Section 106 Estates Tax

Home owners are subsidising infrastructure provision in their local authority area. How?

Section 106 of the Town and Country planning act allows developers to contribute to local infrastructure where planning permission would otherwise have to be refused. The original intention was to facilitate development of more new homes and provide road improvements, school places, affordable homes and leisure facilities for the new population. In recent years local planners have been using section 106 to provide more and more local infrastructure, arguably not always of direct benefit to the development under question. It is being used almost as legalised bribery to extract as much cash as possible from the big house builders.

It is acknowledged that the commercial house builders are driven by profit and shareholder value, so they are going to do everything they can to retain their profit margins including:

  • Cost cutting on home quality.
  • Cramming as many houses as they can onto the development.
  • Skimping on estate amenities preparation.
  • Not offering estate grounds/amenities/roads up for adoption.
  • Implementing the private estate model with unregulated management companies we all know and love!
  • Unjustifiable sale of leasehold houses with onerous ground rents and onward sale of their freeholds to offshore investors.
  • Not providing affordable homes via commercial viability assessments.

Home buyers on these estates are therefore purchasing a sub standard home on a sub standard estate and pay unregulated estate charges – effectively a private tax. There is no doubt that future saleability and value of these homes will be affected.

For leasehold houses with high ground rents and doubling clauses, the homes are unsaleable right now.

A HorNet member has researched the topic, and if you are interested, there are links in this document to articles about section 106 use and its damaging effects: S106 Articles Links

The bottom line is that we, the new home buyers, are getting a raw deal as a direct result of the way local planners are utilising section 106.

 

 


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3 Replies to “Section 106 Estates Tax”

  1. While the criticism of developers and their business tactics is correct I think the link to 106 agreements is disingenuous. Of course Councils will seek to obtain the best deal they can. I do not think they are 106 agreements can be blamed for ‘fleeceholds’ however.

    1. In seeking the best deal they can, councils do not have regard for the consequences on the development under question viz poor quality housing and estate structure, and rip off fees for the home owners. We believe the priority should be to ensure the quality of the estate first and then negotiate other infrastructure contributions, which should be well planned and to support the housing on the new development, not the whole local area.
      Not too far from where I live, the council got a £6m road improvement scheme under 106 which turned out to be a total disaster for the nearby bus station, so there is now talk of changing the layout back! In the meantime the estate in question was not adopted.

  2. As far as I can see, by looking at what occurred on my estate, Section 106 Agreements have certainly been used to allow Developers to escape earlier requirements made of them by local councils, i.e. to escape carrying out measures which local councils require, for good reason, of Developers prior to the construction of new estates.

    So with regard to my own estate, the Developer (one of the top five big names) was permitted by the Council to pay the Council £25,000 for including 23 Shared Ownership homes on the estate; and instead of providing a children’s playground; and £21,000 so as to be able to pass responsibility to the Council for the maintenance of an adjacent Public Open Space; and to make up for a lowered amount of Affordable Housing being included in the estate.

    So, clearly, Developers can ignore the initial requirements of Councils regarding the laying out of new estates by simply paying Councils certain sums of money instead.

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