Section 106 agreements, the Community Infrastructure Levy (CIL) and the new Infrastructure Levy are all similar in that they impose additional conditions on the developer, linked to planning permission. The new ‘Infrastructure Levy’, which was announced in the Levelling-up and Regeneration Bill (May 2022), is intended to broadly replace both Section 106 agreements and the Community Infrastructure Levy.
What is a Section 106 Agreement?
Section 106 has been around the longest and allows local authorities to enter into legally binding agreements with the developer. Since the CIL was introduced, Section 106 agreements have been in decline.
How is a Section 106 agreement different from a planning condition?
Planning conditions, contained within the planning permission, are limited in what they can request from the developer. A Section 106 gives the opportunity for the local authority to create additional obligations on the developer. These obligations can often involve a financial contribution to local infrastructure, affordable housing or community buildings.
However, this doesn’t give the Local Authority free rein to make unreasonable or unrelated demands. The intention is to make the proposed development acceptable and the obligations should be proportional and relevant to the development.
What’s the difference between Section 106, CIL and the new Infrastructure Levy?
- A Section 106 Agreement is bespoke and negotiated. Section 106 contributions can be used for a number of purposes, including schools, clinics, or affordable housing.
- The Community Infrastructure Levy is a financial obligation, based on a published tariff schedule and based on the square footage of a development. The advantage of this for both developers and local authorities is that it gives more cost certainty and reduces ambiguity.
- The new Infrastructure Levy will be very similar to the CIL, but critically, it will be linked to the value of developments as opposed to square footage.
Is Section 106 still used?
The Levelling-up and Regeneration Bill was introduced in May 2022. It sets out the government’s intention to largely replace section 106 and the Community infrastructure Levy (CIL) with a new Infrastructure Levy for affordable housing and infrastructure.
Where a section 106 agreement is bespoke, site specific and negotiated between the developer and local authority, the new Infrastructure Levy is expected to be non-negotiable, and the rate of financial contribution would be set in pre-defined charging schedules. The rates are expected to be in relation the percentage of gross development value when sold and also in relation to local circumstances.
One benefit of the proposed Infrastructure Levy is that is it should create more cost certainty for developers and local authorities and reduce delays in the planning process.
Will Section 106 continue to exist?
The government have not ruled out the use of Section 106 entirely, and said that it may still be used for the largest developments or to deliver certain types of infrastructure.
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