HAs warned over ‘risky’ reliance on Section 106 as Brexit uncertainty bites

A total of 22,000 new affordable homes were built through Section 106 in the year to 31 March 2018 – 10 per cent of all net new homes in England. Five years ago, Section 106 accounted for four per cent of all homes constructed.

Chris Buckle, Savills’ residential research director, said: “From the end of the last property cycle in 2007/08 we saw a roughly 50 per cent fall in Section 106 affordable housing completions to fewer than 4,000 homes.

“Although we are not predicting a market downturn, the housing market is slowing and this could result in fewer Section 106 affordable housing completions.”

He added: “An important point is that at the time of the last housing market downturn, Section 106 made up a far lower proportion of affordable housing completions (19 per cent in 2007/8) – now it is 53 per cent.”

Savills flagged that housing associations can cut their risk to the cross-subsidy housing model through grant funding. “The more grant, the more countercyclical sub-market rented homes can be built within a development programme,” the report said.

It added: “Longer-term grant funding gives housing associations the opportunity to take a more proactive approach to the land market. Building up a pipeline of land would give the sector more control of future affordable housing supply.”

The property agent also highlighted that councils have a “growing role” in building affordable homes, now the government has scrapped the Housing Revenue Account borrowing cap.

“More partnerships and collaborations with local authorities may be needed in order to link up development capacity in housing associations and the private sector with the funding and land controlled by local authorities,” the report said.