Improving local areas through developer funding

The number of local planning authorities with an up-to-date local plan has fallen significantly since 2019. As at February 2025, only 86 LPAs–29% of all the LPAs in England–had adopted a local plan in the past five years. By contrast, in February 2019, 149 LPAs had an up-to-date local plan. This Committee has previously reported on the number of local authorities without an up-to-date local plan, which takes on average seven years to produce. Without an up-to-date local plan, LPAs risk not being able to deliver the new homes needed to meet local demand and may not be able to coordinate the appropriate amount of contributions from development. 2 The Department states that it has provided nearly £30 million to LPAs to speed up local plan production ahead of a new local plan system coming into operation in 2026. It expects a much higher number of LPAs to have an up-to-date local plan by the end of this Parliament. The production and revision of local plans is far too complicated, as it requires a great deal of predictive information which is often inaccurate. recommendation In its Treasury Minute response, the Department should provide the Committee with further details of: a. how it will use its statutory powers to ensure that LPAs produce an up-to-date local plan; and b. if it will examine the local plan making system to make it simpler and shorter, drawing up a revised local plan.

There are additional local planning authorities for whom starting to operate the Community Infrastructure Levy would be both feasible and beneficial. In November 2024, only 52% of all LPAs were operating the CIL. The CIL was intended to make getting contributions from developers fairer, faster, and more certain and transparent. Payment by developers is generally up-front and non-negotiable, and LPAs may spend the monies on infrastructure across the local area, rather than being limited to a specific site. However, the CIL has some limitations, including being resource-intensive and time-consuming to set up, creating a barrier to introduction, and it cannot be used to part fund social housing. There is also often less take-up in areas with lower land value. The Department explains that some LPAs may have delayed introducing the CIL because they were waiting to see the outcome of plans to introduce the previously proposed new infrastructure levy, which would have largely replaced the current system. However, the Department accepts that it would potentially be useful to identify LPAs where CIL ought to be viable but where there are other reasons why it has not been introduced. recommendation The Department should work more proactively with the Planning Advisory Service, to identify LPAs where CIL ought to be viable and encourage wider take-up of the CIL where this is appropriate.

We are unconvinced that the Department is adequately addressing staffing capacity and capability issues within local planning authorities. Research from the sector suggests staffing in LPAs is a serious problem. The Royal Town Planning Institute’s 2023 State of the Profession report found that, in the period 2013–2020, around a quarter 3 of planners left the public sector, while the private sector grew by two-thirds. A 2022 survey by the Local Government Association found that 58% of local authorities in England experienced difficulties in recruiting planning officers. Staffing issues within LPA planning teams are largely due to the working environment, caseloads and pay, and many planners find opportunities in the private sector more attractive. Additionally, the imbalance in capacity and capability between the public and private sector mean that larger developers are generally better resourced with people who have specialist negotiation skills. The Department states that it will provide around £12 million for the recruitment and retention of planners, for a graduate scheme and to encourage more mature professionals with multidisciplinary expertise into LPAs. It also points out that there is a provision in the Planning and Infrastructure Bill that will allow LPAs to set their own planning fees, which should help them improve their staffing and service levels. recommendation Alongside the Treasury Minute, the Department should write to the Committee setting out, in detail, how the Capacity and Capability Programme will improve the pipeline of new planners and help LPAs to retain experienced planners.

Without updated guidance, local planning authorities will still struggle to challenge financial viability assessments submitted by developers and may fail to receive the amount of developer contributions they are entitled to. Viability assessments are an important tool to ensure that sites are financially feasible for developers and to make sure development takes place. However, there is an asymmetry of skills, capacity and resources between LPAs and developers which means that LPAs often struggle to challenge developers’ claims in viability assessments. The Department acknowledges that existing planning practice guidance on viability needs updating, and states that it will publish reforms to the guidance in 2025. The Department promises that the use of late- stage viability reviews will be considered as part of the wider update of viability guidance. recommendation The Department should ensure that its revised guidance on viability balances the need for site-by-site flexibility in negotiations with the need to dissuade developers from gaming the system. The Department should provide an update on its progress in its Treasury Minute response. 4

Given the shortage of social housing, it is unacceptable that unsold homes funded through Section 106 agreements are sitting empty. There is a growing problem of registered providers of social housing (RPs) not buying affordable homes funded by Section 106 agreements. In response, in December 2024, Homes England began the Section 106 Affordable Housing Clearing Service that allows developers to upload details of new homes for which they have been unable to find a buyer, and encourages buyers and sellers to connect. The Department reports that, at the time we took evidence, over 100 local authorities, over 100 developers and nearly 200 RPs had registered for the Clearing Service. The Department also reports that around 800 unsold homes have been listed on the Clearing Service, which is far below the figure of at least 17,000 that exist across the country according to a survey by the Home Builders Federation. The Department accepts that it is unclear why there is such a significant difference in the numbers of unsold affordable homes, and explains that it is engaging with the Home Builders Federation to try to understand better what is going on. recommendation In its Treasury Minute response, the Department should set out how it will diagnose the extent of the Section 106 affordable housing problem more confidently, and how it will ensure the Section 106 Affordable Housing Clearing Service is working much more effectively.

The Department does not facilitate effective communication or the sharing of best practice between stakeholders. Given that developer contributions help to fund a wide range of infrastructure such as schools, health facilities and roads, other government departments have a clear interest in the system. But they have mixed views on the quality and timeliness of communication with the Department. It explains that it is considering establishing a standing forum for government departments to share information, discuss relevant policy updates and identify areas of overlap. LPAs have also expressed a desire for more direct engagement with the Department on planning matters and live issues relating to developer contributions. There is variation across the country in how well local bodies engage with the system and co-operate with each other. Despite the devolved nations having similar systems of developer contributions, and some of the same issues, there is no formal mechanism for the Department to communicate and share best practice across the UK. 5 recommendation In its Treasury Minute response, the Department should provide the Committee with further details of how it will sponsor more effective communication between: government departments that have a stake in developer contributions; local planning authorities and other local bodies; and the devolved nations, to share best practice. 6 1 Systemic problems Introduction

On the basis of a report by the Comptroller and Auditor General, we took evidence from the Ministry of Housing, Communities and Local Government (the Department) on improving local areas in England through developer funding.1

In its written evidence, the National Housing Federation explained that there is very little up-to-date information on the difference between the value of developer contributions that are agreed up front, and how much is subsequently collected. This makes it hard to understand the extent to which developers can negotiate down their contributions.10

We asked the Department why it did not issue stronger guidance to local authorities that IFSs must be delivered on time and in a more consistent form. It told us that, following the publication of the NAO report, the Chief Planner wrote to every LPA to remind them of their statutory obligations regarding the completion of IFSs. The Department explained that the letters also reminded local authorities of the existing template for IFSs, along with good practice examples as identified by the Planning Advisory Service (a Local Government Association body that is funded by the Department).11 Local plans

The Planning and Compulsory Purchase Act 2004 requires LPAs to prepare a local plan, setting strategies for meeting the need for new homes in a local area.12 The NPPF states that a local plan should set out the contributions expected from development, including the levels and types of affordable housing provision required, along with other infrastructure, such as that needed for education, health, transport, flood and water management, and green and digital infrastructure.13

The number of local authorities with up-to-date local plans is declining. As at February 2025, only 86 LPAs–28% of the total of 308 in England– had adopted a local plan in the past five years, while 202–65% of the total–LPAs had plans that were more than five years old.14 This Committee previously reported that, as at December 2018, some 42% of authorities had an up-to-date plan.15 We asked the Department why the situation 8 C&AG’s Report, paras 2.5–2.6 9 Q 37 10 ILA0007 11 Q 38 12 C&AG’s Report, para 1.10 13 C&AG’s Report, para 1.11 14 C&AG’s Report, para 1.13 15 Committee of Public Accounts, Planning and the broken housing market, 103rd Report of Session 2017–19, HC 1744, June 2019, page 5 9 with regard to local plans had not improved over time. It replied that it had given local authorities nearly £30 million to speed up local plan production, ahead of new guidance on plan-making coming into operation in 2026.16

As at February 2025, while 65% of local authorities had a local plan more than five years old, around 7% did not have an adopted local plan at all, and it can take up to seven years to publish one.17 The risks associated with not having an adopted, up-to-date local plan include not delivering the new homes in the right location to meet local demand, and being unable to coordinate the appropriate amount of developer contributions.18

The Department told us it was introducing a new system for plan-making that should be more streamlined, and would involve statutory timelines. Its aim would be for local authorities to be able to complete a plan in 30 months. The Department also told us it was giving additional support to those local authorities who had not started a plan, and in the future it would expect local authorities to feel under departmental pressure to produce a plan. It expressed a hope that a much higher number of local authorities would have an up-to-date plan by the end of the Parliament.19 The plan making system is far too complicated. The government should examine how it could be simplified, requiring less detailed predictive information that may be inaccurate. This change could considerably speed up the local plan making and revision, and increase the number of local authorities able to provide a plan. The Community Infrastructure Levy (CIL)

The CIL was introduced through the Planning Act 2008, which gave LPAs the option to introduce a locally developed charging system. It was intended to make the system fairer, faster, and more certain and transparent. Payment by developers is generally up-front and non-negotiable, and LPAs may spend the monies on infrastructure across the local area, rather than being limited to a specific site. But there is lower take up in areas with lower land values, and it can be expensive and time-consuming to set up, creating a barrier to introduction. In November 2024, only 52% of authorities were operating the CIL.20

Given that it can provide benefits for the local community, we asked the Department why more authorities were not operating the CIL, as only 52% of local authorities operate them. The Department explained that 16 Q 30 17 Q 31; C&AG’s Report, para 1.13 and Figure 4 18 C&AG’s Report, para 1.14 19 Qq 30–32 20 C&AG’s Report, para 1.7 and Figures 1 and 2 10 the CIL is not always an appropriate instrument for LPAs to use, largely because of financial viability issues and the potential for it to disincentivise development in their areas. It also reflected that some LPAs may have paused their plans to introduce the CIL while the previous government considered whether to introduce a new mandatory infrastructure levy. The Department said that, since all authorities now understood that the new levy was not going ahead, more might decide to use the CIL.21

The Department explained that, in 2019, it had helped LPAs by removing pooling restrictions that prevented them from using Section 106 and CIL monies together for local infrastructure.22 We asked whether the Department was aware of areas that would benefit from introducing the CIL but had not yet done so. It replied that it had not carried out such analysis, but that it could potentially be useful to better understand local authorities’ reasons for not introducing the CIL.23 21 Q 22 22 Q 24 23 Qq 28–29 11 2 Stewardship of the system Local planning authority capacity and capability

Research from the sector suggests that staffing in local planning authorities (LPAs) is a serious problem. The Royal Town Planning Institute’s 2023 State of the Profession report found that, in the period 2013–2020, around a quarter of planners left the public sector, while the private sector grew by two-thirds. A 2022 survey by the Local Government Association found that 58% of local authorities in England experienced difficulties in recruiting planning officers. Staffing issues within LPA planning teams are largely due to the working environment, caseloads and pay, and many planners find opportunities in the private sector more attractive.24

There is an imbalance in capacity and capability between the public and private sector. Larger developers are generally better resourced with people who have specialist skills for negotiation.25 In its written evidence, the Chartered Institute of Housing expressed concern that local planning departments across England had faced significant reductions in staffing levels, with reduced capacity causing delays in planning approvals and loss of skills.26 A recent report by the Department found that 97% of planning departments reported planning skills gaps, with around half reporting skills gaps specifically in CIL, Section 106 and viability assessments.27

We challenged the Department on what it was doing to tackle the root causes of LPAs’ staffing problems. It explained that several initiatives were under way, and that it would provide direct funding of around £12 million for the recruitment and retention of planners. It also told us that LPAs were allowed to increase planning fees in 2025, and that the Planning and Infrastructure Bill (which is currently being debated in Parliament) contained provisions that would permit LPAs to set their own fees to 24 C&AG’s Report, paras 2.13–2.14 25 C&AG’s Report, para 2.16 26 ILA0005 27 MHCLG, Local Authority Planning Capacity and Skills Survey 2023, January 2025 12 recover their costs. The Department believes that, in the longer term, this will allow LPAs to properly fund their own planning departments and deliver a much better service.28

The Department subsequently wrote to us with additional information on this topic. It explained that: • Since it began funding the Pathways to Planning programme in 2023, two cohorts of graduates had been placed into LPAs, both of which started in September 2024. There were 87 placements in total, and recruitment for the subsequent intake had attracted over 2,100 applications. • Some 45 experienced professionals had been recruited into LPAs, with a further 80 expected to be placed during 2025–26. • The Planning Capacity and Capability programme was taking forward a programme of support, working with partners across the planning sector to ensure that LPAs had the skills and capacity they needed, modernise local plans, and speed up decision making, including through innovative use of digital planning and software.29 Financial viability assessments

Viability assessments are financial appraisals submitted to LPAs by developers, that establish whether a site is viable by examining whether the value likely to be generated by the development is more than the cost of developing it, including ‘suitable’ profits for developers. Planning practice guidance states that, for the purposes of plan making and for individual negotiations, a profit margin of 15% to 20% may be considered suitable. Developers can submit a viability assessment alongside their planning application.30 The Department wrote to us after the session, stating that it does not hold any analysis or data on LPAs’ use of the profit margin assumption, because it is important for viability judgements to be informed by engagement between the relevant parties and to reflect local circumstances.31

There is an asymmetry of skills, capacity and resources between LPAs and developers that means LPAs often struggle to challenge developers’ claims in viability assessments. Additionally, land values vary significantly across the country, so in some local areas, particularly less affluent areas, developers can argue that sites are not viable. Viability assessments are 28 Qq 44–45 29 Letter from the Permanent Secretary, 9 July 2025 30 C&AG’s Report, paras 2.9, 2.10 31 Letter from the Permanent Secretary, 9 July 2025 13 known to be difficult for LPAs to challenge as they are not transparent, and as a result, LPAs do not know if costs included by developers are realistic and reasonable.32 Sometimes developers will renegotiate their contributions with the LPA in the middle of a development using viability arguments as way to reduce their Section 106 contributions. This should be restricted to exceptional circumstances.

The Department acknowledged that it originally intended to provide LPAs with updated guidance on how to handle financial viability challenges in Spring 2025. However, it explained that advising LPAs on how they should deliver value for local people while also allowing for some degree of local variation was complex, and it therefore now planned to issue the guidance “as soon as possible” in 2025. The Department added that it would include the use of late-stage viability reviews as part of this updated guidance.33 In its letter to us after the session, the Department clarified that it intended to use the guidance to ensure the viability system works to optimise developer contributions, allowing negotiation only where genuinely necessary.34 Unsold Section 106 affordable homes

Developer contributions provided via Section 106 agreements have become an important way to deliver affordable homes in England. In 2023–24, 44% of affordable homes were provided in this way. Developers rely on bids from registered providers of social housing (RPs) to buy the Section 106 affordable homes they deliver, but recently developers have been struggling to sell them. The Department believes this issue is widespread, despite not yet showing up in official statistics.35 This issue represents a risk to the delivery of affordable and social rent homes, and to the government’s aim of increasing overall housing supply. Additionally, developers may use unsold Section 106 affordable housing as a reason to claim financial viability issues on future development sites, as they can claim that what they previously delivered was not needed.36

In its written submission, the Home Builders Federation (HBF) quoted its research which had found that at least 17,000 Section 106 affordable housing units were unsold. It also claimed that the delivery of almost 32 C&AG’s Report, para 2.11 33 Qq 14, 42 34 Letter from the Permanent Secretary, 9 July 2025 35 C&AG’s Report, paras 2.17, 2.18 36 C&AG’s Report, para 2.20 14 100,000 private homes was blocked or delayed, because construction often cannot start on a site until a buyer for the Section 106 affordable homes is found.37

In response to this problem, in December 2024, Homes England (an executive non-departmental body sponsored by the Department) began the Section 106 Affordable Housing Clearing Service that allows developers to upload details of new homes for which they have been unable to find a buyer and encourages buyers and sellers to connect with each other.38 We asked the Department whether it thought the Clearing Service was working. It told us that over 100 local authorities, over 100 developers and nearly 200 RPs had signed up to it, and that around 800 unsold housing units had been listed.39

We challenged the Department on the difference between the number of unsold housing units listed and the much larger numbers that exist across the country according to the HBF. The Department explained that it was in active conversation with the HBF, aiming to better understand the problem and identify whether it might be missing a much more significant issue. It accepted that it needed to work out if it should be approaching the problem in a different way, while also encouraging local authorities, housing associations and developers to become involved in the existing Clearing Service.40 Communication and best practice sharing

Public bodies, including agencies and arms-length bodies sponsored by government departments, who work with local authorities to help deliver health, educational, transport, environmental and other facilities, have a role in the system locally and often make a case for a portion of developer contributions. The Department engages widely with other departments in relation to planning matters. It states that, where developer contributions policy is under consideration, this engagement is targeted towards relevant departments and is proportionate to the level of involvement each department has in the system. But other government departments have mixed views on the quality and timeliness of communication with the Department.41 It told us that it was considering creating a more structured and regular forum for engaging with other government departments on developer contributions.42 37 ILA0004 38 C&AG’s Report, paras 3.9–3.10 39 Q 53 40 Qq 55, 58 41 C&AG’s Report, paras 1.18–1.19 42 Q 35 15

Some LPAs would also like more direct engagement with the Department on developer contributions, housing targets and the planning system more widely.43 We suggested to the Department that one of the problems is the difference in performance between the best and worst authorities. It explained that a core aim of its Planning Capacity and Capability programme is to bring areas up to the standards of the best by making sure they have the professional expertise and experience to properly understand what they are trying to deliver through Section 106 agreements, and to negotiate directly with developers in an effective way.44

We asked the Department whether there were mechanisms to share best practice on themes that are common across other parts of the UK. It explained that fairly regular conversations take place with counterparts in the devolved administrations, but there is no set forum. The Department accepted that it should consider trying to set up such a forum, since there are clearly interesting developments emerging in other parts of the UK that it should consider when formulating policy for England.45 43 C&AG’s Report, para 3.18 44 Qq 63–64 45 Qq 50–51 16