The government has recently endorsed guidance published by housing sector bodies to improve efficiency and collaboration in the delivery of S106 homes. What are the potential benefits for developers and housing associations alike?
Data published by Inside Housing has indicated that S106 sales (affordable housing provided as a condition of planning approval through section 106 agreements) previously accounted for nearly half of affordable housing completions in the UK. Following an industry survey, it was found that in 2023-24, S106 sales reportedly made up 42% of all affordable housing completions.
However, in more recent years, the challenges facing housing associations have become more acute. Increased costs, balance sheet capacity and issues relating to existing stock – with retrofitting, repairs and maintenance required for current energy efficiency standards, and new compliance frameworks such Awaab's Law – have created competing priorities.
The resulting decline in S106 sales is not surprising. Inside Housing's reported data shows that the percentage of S106 homes comprising annual completions has continued to fall since 2023-24 and is projected to sit at 29% in 2026-27. Reports suggest that some housing associations are focusing on investing in their existing stock instead, whereas others are turning to land-led schemes, which potentially provide them with greater control over aspects such as quality and design of their homes.
As might be expected, challenges to the S106 market potentially impact the delivery of private homes and open market sales as well. Where the delivery of affordable homes is linked to the construction of private homes on developer-led schemes, the decline in S106 also has the potential to hinder the delivery of private homes. Homes England's clearing service, allowing housebuilders to list details of planned affordable homes without a buyer, has seen an increase in listed homes from last year resulting in 5,745 homes being listed as of 3 August 2026 (according to Inside Housing's reports).
Certain government proposals have attempted to unlock this, with a recent announcement outlining plans to enable developers to pay cash in lieu of on-site affordable housing delivery (view our article here: Is cash king? Should the NPPF allow local authorities to accept cash in lieu of affordable housing?). In London, the Mayor of London has introduced an incentive to allow developers a fast-tracked planning application for new housing developments if 20% of the scheme is delivered as affordable housing, down from 35%.
Despite the perceived issues with S106, parts of the industry have remained focused on S106 delivery to try to maintain its status as a viable route of affordable housing delivery. Last year, the G15 of London's largest housing associations published their 'Building Together, Building Better: Rethinking S106 for Affordable Housing Delivery' (G15 publishes guidance for developers on S106 - G15) in April in a bid to encourage increased efficiency in S106 delivery through engagement and collaboration between housebuilders and housing associations.
Following this, the latest affordable housing engagement guidance (available here: Section 106 affordable housing engagement guidance - GOV.UK) can surely be seen as the industry's recognition of the importance of S106 delivery. In endorsing the guidance, the government warned that, without S106, the development pipeline of affordable housing in England is "at risk of contracting sharply".
The new guidance, developed by the National Housing Federation, the Home Builders Federation, the Chartered Institute of Housing, and the Local Government Association, is intended to represent a shared commitment by housebuilders, local authorities and housing associations and includes a statement of collaboration to encourage engagement between them. The guidance reinforces the need for key partners to be engaged at all stages of the process, from the development of local plans informed by housing needs assessments, through to the planning of individual schemes, and to the handover of new homes to housing associations. It sets out suggested topics for discussion, from pre-planning and scheme requirements to maintenance and aftercare, to support such engagement.
Whilst the guidance is non-binding, and acknowledges that collaboration between developers and housing associations already exists in areas of the market, what are the additional benefits that it may bring about?
For developers and housebuilders, it may result in:
- increased predictability when engaging with both local authorities and housing associations;
- clarity over handover arrangements to reduce delays, helping to release any payments due at handover or practical completion at the earliest opportunity;
- industry bodies and a market which are more open to the commercial requirements necessary for the future success of S106 delivery, perhaps creating a more receptive environment for developers and housebuilders to share their perspectives regarding the S106 process and to work with housing associations to overcome these; and
- taking these points above, alongside an improvement in the perceived issues regarding quality and design of some homes, may lead to an increase in S106 sales in future.
For housing associations, the guidance may mean:
- earlier engagement with developers and housebuilders regarding housing associations' needs relating to tenure mix, housing type and design, which may help to successfully support these requirements;
- earlier agreement on mortgagee protection or mortgagee exclusion clauses to support borrowing by housing associations and reduce funding delays;
- aligned expectations on design and quality may help with meeting the housing association's specific requirements and specification for the homes, the needs of residents as well as assessing long-term affordability of the scheme; and
- clarity around handover and aftercare arrangements may reduce delays to occupation and may help to identify any snagging issues sooner.
The reported decline in S106 sales highlights that S106 has clearly fallen out of favour in some areas of the market. There appear to be a number of factors at play which may be contributing to the decreasing numbers.
The new guidance comes at a time where S106 sales are projected to continue falling, but it will hopefully turn the housing industry's attention to S106 delivery once more and encourage some developing solutions to the perceived issues with S106.
At its core, the new guidance restates the importance of the S106 system and how cross-sector collaboration is vital to affordable housing delivery. Whether it will prompt any shifts in the S106 market in the near future remains to be seen, but the collaboration of major industry bodies in publishing the guidance, as well as the government endorsement it has received, is surely a vote of confidence for the S106 market and its significance to the industry.
