Section 106 negotiations can seem like an unassailable monster to councils and now Lord Rooker's Challenge Fund is piling on extra pressure. Housing Today looks at what can be done to persuade developers to build more social housing
In theory, it was simple. Use some empty green fields to provide much-needed affordable housing in London with good transport and employment links to boot. In practice, though, this idea turned to dust like so many others before it, when the local authority and developer failed to agree on exactly what should be done with the site and how much housing, if any, should be affordable. Now the land lies empty, waiting for a decision to be made on its future. The council is angry because the site could have held up to 550 affordable homes. The developer is angry because, as one consultant puts it, the council failed to "speak to them, be flexible about what it wanted or be sensible about what could be provided".

In negotiations over section 106 planning gain agreements on how much affordable housing must be included in a development, relationships between profit-seeking developers and housing-short councils often turn sour. Developers feel they are already providing as much affordable accommodation as they can (see linked story, below) but councils need more. While there are no government targets for social housing provision, most councils are in desperate need. Oxford, for instance, has just set a target of 50% affordable housing in new developments and a further 20% for key-worker housing.

The process of making the deal has a notoriously murky image – meetings behind closed doors, both sides sparring – and so what is supposed to be a round of constructive talks often ends up as a long, messy and acrimonious series of discussions. In the worst cases, negotiations can be abandoned and developments put on hold indefinitely.

The government has recognised the problem and set aside more than £380m for local authorities in July's comprehensive spending review. This will enable them to bring in consultants and negotiators to help when there is a deadlock. Indeed, deputy prime minister John Prescott is so concerned about the situation that he is set to unveil plans to build a series of regional skills centres for local authority planners and engineers at the urban summit in Birmingham next month. It is hoped the centres will bridge the knowledge gap that results in planners not being able to meet housing and brownfield targets.

Westminster's focus on the issue is to be welcomed but does nothing to solve the immediate problem. The government's decision in July to drop the idea of planning tariffs, which would have enabled councils to impose a levy on new developments or insist that some sites be used only for social housing, means councils now need to be more astute when negotiating with developers.

The problems
There are several factors that contribute to the persistent disagreements between planners and developers when they are negotiating issues such as section 106 planning agreements on affordable housing provision. As a rule, says Gareth Capner, senior partner at planning consultant Barton Willmore, local authorities need to "be real, lay their cards on the table and spell out what they want from developers from the outset". This will build up better working relationships.

Negotiation should involve an understanding of what the planning gains will be, and an understanding of what the section 106 agreement entails.

Any housing associations that are going to be involved in the project should also be part of the talks at an early opportunity – ideally from when the developer is chosen – so that they too can see what is being laid out and have their say on whether the development is right or not.

But it's hard to get things to run this smoothly. One London architect who liaises with housing associations entering into development partnerships with councils, says that often planners "talk the talk when it comes to discussing the planning issues, but they won't turn up to planning meetings". She says: "We're almost set up to fail because we're pulling in two directions. The councils assume that housing associations are made of money and they don't accept there is a budget associations have to stick to when they are putting money into new housing. In addition the delay between a planning application being submitted and it getting the go-ahead means the value of the land has gone up in the meantime, so there are strains on the budget."

She recalls a time when the chief executive of a housing association was forced to visit the council's chief planning officer in person because negotiations over building properties were getting nowhere.

Councils often lack the skills and the expertise to negotiate properly. Keith George, director of land for housebuilder Westbury, says: "Some local authorities have a good knowledge base of what to do and how to liaise with developers, whereas others don't have the background knowledge or level of sophistication in their ability to compromise. So negotiations can be completed within a few months, or can take up to two and a half years." Effective negotiation practice should involve all those with an interest in the development, and the various council departments involved should be clear from the start on what they want from the developers and from each other.

Another problem is the frequent inability of council departments to communicate with each other. Given that development plans often involve several departments such as education – which may want a creche facility – health – which may argue for a health centre – as well as housing, developers argue that it is important for all those with a stake in the project to speak to each other about the plans and how they fits in with local needs. There can be unnecessary delays as different departments object to plans because they have had no input in them.

One developer recalls a stark example. "We'd agreed to build 200 extra homes and a brand new college campus in an area of economic decline in the south. But in addition to the development itself the council then asked us for a financial contribution to the education services and the district council asked for 25% affordable housing as well as the agreed 200 homes and the college. The demands nearly stopped the development in its tracks completely because the extra number of affordable homes would have meant less money for the new college." In the end, the developer had to get the city and district council officers together to decide on whether they wanted the extra affordable housing or the college. They chose the latter.

Staff shortages also contribute to the wieldy nature of the planning gain – high turnover results in different planning officers dealing with development proposals. Roger Humber, chairman of Anglia Housing Group, says: "There is a general frustration with understaffing and the high staff turnover and developers could end up speaking to several officers, all of whom have different views."

You may have a vision in the beginning of your development, but then you have to deliver it. That’s when you have to be honest about what’s realistic and what isn’t

Jan Fitzgerald, Sheffield Council

Capner says that when councils are not clear from the start about what they want in terms of affordable housing and other provisions, this plays to developers' advantage: "Local authorities always have a list of wants that are changing," he says. "Councils have to make it clear what they are asking for. If you don't, developers can use the ambiguity to negotiate things their way."

For instance, not specifying whether the council wants 25% of the land on a development to be made into affordable housing, or 25% of the new properties to be affordable, means that it could end up with less than it hoped for.

Meanwhile, councils are often excessively hopeful when it comes to planning gain. One development source says: "Local authorities have to understand that the developer won't necessarily be able to sort out every single transport issue or provide 50% affordable housing for that development."

Combined, these problems lead to wasted time and resources for the council and large financial repercussions for the developers. Most developers work with a consultant team including architects and legal consultants and the longer the negotiations are stalled, the more money it costs the developer. And there is an added danger for the developer who may lose a prospective buyer if planning permission has been granted but there is indefinite delay in the negotiations process.

The solutions
According to Chris Brown, chief executive of development agency Igloo Regeneration, consultants can be a big help. "There are a number of people who can give advice," he says. "The money announced in the comprehensive spending review is a good incentive for authorities to perform better by employing more staff or getting outside help."

Another option is that of sending planners on secondments to development companies so that they get an idea of the other side's needs and the way in which they work. Jan Fitzgerald, service manager at Sheffield council, which works hard to liaise with developers (see "Sheffield does it in public", below), says: "It never does any harm to learn about someone else's sector. It enables people to actually see how the other half work."

Fitzgerald strongly advocates good communication between colleagues so that everyone is clear about what is being proposed from the outset.

She also warns councils not to be "romantic" about what they are asking for, warning: "You may have a vision in the beginning of your development, but then you have to deliver it, and that's when you have to be honest about what is realistic and what isn't."

Where possible councils should have the main points of a section 106 agreement prepared and ready to be submitted with planning application when it goes to committee. Housing and development specialist Roger Humber says: "In an ideal world the local authority should prepare the main point of agreement for a section 106 simultaneously with the planning application when it goes to committee." This saves a lot of time and means that the main points will have already been thrashed out between the parties. If this is not the case, delays are unavoidable.

Transparency
Most experts agree that the process should be more transparent with all interested parties able to attend talks.

As one source puts it: "A forum where both parties are present will open up a two-way process and then associations, consultants and councils can sit down and look at each others' needs. There should also be an internal education process that brings all planners up to speed with current planning legislation."

Laying your cards on the table means negotiations will not become unnecessarily complicated as disputed issues are debated.

Some local authorities have the capability to work well with the private sector. There are those, such as Sheffield, Hammersmith & Fulham, Reading and Basingstoke and Dean, which have managed to build up a good relationship with developers over the years.

Jargon buster

Section 106
A type of planning agreement where approval for a scheme is granted to a development subject to a set of conditions. These conditions may include planning gain: a deal in which the developer agrees to provide a certain amount of social housing or facilities either on the scheme in question or elsewhere. PPG 3 (Third Planning Policy Guidance)
This sets out the government’s policies on all aspects of planning including housing. These policies should be taken into account by regional planning bodies and local planning authorities when they prepare their regional planning guidance and development plans.

Hampshire does it with coordination

Hampshire county council has been innovative this month by approving the appointment of a development contribution coordinator. He or she will lead negotiations on behalf of the whole authority and maximise the level of contributions obtained from developers for the provision of services. The decision to appoint someone was prompted by the fact that the council has not maximised the contribution it could have made from its planning gains because departments that provide a service or infrastructure are not party to the process of securing the contributions. As a result, a development may go ahead without an essential service or infrastructure and facilities may become over-stretched. In addition the council has put together a form for each department that sets out the infrastructure and services for which they are responsible and their individual basis for establishing developer contributions. It will also be sending out a negotiating protocol to each department that sets out step by step the process of how council officers should liaise with developers.

Sheffield does it in public

Sheffield council prides itself on having a good relationship with developers. Service manager Jan Fitzgerald says the council’s procedure when choosing a developer starts with the council using its land strategy to pinpoint the location of the development. It then advertises the scheme in Europe with the proposals. Once a developer is chosen, a housing association will also be picked and the public is consulted, normally for about six weeks. The developer then draws up an application. The time this takes will vary depending on the complexity of the scheme but on average it will be three to six months. The developer decides when a planning application actually goes to the planning committee, but council planners give it an idea of the timetable they have to work to. Both parties meet to discuss the scheme while the application is being drawn up. All departments with an interest in the scheme are consulted on the plans, although the planning department will take a lead on it. The plan then goes to the planning authority and the planning department negotiates with developers about the amount of housing required and the additional services that form a part of the development. Both sides keep in contact as the plans progress, and legal teams will get involved and liaise on behalf of the parties if there is an unresolvable disagreement over details. Finally, a report outlining what schemes will be present on the development will be handed to the planning committee. It can take up to a year for a difficult planning application to get to the planning committee, but it depends on each individual scheme.

Planning by numbers

The Joseph Rowntree Foundation published research in 2001 on the inconsistency and lack of clarity in planning policies. It found that local authorities in the high-demand South tend to take a stricter approach to negotiations with developers on the level of contribution to affordable housing, although they are prepared to negotiate around a target figure. Those in the North, meanwhile, are more ready to accept less or no contributions. Affordable housing is only approved on a minority of development sites. On those sites where it is included, the proportion of low-cost homes varies between 11% in the North-east and 27% in the South-east. However 89% of authorities have an affordable housing plan, which means that these policies are present in local development plans.