The public doesn't really know what a section 106 agreement is. If it did there'd be trouble, especially now it is used for all manner of community largesse
Call it what you like, this lark sounds to me like a bribe. We are told that the price of a knighthood is £2m, and you can get a peerage for £10m. But how much do you have to pay to get planning permission?
The price tag on that new house you bought has a price tag that isn't all it seems. The price includes the cost of a bung, albeit a lawful one. The ordinary bloke in the street and his partner haven't heard of "one-o-six" sweeteners. The landowner has, the developer has, the builder has, the planning people certainly have … but Mr & Mrs homebuyer haven't. But they pay. Go on, ask the everyday homebuyer if he or she has heard of the Town & Country Planning Act 1990 and what has become known as section 106 agreements. This cosy little game puts an average of at least £25,000 on the cost of their home.
A developer approaches a landowner; he reckons he can fit a hundred new dwellings in the space available. Snag is planning permission. Snag, too, is that these planning people are cautious. Local infrastructure may not be able to cope. Those houses might mean that millions have to be added to council tax to pay for a sewage works or whatever. So the idea of section 106 was to give conditional planning permission for bits and bobs associated with the 100 homes. In other words planning permission should come with an obligation to build a pumping station or a roundabout or landscaping.
But not now. Put politely, the 106 agreements have "broadened" to include the provision of amenities further and further away from the fields where those houses are to be built.
So, if you are buying one of those 100 houses, you may also be paying for the builder to build 20 flats or houses for free alongside the 80 for sale. Those 20 will be for rent by a housing association under the banner of social housing. Some call it affordable housing. Of course it is affordable because the 80 buyers have paid for the 20 affordable ones. Nobody told the 80 this, of course; if they did some of them might have given a rude response.
Can you build a sports centre for the use of the whole of a town at the expense of the relatively few people on a new estate?
The broadening of 106 brings a glint to the eyes of local authorities. After all it's exciting to arm wrestle a deal from a developer; in exchange for planning permission can we have a ring road, or maybe a swimming pool (Olympic size, of course), or a sports hall, or new playing fields?
So, is all this a tax, pure and simple? Yes, it is. It is another stealth tax. This time the money goes direct to the local authority by way of building something extra or several extra somethings. The prime cost of building your home is made up of land, of bricks, of carpenters and builders' overheads and profit, plus the costs of building those 20 free units of affordable housing. Instead of the sale price being £200,000 it works out at £200,000 plus the cost of a sports centre. That adds another £25,000.
Section 106 says: "Any person interested in land in the area of a local planning authority may by agreement or otherwise enter into ‘a planning obligation' restricting the development or use of the land in any specified way or require specified operations to be carried out, in, on or over the land, or require the land to be used in any specified way or requiring a sum or sums to be paid to the authority."
Well now, that is all very interesting and it is interpreted broadly by developers and planning people. Are those words wide enough to allow the deals that are going on to get planning? Can you build a sports centre for the use of the whole of a town at the expense of the relatively few people on an estate? Can you add the cost of 20 social housing units to the sale price of 80? Are you lawyers in the planning business comfortable interpreting 106 as widely as that? If you have got it wrong and the word gets out to those 80 buyers there is going to be fun compensating them.
Milton Keynes doesn't get involved in any of this malarkey. Instead it gets a straight £18,000 per dwelling in the form of "roof tax", but let's face it, Milton Keynes has a sports centre the size of Arsenal's ground on every street corner. Rumour has it that all signboards for homes in Milton Keynes will have to publish the sale price: £200,000 plus £18,000 roof tax.
Tony Bingham is a barrister and arbitrator specialising in construction.