Section 106 and Commuted Sums

• When a developer submits a planning application for housing, the number of proposed homes may trigger a need for affordable housing in line with a Council's Core Strategy or Local Plan
• Government guidance states that, in the interests of creating mixed and balanced communities, affordable housing should be provided on-site and integrated with the market housing wherever possible
• Therefore, the main objective of a local authority should be to deliver the affordable homes on-site as part of a new development. However, on some developments this may not be possible and there may be sound planning or housing reasons where off site delivery can be justified and it may be acceptable to take an off-site commuted sum of broadly equivalent value in lieu of part or all of the affordable housing provision on a site
• When this happens the developer must pay the Council money to enable the equivalent affordable housing to be built or provided on another site. This payment is called a commuted sum and it is agreed and secured via a planning obligation under Section 106 of the Town and Country Planning Act 1990 (as amended), commonly known as an S106 Agreement. This is the legal mechanism which makes a development proposal acceptable in planning terms that would not otherwise be  acceptable
• Some community-led housing projects have benefited from commuted sums to fund their development. For example, North Kesteven District Council in Lincolnshire has, in the past, deployed Section 106 monies into Wilsford CLT’s 10 dwelling scheme. The sum was £100,000 and also equalled the site purchase price. The CLT scheme here involved a partnership between the CLT and a housing association, with Homes England grant sitting alongside the local authority contribution

Relevant Resources

Detailed overview of Section 106 Agreements

Guide to Section 106 Agreements in Wales