High Court ruling on Section 106 (S106) affordable housing rules will heighten housing crisis says Federation of Master Builders

A High Court ruling overturning the Government’s policy to exempt small sites from Section 106 (S106) affordable housing rules has come under fire from the Federation of Master Builders (FMB) amid concerns that it will heighten the housing crisis.

West Berkshire and Reading borough councils launched a challenge in January after then-local government secretary Eric Pickles said S106 agreements should not be sought on developments of fewer than 10 properties in urban areas and five properties in rural areas.

At the time, Pickles said S106 charges were a stealth tax that “hammered” small house builders with charges as high as £145,000 on a single property. He claimed that the charges have “undermined the building industry, cut jobs and forced up the cost of housing”.

But following a judicial review, earlier this week, Mr Justice Holgate ruled in favour of the councils, who argued that S106 agreements are needed to provide essential affordable housing and to mitigate the effect of development on local infrastructure, such as highways and schools.

The decision threatens to accentuate the housing crisis, says Brian Berry, chief executive of the Federation of Master Builders “casting a dark cloud on small local builders at just the time when these firms are beginning to show signs of real growth.”

He added: “This decision comes just at the point at which more and more sites are being subject to Community Infrastructure Levy (CIL) charges. Taken together, this will push up demands on small house builders to unprecedented levels.

“Up until only a few years ago, planning guidance contained a national indicative minimum site size threshold of 15 dwellings for affordable contributions. As such, the Government’s decision last year to move back to a ten unit threshold is hardly an unreasonable step. Rather it recognised that the small firms which invariably build out small developments have proportionately higher costs and do not necessarily have the muscle or inclination to challenge local authority demands for affordable housing.

“The likely response is that they will avoid attempting to build on certain sites full stop and because of this, there will be less homes of all description.”

Berry has urged the Government to stand its ground “on the principle of the ten-unit threshold” adding: “It could seek to address reasonable concerns which some local authorities have – for instance, there could be some flexibility allowed to local authorities with a very high proportion of small sites. However, the Government should strongly defend the principle of the exemption – it is not appropriate to impose the same level of obligations applied to large multi-million pound developments to the smallest of developments being brought forward by the smallest firms.”

The move will make smaller developments less viable said David Ramsay, director at JLL in Southampton. He added: “It’s no secret that Britain is in desperate need of more homes, so it is disappointing to hear that smaller builders who make an important contribution to the country’s housing provision are being discouraged from doing so.

“The challenge was brought about as West Berkshire District Council and Reading Borough Council were concerned about the impact the policy would have on affordable housing provision on small sites. However, the ruling means that, in fact, in many areas, developers will be discouraged from bringing smaller developments forward at all as they will not be viable.”

The Department for Communities & Local Government has said that it will challenge the decision.

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