The Home Builders Federation today (2 December 2024) released their SME State of Play Report 2024/25, which can be found here.
Key takeaways will be little surprise to a majority of our SME client base, including the challenges of delays, additional regulatory burdens, and extra costs being added into the planning system which are driving many schemes into non-viability.
The Home Builders Federation also endorse an approach that S106 Management have been assisting clients with for several years - namely cascade mechanisms to circumnavigate the current and historic considerable challenges of offloading small numbers of s106 affordable homes on schemes under 10-15 dwellings where registered providers are not interested.
'Home builders are finding it increasingly difficult to fulfil their affordable housing Section 106 (S106) requirements due to a lack of bids from Registered Providers (RPs). Currently, there are tens of thousands of uncontracted S106 units due to a wide range of pressures facing RPs including rising costs, increasing cost of debt and rent caps.'
While the latest crisis is likely a short term issue, SME developers have for many years been finding difficulty in certain areas offloading s106 affordable homes to registered providers, who typically are more interested in larger blocks in single tenure than individual or small numbers of mixed tenure units in more remote locations particularly.
Local plans are often predicated on a 'blanket' approach to affordable housing amount and tenure which does not necessarily consider demand from registered providers, but rather 'need' in a local area. The two do not often match.
More modern plans recognise these challenges through a commuted sum cash contribution calculation approach to sites under 10 dwellings, which is more functional and throws up fewer barriers to quick delivery. Even if, arguably, this conflicts with the NPPF's direction that smaller schemes should not be required to deliver affordable housing.
'It is vital that swift action is taken to support the delivery of these much-needed homes. In the short-term, a key part of this solution could include, but not be limited to, encouraging a greater acceptance of cascade agreements by Local Planning Authorities (LPAs) which could be achieved via a Written Ministerial Statement (WMS) from the Government.'
We have consistently advocated in consultation responses that the government should direct LPA's towards a more blanket cascade mechanism approach to s106 agreement drafting. This would reduce regulatory burden on developers, but also on council planning departments as fewer applications to vary or remove s106 obligations would be made.
Our blog post on cascade mechanisms can be found here.
We likewise suggest that greater use of review mechanisms should be made, combined with cascade mechanisms, to push viability issues out of the planning system and into post-planning matters. This would twin well with cascade mechanisms, reducing delays and costs at the front loaded planning side, allowing SME developers to move forward quickly and more efficiently on sites, while affordable housing delivery would more accurately be based on actual costs and values, rather than attempted predictions far in advance which professionals argue over.
While this sort of pragmatism from central government would assist moving forward, it would take time to filter into the system, and there is a considerable crisis now which is only exacerbating the challenges of the housing crisis.
In the meantime, if proposed or existing affordable housing requirements on smaller sites are proving a challenge for your business, please give us a call to discuss. Solutions can include a full viability challenge of the proposed contribution; or a more pragmatic negotiation of review a cascade mechanisms in a varied s106 agreement to improve deliverability and viability.
