Section 106 Agreements Explained

What Section 106 agreements are, how they work, and what developers and homeowners need to know about planning obligations in the UK.

If you are involved in a major planning application - as a developer, landowner, or even a neighbour - you may encounter a Section 106 agreement. These legal agreements are a key mechanism through which new development contributes to local infrastructure and affordable housing. Understanding how they work is important for anyone involved in the planning process.

What Is a Section 106 Agreement?

A Section 106 agreement (also called a "planning obligation" or "S106") is a legally binding agreement between a developer and the local planning authority. It is made under Section 106 of the Town and Country Planning Act 1990.

S106 agreements are used to mitigate the impact of new development on the local area. They require the developer to provide or fund things that are necessary to make the development acceptable in planning terms - things that cannot be secured by planning conditions alone.

What Can Section 106 Cover?

The most common obligations in S106 agreements include:

Affordable Housing

This is the most significant S106 obligation for residential developments. Most local plans require a percentage of new homes on major sites (typically 10+ dwellings) to be affordable. The percentage varies by area - typically 20% to 40% of the total number of homes.

Affordable housing can take several forms:

• Social rent - managed by a housing association at below-market rents
• Affordable rent - up to 80% of market rent
• Shared ownership - part-buy, part-rent
• First Homes - sold at a minimum 30% discount to market price

Education Contributions

New housing generates demand for school places. S106 agreements often require developers to contribute to the cost of expanding existing schools or building new ones. Contributions are calculated based on the number and size of new homes (larger homes generate more children).

Highways and Transport

This can include:

• New or improved road junctions
• Pedestrian and cycle infrastructure
• Public transport improvements (bus stops, service subsidies)
• Travel plans and car club memberships

Open Space and Recreation

Developments may need to provide on-site open space (play areas, parks, sports pitches) or contribute financially to off-site provision. The amount is typically calculated on a per-dwelling basis.

Healthcare

NHS and Integrated Care Board contributions to fund additional GP capacity, mental health services, or other healthcare infrastructure needed to serve the new population.

Other Obligations

• Biodiversity net gain - habitat creation or restoration
• Public art - contributions to public realm improvements
• Employment and skills - local labour agreements, apprenticeship targets
• Carbon offsetting - contributions to local carbon reduction schemes
• Heritage - restoration or preservation of historic assets

How Are S106 Contributions Calculated?

There is no national formula. Each council sets its own requirements based on local plan policies, supplementary planning documents (SPDs), and infrastructure delivery plans. Contributions are negotiated on a site-by-site basis, though many councils publish standard charges as a starting point.

For a typical residential development of 50 homes, S106 contributions might include:

• Affordable housing: 15–20 affordable units (on-site)
• Education: £200,000–£500,000
• Highways: £50,000–£200,000
• Open space: £100,000–£300,000
• Healthcare: £50,000–£150,000

Total S106 costs can represent 20–40% of a development's gross value, making them a critical factor in scheme viability.

S106 vs CIL: What Is the Difference?

The Community Infrastructure Levy (CIL) is a separate charge that some councils levy on new development. While S106 and CIL both fund infrastructure, they work differently:

Many councils use both S106 and CIL. S106 handles site-specific obligations (affordable housing, on-site infrastructure), while CIL funds strategic infrastructure projects.

Viability and Negotiation

S106 obligations are negotiable. If the total cost of obligations would make a development financially unviable, the developer can submit a viability assessment to argue for reduced contributions. This is a common tactic, particularly in areas with high land values or challenging site conditions.

Viability assessments are complex financial appraisals that consider land value, build costs, profit margins, and the cost of all planning obligations. Councils often appoint their own viability consultants to scrutinise the developer's figures.

The negotiation of S106 agreements is one of the main reasons major planning applications can take months longer than the statutory target - legal agreements need to be drafted, negotiated, and signed before planning permission can be issued.

How S106 Affects Homeowners and Small Developers

S106 agreements primarily affect major developments (10+ dwellings). However, they can also apply to:

• Self-build projects - if a self-build site was part of a larger S106-linked development
• Small developments in high-value areas - some councils apply affordable housing requirements to schemes of 5+ or even 1+ dwellings in designated rural areas
• Change of use - commercial to residential conversions of 10+ units may trigger S106

If you are buying a property that was built as part of a larger development, check whether there are any S106 restrictions on the title - such as affordable housing restrictions that limit who can buy or what price can be charged.

Enforcement and Modification

S106 agreements run with the land - they bind not just the developer who signed them, but all subsequent owners. If obligations are not met, the council can take enforcement action.

S106 agreements can be modified or discharged after 5 years by applying to the council. If the council refuses, the developer can appeal to the Planning Inspectorate.

Checking S106 for a Specific Development

S106 agreements are public documents. You can view them by:

• Searching the planning application on your local council's planning portal - the S106 agreement is usually published as a document on the application file
• Requesting a copy from the council's planning department
• Checking the title at the Land Registry

Section 106 agreements are a fundamental part of the UK planning system, ensuring that new development contributes to the infrastructure and services needed to support growing communities. For developers, understanding S106 is essential for project viability. For communities, S106 is the primary mechanism for securing tangible local benefits from new development.