Pressures in the S106 market are yet to fully feed through to completion figures, and still pose a challenge to wider housing delivery.
Last year, our research found that over half of respondents to our survey were seeking to either reduce their requirements for Section 106 (S106) or withdrawing from the market completely. So how has this impacted S106 delivery volumes over the last year and what has been the knock on impact on the wider development pipeline?
The decline in appetite for S106 homes is yet to filter through to new housing delivery, as there was no major fall in S106 volumes in the net additional dwellings figures for the year to March 2024. Just 67 fewer S106 homes were built compared to 2022-24. Despite the headwinds facing the market, 2023-24 actually saw the third highest annual level of S106 delivery of the last decade.
It’s important to note that these figures reflect completions, not starts – so they do not yet capture the recent downturn in S106 acquisition appetite, which is likely to be more visible in future delivery cycles.
The slight drop in delivery follows three years of growth, and given the length and complexity of the development process, we expect the recent decline in appetite to buy S106 homes to impact annual net additional dwellings figures more strongly from next year.
The effect will be seen in both the supply of new affordable homes, and also the supply of housing overall, as developers will be increasing unable to progress to new phases of large sites or secure financing for land deals without a registered provider in place to acquire the affordable portion.
With no intervention, the areas of the country that have historically been able to viably deliver higher proportions of S106 will feel the greatest impact on delivery. In Malvern Hills, Wychavon and Maldon, new S106 supply accounted for over 34% of net additions to dwelling stock in the five years to March 2024, compared to a national average of 11% over the same period.
Although the overall trend has not yet seen strong falls in S106 completions, there are an increasing number of locations where no new S106 homes were built in the last 12 months. 76 LPAs saw no new S106 completions in 23/24, an increase of 13.5% compared to the previous year. These nil delivery locations include Test Valley, West Berkshire, and North Gloucestershire, which have all averaged well above the national average for S106 delivery over the past 5 years.
Without stronger collaboration between developers and registered providers to align what developers are building and what Housing Associations need, as well as a further boost to Housing Associations financial capacity, there is a risk that more locations that have previously been able to make a great contribution to affordable housing supply will face even further disruption.
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