemes where developers were unable to secure buyers for affordable homes set out in the original s106 agreement.
The paper said that section 106 had become “synonymous with inefficiency and delay”, recognised the “need to reduce its complexity and minimise negotiation friction”, and set out plans to get the market moving in the short-term and reform the system in the medium-term.
It outlined its intention to “reset” the market, stating that this should involve “improved transparency and consistency of pricing” as well as “greater clarity as to the standards that S106 units must meet”.
Immediate actions to unlock legacy uncontracted section 106 homes included policy guidance setting out the steps expected of local authorities in situations where developers can demonstrate they have “made all reasonable endeavours” to find a buyer but beenm unsuccessful.
MHCLG stressed that this was a “time-limited, emergency measure” and set out a number of conditions that developers have to meet.
Developers must have uploaded the homes onto the Homes England Clearing Service by 1 June 2026 for them to be included in the process. Homes must be live on the service for a period of at least six weeks and must be due for completion on or before 1 December 2027 to be eligible.
“LPAs should seek to avoid tenure renegotiations for uncontracted s106 homes that have received reasonable offers from willing and suitable RP buyers,” said MHCLG, noting that where there was a dispute over whether bids were reasonable, local authorities could seek a third-party view.
When renegotiating section 106, local authorities have been told to seek alternative affordable or discounted tenures in the first instance where possible, before proceeding to private market rent or sale.
MHCLG also told councils to include stipulations that if homes are not completed by 1 December 2027, they should revert to the tenure mix set out in the original section 106.
It said it would provide an update to the policy document in the spring.
Addressing permanent reforms to the system, MHCLG confirmed plans to publish a standardised section 106 agreement, with Town Legal LLP already awarded the contract to draw this up.
It plans to issue a template for medium sites as an initial priority. The template “will set out the foundational elements and clauses expected in the majority of S106 agreements for sites below 50 units”, the department said.
Meanwhile, new guidance will set out the standards expected of S106 homes, an agreed framework for how the sector will collaborate to deliver agreements, and standardise the negotiation of prices across the market.
The guidance will be published before the close of the emergency route to unlock uncontracted or unsold S106 units.
To expand the financial capacity of the sector to buy S106, MHCLG also said it would explore the option of bringing RPs together as consortia to pool their buying power.
Steve Turner, executive director at the Home Builders Federation, said: “The Section 106 cross-subsidy model continues to be responsible for providing around half of the country’s Affordable Homes, but it is reliant on a functioning market for new Affordable Homes of all tenures.
“In recent years the lack of Registered Providers in the market to take on the tenures specified in planning permissions has seen developments stall and much-needed Affordable Homes sitting empty.
“Registered Providers are grappling with financial and regulatory challenges, and so encouraging councils to be more pragmatic in negotiations around the tenure of the affordable housing to be provided is a very positive step that should help unlock housing supply.”
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