Source · Select Committees · Public Accounts Committee
Recommendation 24
24
Accepted
Developers struggling to sell Section 106 affordable homes presents delivery risk
Conclusion
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
Government Response Summary
The government launched the Homes England Clearing Service to connect buyers and sellers of S106 homes and gather data on delivery challenges and is progressing work at pace on a holistic policy package to deal with the legacy problem of existing uncontracted S106 units and prevent the problem recurring.
Government Response
Accepted
HM Government
Accepted
6.1 The government agrees with the Committee’s recommendation. Target implementation date: Spring 2026 6.2 The department recognises the Committee’s concern and is taking steps to robustly diagnose the scale and causes of the build-up of unsold and uncontracted Section 106 (S106) units. Estimates vary, but it is not in dispute that thousands of unsold S106 homes have built up over recent years. This is as a result of the complex interplay between a range of factors ranging from affordable housing providers’ constrained financial capacity to concerns, both perceived and real, about the quality, standard, and price of available Section 106 homes. 6.3 In December 2024, the government launched the Homes England Clearing Service to connect buyers and sellers of S106 homes and gather data on delivery challenges. However, participation has been optional, and uptake limited. 6.4 While there are positive signs of an increasing appetite among affordable housing providers to take on uncontracted and unsold S106 homes post-spending review, there remains a serious problem that must be dealt with. The government is progressing work at pace on a holistic policy package, to be confirmed shortly, that will deal with the legacy problem of existing uncontracted S106 units and also, prevent the problem recurring. Through these measures, the department will deepen its understanding of the underlying issues in the S106 market, with an intention to have a clearer picture in the next few months, as the Committee recommends and lay the foundations for a simpler, more transparent, and more resilient system whilst protecting social and affordable housing delivery.