Background to the report

Before starting to construct houses or other buildings, developers must generally apply for planning permission. The Ministry of Housing, Communities & Local Government (MHCLG) sets national policy for the planning system, mainly through the National Planning Policy Framework (NPPF) and accompanying planning practice guidance.

Jump to downloads

Administering the planning system is largely devolved to local planning authorities (LPAs), including preparing local plans, which set out policies and proposals for new development, determining planning applications and enforcing planning obligations.

LPAs can require developers to make financial or other (in-kind) contributions to them as part of the process of granting planning permission. These ‘developer contributions’ ensure the impacts of development are appropriately mitigated, and the right infrastructure is in place to support new development. They can include affordable housing, and infrastructure such as new roads, health facilities, schools and open spaces. There are two main ways an LPA can secure developer contributions.

  • The LPA enters a negotiated Section 106 agreement with developers, requiring them to deliver certain ‘planning obligations’ to make a development acceptable in planning terms.
  • The LPA imposes a Community Infrastructure Levy (CIL) on new development. Developers must pay the CIL if the LPA has chosen to set a charge in its area

Scope of the report

We reported on these elements of the planning system in 2019. We found the developer contributions system was complex and not working effectively to maximise the amounts collected, with developers able to negotiate lower contributions on the grounds of financial viability. MHCLG was introducing some reforms to improve the system’s effectiveness, but acknowledged they would not take effect for several years.

We are returning to this topic now that the current government has chosen not to implement a previously proposed mandatory infrastructure levy which would have largely replaced the current system. It has also made several changes to the planning system to accelerate housebuilding and deliver its commitment to build 1.5 million new homes over this Parliament. This report assesses whether MHCLG is overseeing an effective and efficient system of developer contributions that delivers the intended benefits.

  • Part One sets out how the system works and MHCLG’s oversight of it
  • Part Two examines challenges within the system
  • Part Three assesses MHCLG’s actions to make the system more effective at delivering the intended benefits

Conclusions

Developer contributions support the delivery of vital new infrastructure and affordable housing for local areas, but they have significant limitations. Current policy is not reliably delivering the infrastructure funding required for new developments, even where it may be financially viable to do so.

Additionally LPAs are stretched, both in terms of finances and skills, meaning they are often unable to effectively challenge developers. The number of planners leaving the public sector and the resulting vacancies make these challenges more acute.

While MHCLG has updated the NPPF and targets for housebuilding, it is yet to update financial viability guidance. Issues affecting registered providers are continuing to affect the delivery of affordable homes through Section 106 agreements, although Homes England has implemented a basic coordinating service to try and help improve this.

Asymmetries of skills and resources between LPAs and larger developers, the complexity of financial viability assessments, and a lack of coordinated support from central government, all need to be addressed for these challenges to be overcome. Until they are, we cannot conclude that the current approach represents value for money.

Downloads

Publication details

Press release

View press release (6 Jun 2025)

Related work