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Section 106 (planning obligations) explained

Updated: Dec 9, 2023

Planning obligations, associated with the grant of planning permission, are used to secure affordable housing and other payments or works needed to address the impacts of a development.

This image shows a Section 106 agreement which is used to secure planning obligations, like affordable housing. This type of agreement is usually negotiated between a council and a developer and linked to the grant of planning permission for new development such as housing or commercial buildings.
This image shows a Section 106 agreement which is used to secure planning obligations, like affordable housing. This type of agreement is usually negotiated between a council and a developer and linked to the grant of planning permission for new development such as housing or commercial buildings.

If you are new to planning it is worth reading the following explainer articles about planning applications before you read on so you understand how Section 106 fits into the planning process.

Section 106 - the basics

Planning obligations are to mitigate the impacts of a development. They are usually secured through a legal agreement under Section 106 of the Town and Country Planning Act 1990 which is why they are called Section 106. Section 106 is explained in more detail in national planning practice guidance. Here is a short video providing a very simple overview.

How Section 106 fits in with the planning system

It can be helpful to break down the distinct stages or aspects of developer contributions, when trying to understand how its works, these are:

  1. How requirements are determined

  2. How these requirements are applied to planning applications

  3. How the requirements are monitored and delivered after permission is granted and once a development starts

Section 106 requirements

Section 106 requirements are often highly tailored to a specific site or proposal, but common requirements should be identified in a local plan. A local plan includes policies such as how much affordable housing is expected and whether Section 106 is required to for specific measures.

The combined cost of Section 106 requirements and other policies are taken into account when the local Plan is being prepared. This is to make sure development will still be viable - which means that a developer can pay all these costs and other building costs and make a profit. If these cost can't be met and there is no profit in it a development simply won't happen (see: Viability and Plan Making National - Planning Practice Guidance). If you Google ‘local plan viability assessment’ you will quickly see some examples of local plan viability evidence. Public Practice has produced some viability explainer sheets which might help you understand some of the terms used.

Councils sometimes also prepare a supplementary planning document (SPD) to provide additional guidance on how Section 106 requirements in a local plan will be applied to specific development. Again, if you Google ‘Planning Obligations Supplementary Planning Document' you will see some examples of these.

Applying Section 106 to planning applications

Section 106 is negotiated between the council and developer and can include:

  • Requirements for parts of a development to be used or restricted in certain ways, for example for affordable housing or to be car free in areas with good public transport access.

  • Financial contributions to address the impacts of development – usually limited to those cases where it is not feasible to meet policy requirements on site or to mitigate specific development impacts, for example the carbon emissions from development.

Section 106 can only be used where certain legal tests are met which are that they must be:

  • necessary to make the development acceptable in planning terms;

  • directly related to the development; and

  • fairly and reasonably related in scale and kind to the development.

The development management officer determining the planning application will assess the need for Section 106 planning obligations in each case and identify these in their report. If the application is granted, the legal agreement or undertaking is finalised. This template Section 106 Agreement used by the City of London gives you a sense of the form of these agreements and the sort of things they cover.

The Section 106 agreement will clearly set out what needs to happen - including any payments - and when.

Monitoring and delivering Section 106 after permission is granted

Section 106 agreement will normally require developers to tell the council before they start a development. The council will monitor that planning obligations secured are complied with.

Different authorities have different approaches to the way in which they approach the way CIL and Section 106 and its spend is governed. The Planning Advisory Service (PAS) have identified prioritisation and governance of spend are critical to supporting the delivery of sustainable development and growth. PAS has produced guidance on this subject for Local Authorities with the governance and spend process: Start with the spend in mind.

PAS Developer Contributions

Information about Section 106 secured and any spend is published annually by councils in a document called an Infrastructure Funding Statement. The Planning Advisory Service (PAS) has written guidance on what should be in this statement, see: Infrastructure Funding Statements Guide.

Why work on S106 and CIL

CIL and Section 106 are essential to making development happen and delivering infrastructure and other projects that support communities impacted by growth from development. Your role will contribute to making sure this happens if you work on any part of the developer contribution process.

As explained above, there are different stages of the developer contributions process: how requirements are set (more aligned with preparation of local plans), how they are applied (which is part of determining a planning application) and how they are monitored and delivered post permission once a development starts. These different stages have different challenges and opportunities associated with them, and require different skills.

There is a particular demand for Section 106 and CIL monitoring officers who can work on the post permission stage in councils. For these roles, you need to be numerate, able to navigate legal documents and have good customer service skills. Detective skills to deal with older documents and complex cases can help too. For roles more focused on the ‘spending’ aspect of the role, your project and stakeholder management skills will also come into play as you work with others to ensure spend is in line with any legal requirements and is effective in supporting growth and development.

Learn More

If you are just starting out in a planning role or on a planning project, you can sign up for the Planning in 60 Minutes: A simple guide to town planning (England). The course covers planning applications, local plans, developer contributions (section 106 and CIL) and more.

Ready to work on Section 106 or CIL projects?

Head over to the Work In Planning Job Board to check out the latest opportunities to work on CIL and S106.


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