‘Not good enough’ - MHCLG takes aim at registered providers for not buying enough section 106 units

The Ministry of Housing, Communities and Local Government (MHCLG) has criticised registered providers for not buying enough section 106 affordable homes, in response to fresh figures suggesting thousands of homes are at risk of standing empty or not being delivered due to the slowdown.

Around 8,500 affordable homes due to be delivered in the next 12 months are at risk because of a lack of a contract with a registered provider of social housing, according to analysis by the Home Builders Federation (HBF) today.

The body also said more than 700 housing developments have been stalled in the past three years because of registered providers (RPs) stepping back from buying affordable housing units required by local authorities.

In response a spokesperson for MHCLG: ”These figures are not good enough. We are taking decisive action to make affordable homes available to those that desperately need them. 

“We’ve already given housing providers financial stability to help them buy section 106 homes so they are not stood empty – with a new 10-year social rent settlement – and we will get Britain building the 1.5 million homes families across this country need.”

HBF said more than 700 housing developments have been stalled in the past three years because of registered providers (RPs) stepping back from buying affordable housing units required by local authorities.

The figures are likely to deepen concern about the slowdown in the section 106 market. Under this mechanism, housebuilders are required by local authorities to make a percentage of homes in their schemes affordable. The housebuilder typical sells the affordable homes to an RP at a lower rate. This mechanism has in recent years accounted for around four in 10 affordable homes delivered.

However in recent years cash-strapped housing associations have stepped back from doing section 106 deals, with many shifting towards doing their own direct ‘land-led’ development to ensure greater control over projects.

HBF said the ramifications are “wide-ranging and increasingly alarming”.

It said the slowdown is intensifying financial pressure on SME developers, creating uncertainty across the housing delivery pipeline, undermining national housing targets, putting strain on planning departments and reducing the availability of housing of all tenures.

HBF said anecdotal feedback suggests some SME developers are now avoiding sites where RP contracts are not in place or prioritising opportunities that do not carry affordable housing obligations, such as sites of fewer than 10 units.

HBF has called on MHCLG to encourage greater use of pre-agreed “cascade mechanisms” – under which tenures of section 106 homes can be changed or an in-lieu payment accepted – if planned provision cannot be met. HBF also suggested government considers allowing the use of Homes England grant funding on section 106 homes for a time-limited period.

>> See also: ‘Early engagement is essential’ - G15 publishes guide for housebuilders seeking section 106 deals

>>See also: What does the collapse in section 106 demand mean for housing delivery? 

Neil Jefferson, chief executive at the HBF, said: “Against rising affordability pressures and increasing numbers of families living in temporary accommodation, it cannot be that affordable homes are left standing empty.

“While [the] government’s housing announcements have been welcome, as it stands, housing associations are unable to bid and private buyers unable to buy, leaving the housing outlook increasingly uncertain.”

Homes England responded to the slowdown last December by setting up a section 106 “clearing service” to help match buyers and sellers of section 106 affordable homes. MHCLG is encouraging housebuilders, RPs and councils to use the service.

HBF’s findings are based from data obtained from local authorities via requests made under the Freedom of Information Act (FOIA). It found 105 councils had 302 completed section 106 homes unsold, while 84 councils had 2,254 homes not under contract with a registered provider.

Around 228 sites have been delayed or stalled in the past three years due to the absence of a contract with an RP. HBF extrapolated the figures to cover all 317 councils in England and Wales.