Good news for developers as Pickles cuts Section 106 payments

by Malcolm Jones

10:36 AM, 10th December 2014
About 4 years ago

Good news for developers as Pickles cuts Section 106 payments

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Good news for developers as Pickles cuts Section 106 payments

The government has confirmed that the development of 10 houses or less will be exempt from section 106 affordable housing contributions. (A lower threshold will apply in designated areas, such as National Parks).

Eric Pickles, the Communities Secretary, said “Small builders are being hammered by charges, which have undermined the building industry, cut jobs and forced up the cost of housing. By getting rid of these 5 and 6 figure charges, we will build more homes and help provide more low cost and market housing.

This will also be a massive boost to the self-build and custom build sector. Overnight in many parts of England, it will be cheaper to build an extension, a family annex or just build your own home. Our long term economic plan is to help hard working people”

It is estimated that on average Section 106 charges are £15,000 per Home. Thus a developer will now save £150,000 for a 10 house development. It is estimated by the National Housebuilding Council that the number of small and medium sized builders have halved from 6,167 in 1997 to 2,832 in 2012. These savings should allow a number of new developments, that were previously considered too marginal, to proceed in the New Year.

It is hoped that this initiative, along with the increased availability of funds for developers will see an increase in the level of new homes in 2015.section 106

If any reader needs access to the finance that might be required to complete such developments please just complete the contact form below and we would love to be able to help.

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Comments

Mark Alexander

11:34 AM, 10th December 2014
About 4 years ago

I am sure this news will be most welcome to small developers.

I wonder how the decision was made to cut off at 10 properties though?
.

Neil Patterson

8:42 AM, 11th December 2014
About 4 years ago

I suppose anything that assists developers and the housing crisis is better than nothing.

Jiten Karia

10:12 AM, 11th December 2014
About 4 years ago

Thanks Malcolm

The is helpful and indeed good news. Have a question for you on the above please, could you elaborate on "increased availability of funds for developers"

Thanks

Brooklands Commercial Finance

10:26 AM, 11th December 2014
About 4 years ago

Jiten

Since the beginning of 2014 the various development lenders, including the high street banks and specialist lenders have shown a far greater appetite for lending to developers. This is demonstrated in terms of the rates they are offering, the loan to costs and the geographical locations that they will lend to.

matchmade

10:37 AM, 11th December 2014
About 4 years ago

Unfortunately this exemption has two problems:

1) It does not apply to the Community Infrastructure Levy, which will be introduced by many local authorities on 1 April 2015. This gives small builders only 3-4 months to make their small-site applications if they want to benefit from the exemption. In my local authority area, the S106 tax will be replaced by a flat-rate CIL charge of £365/m2 of floorspace. Garages will be charged at the same rate as regular living accommodation. Large extensions over 100m2 will also be charged for the first time, which will add a minimum of £36,500 to the cost.

So a nice-sized 4-bedroom house with a single integral garage, with a floorspace of say 175m2 (1850 ft2) will see its infrastructure tax rise from around £19,000 under S106 to £63,875 under CIL. This is for a house worth maybe £500K. Small developers are going to be crucified by CIL.

2) My nearest local authority is going to claim that the exemption of S106 does not apply to them because even though you pay £x towards education, £x towards playgrounds and parks and so on, the council has fully costed everything and therefore these are "charges", not a "tariff", which is the terminology used by the DCLG.

So an application I am just going to make for six houses will still be charged S106, and it is up to me to take the council to court, with all the potential costs and risk of having to pay the council's legal bill as well as my own if I lose.

Also, note the small site exemption applies to less than 10 houses and less than 1000m2 Gross Internal Area.

Yvonne B.

12:16 PM, 11th December 2014
About 4 years ago

I applied for planning on 18x1 bed flats, just less than 1000sq mtrs. Just what we need, small affordable homes for single people.
Council want well over 100k for section 106 & CIL, this is in the North - no money in doing the project now - so delayed for over 18 months so far with the wrangling.
No wonder nobody is building!


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