top of page
  • Writer's pictureDan Luxon

The Section 106 Scandal

 

Section 106 is an agreement between a developer and the local authorities that allows for planning and development of affordable housing to be completed in an area where it otherwise would not have been possible to complete, by obtaining concessions and contributions from the developers to the local councils.  

These contributions are often crucial to the sustainability of a site, helping deliver major infrastructure that will be used by occupants of a development. Improving and maintaining infrastructure, developing local community assets, and ensuring an appropriate mix of housing types and tenures all require investment. 

However, there is a problem! While appropriate contributions may have been made by the developer, these funds can remain unspent for years, possibly forever…  


Person holding a broken five pound note.

Property Week analysis (Property Week) of infrastructure funding statements (IFS) for every London council that published statements at the end of the 2019/2020 financial year found that over £900 million of S106 money was not spent and was sitting within local authorities. An investigation in 2019 found that 63% of the money from local developers given to local councils under S106 was not spent on infrastructure or developments, and in London, 40% of S106 payments were unspent.


Breaking it down even further we see that Westminster collected £80.65 million through S106 and CILs, but only spent £47 million. Brent collected £28.9 million and only spent £5.3 million of those funds, and Tower Hamlets collected £65.8 million and only spent £27.3 million (all at the end of the 2019/2020 financial year.)  

This still holds true today, Hounslow IFS for for example during the 2021/22 financial year received £6.509 million from S106 contributions, but spent only £4.18 million. (Hounslow IFS)

The London Borough of Brent in the 2022/2023 IFS, collected contributions of £6.95 million and only spent £4.53 million, leaving over £2.4 million still in the coffers of the council. (Brent IFS)


Barry Jessup, director at the developer First Base stated: “Planning consent is a promise from the developer and local authority to the community… Those are promises that are being made. The developer has no control over whether those promises will be kept when they hand the money over… they (local authorities) absolutely have to be accountable for how the money is spent.

Nicola Gooch, planning partner at Irwin Mitchell is just as critical, stating: “The amount (councils) have got stored up took me by surprise… they have not spent it and they should spend it - it is there to be spent.”

 

Money spilling out of a jar in black and white

There seem to be a number of reasons why this unused money is not spent on its intended purposes, one suggestion being political wrangling. One legal expert claims that the money is being saved for political and voting purposes, as the conservatives don’t wish to spend extra money on affordable housing as ‘poor people will vote Labour.’

Another, perhaps, less flippant reason is simple inefficiency with local authorities beleaguered by staff and fiscal shortages.


Councils however, will suggest that they are saving the money for major projects, such as a new school or a large bridge. A spokesperson for Wandsworth council states that “the nature of major infrastructure programs is that the collection of that funding must be made over a number of years to ensure the necessary money is available to complete projects.” 

Whilst this may be one explanation, it does not justify the amount of money being held by local authorities over the course of many years - Tower Hamlets (at the end of the 2019/2020 financial year) still held £101 million that had not been allocated to anything in its IFS.  

Nicola Gooch further corroborates this as “It’s a reason for not spending, but there doesn’t seem to be a valid reason to not allocate it.”


s106 Reclaim logo

 

How s106 Reclaim can help you. 

s106 Reclaim co-founder James Wood

s106 reclaim has been set up specifically to recover unused contributions from local authorities who have not spent the money for its intended purpose within the contracted time period. They will help regain that money and return it to the developer or housing association in order for it to become useful for new projects and business objectives.  

s106 reclaim will research and identify the funds that the developers have paid to local authorities which remain unspent, and using that information they will structure and pursue the financial claim which is then directly repaid to the developer.   


Read more about s106 Reclaim here or call James on 07808 08434.




Clarity Development Finance logo

39 views0 comments

Comments


bottom of page