On Thursday 14 December 2023, Dr. Edward Mitchell will deliver a lecture as part of the flagship Current Legal Problems lecture series, hosted by University College London’s Faculty of Laws.

Dr. Mitchell’s contribution to the lecture series and the accompanying volume will address the role of contract in contemporary town planning processes. Dr. Mitchell will argue that contract has the potential to work in town planning practice to offer administrative efficiency and secure binding commitments from landowners and developers. However, he will also explain that, while contract mechanisms often contribute to the successful performance of planning processes, there are significant gaps in the existing practice.

Interested readers can find more details about Dr Mitchell’s contribution to the lecture series, including booking details, on the Current Legal Problems website.

The Essex Law School Research Visibility Team had the opportunity to interview Dr. Mitchell about his research and his forthcoming contribution to the Current Legal Problems lecture series.

Could you explain, in simple terms, the role of section 106 agreements in the development of land and how they affect residential property development in England?

Certainly, section 106 agreements play a crucial role in shaping residential property development in England. Section 106 agreements are a type of contract used in town planning processes. Local authorities and property developers negotiate these contracts when a developer applies for permission to carry out a property development project. In the context of residential property development, these section 106 agreements operate as a set of contractual rules designed to regulate what developers do when they’re building new housing projects.

Let’s say that a property developer has purchased some land on the edge of Colchester and wants to construct 100 new homes on that land. That developer can’t start building those homes unless it has obtained permission to do so from Colchester City Council. Of course, a development of 100 new homes will increase demand for school places and healthcare services in the local area, as well as placing pressures on transport networks and existing open spaces. Consequently, Colchester City Council will probably not grant planning permission unless the developer agrees to provide or fund improvements to local infrastructure.

The purpose of creating section 106 agreements often relates to this infrastructure provision. These agreements should ensure that new developments benefit local communities in some way and do not place excessive pressure on local infrastructure, like schools, hospitals, transport networks, and so on.

Section 106 agreements seem to play an essential role in shaping the built environment. Could you provide one or two examples of how these agreements impact the places where people live?

There are lots of possible examples! Local authorities and property developers negotiate these agreements for most types of property development activity. For a large project with 1,000 new homes, a local authority may expect a developer to allocate 30% of these homes as ‘affordable’ housing, create substantial public open spaces, provide a site for, and fund the construction of, a new primary school and a community building, and to fund improvements to both the local transport network and local healthcare provision.

On the other hand, for a smaller development of around 15 new homes, a local authority might expect a developer to provide just 4 or 5 affordable homes, a small amount of public open space and a small financial contribution to a community resource (like a contribution to the maintenance of a village hall, or a local public swimming pool).

In other words, for developments big, small and somewhere in between, local authorities seek to use section 106 agreements to secure the delivery of these community benefits. Local authorities and property developers usually work out the details of these community benefits in section 106 agreements, which allows for a negotiated arrangement between the developer and the local authority.

In your research, you mention that the existing methods for affordable housing delivery in England cause instability and tension. Could you explain how these methods operate?

My research took place in the context of an acute shortage of safe, warm and genuinely affordable homes in England.

The Government defines ‘affordable housing’ as residential properties provided to occupants at below-market value, either through discounted sales or discounted rents. Current Government policy requires local authorities to set rules outlining the amount of affordable housing that developers should provide in new housing projects. Local authorities then use section 106 agreements in an attempt to secure the delivery of this affordable housing.

You examine the power dynamics visible in these section 106 agreements. Can you elaborate on how these dynamics influence the outcomes of affordable housing delivery?

My research argues that there is a one-sided power dynamic running through some section 106 agreements. I argue that this dynamic enables property developers to exercise significant control over affordable housing delivery, exacerbating pre-existing problems relating to a shortage of warm, safe and genuinely affordable homes.

This lopsided power dynamic arises because current affordable housing policy relies upon developers providing this affordable housing alongside private market housing in the projects they build. This affordable housing delivery method depends, therefore, on a developer being able to project a profit from a development project. If a developer concludes that providing affordable housing would undermine a project’s profitability, that developer might seek to negotiate a reduction in its affordable housing obligations before signing a section 106 agreement with a local authority.

These negotiations often lead to the creation of highly complex contractual arrangements in section 106 agreements. Moreover, and as noted in various mainstream media outlets, there is evidence suggesting that some developers have sought to manipulate these negotiations to secure significant reductions in the amount of affordable housing that local authorities expect them to deliver.

I argue that these outcomes are an inevitable product of a tendency to prioritise private profit-making over public housing need in current policy relating to affordable housing delivery.

You mentioned the complexity of the contractual arrangements governing affordable housing delivery. Can you share some specific examples of these complexities and how they affect ordinary people’s lives?

I’m interested in the way that any given section 106 agreement can appear to commit a particular property developer to a very specific course of action. For example, a local authority that receives an application from a developer for permission to build 100 new homes might agree to grant planning permission to that developer if that developer promises to provide 30 of those homes as ‘affordable’ housing. This might then lead to the creation of a series of complex clauses in a section 106 agreement, stipulating the deadline by which the developer must provide those affordable homes, and giving the local authority a right to enforce that commitment if the developer fails to fulfil it.

However, my research shows that the ostensibly prescriptive clauses in section 106 agreements relating to affordable housing can sometimes operate as part of a wider and sometimes hidden network of flexible contractual arrangements. My research offers a case study of three inter-linked development projects that illustrates how an intricate network of contractual arrangements can empower developers to choose not just when but also where and how they fulfil their public policy obligations.

Of course, it shouldn’t surprise us that, when local authorities rely on property developers to provide affordable housing, those developers will seek to create outcomes that are favourable to them. But my research provides new perspectives on opportunism and the pursuit of control in town planning processes and shows how developers can create flexibility even amidst highly formal contractual behaviour.

This affects ordinary people’s lives because it disrupts the equitable supply of safe, warm and genuinely affordable housing in our communities.

The government proposes to reform the existing system of developer contributions to the provision of affordable housing and other types of infrastructure in England. Is this reform welcome and could you elaborate on how this change might impact the contractual arrangements in section 106 agreements for affordable housing development?

In its 2020 White Paper, Planning for the Future, the Government proposed to reduce the role of section 106 agreements in town planning processes by implementing a new ‘Infrastructure Levy’. This new Infrastructure Levy will be a mandatory, nationally set land value-based flat rate charge that developers will pay to local authorities during the property development process. The Government has since taken these proposals forward in the Levelling-Up and Regeneration Act 2023, which received Royal Assent on 26 October 2023. The 2023 Act empowers the Secretary of State for Levelling Up, Housing and Communities to make regulations to facilitate the implementation of this levy. While the Secretary of State has not yet exercised this power, the prospect of doing so is an important legislative development.

The Government’s proposals envisage that local authorities will use the proceeds that the levy generates to fund the provision of affordable housing and other types of infrastructure that is needed in their communities. The idea is that this will improve the speed of town planning decision-making and provide both greater certainty and simplicity in town planning processes by removing the scope for negotiation that currently exists in affordable housing delivery.

Some reform of the current system for securing affordable housing does seem necessary given the current shortfall in provision. Research commissioned by the Government suggests that, in some property development settings, the Government’s proposals might generate greater developer contributions to local infrastructure provision and alleviate some of the complex and time-consuming negotiations that the current system causes. However, other town planning stakeholders question whether this proposal will either simplify town planning processes or provide more funding for affordable housing provision.

Moreover, the Government has acknowledged that section 106 agreements will still play an important role in securing developer contributions to community infrastructure needs. I’m interested in exploring this further in my next research project by looking beyond affordable housing to examine the other developer commitments commonly incorporated into section 106 agreements. If there is still a role for section 106 agreements, we need a better understanding of the way the current system operates. I think that we need to get inside the text of section 106 agreements to understand the possibilities that they enable and the problems that they create. By doing this, I think we’ll know more about the appropriateness of the use of contract to secure the delivery of vital public services.