Section 106 Abolished for Self-builders
Section 106 Exemption Confirmed for Self-builders
Homebuilders across the UK can claim a major success with news announced by DCLG on Friday 28 November. People building their own homes will now be exempt from Section 106 payments to local authorities, the Communities Secretary Eric Pickles announced. The exemption, originally announced back in February, will come into force immediately and could affect hundreds of self-builders currently going through the planning process.
More specifically, Paragraph 12 of the NPPG states that contributions should not be sought:
in all areas – from developments of 10-units or less + which have a maximum combined gross floorspace of up to 1000sqm;
in designated rural areas (that is, as described under s157(1) of the Housing Act 1985, including National Parks and AONBs) where the Local Planning Authority (the LPA) chooses to apply a lower threshold – from developments of 5-units or less (no floorspace limit); and / or
from any development involving only the construction of a residential annex or extension to an existing home.
In addition, in a rural area where the LPA applies the lower threshold, affordable housing and tariff-style contributions are to be sought from developments of 6-10 units:
in the form of cash payments / financial contributions;
not as affordable housing units on the site; and
with the payments commuted until after the units within the development have been completed.
The only exception allowed to the 10-unit threshold is where LPAs have chosen to apply the lower threshold already noted – that is, in designated rural areas. The restrictions do not apply to development on Rural Exception Sites, again unless the development consists only of an annex or extension being constructed to an existing home, in which case no contributions are to be sought (Paragraph 13, NPPG).
The 10-unit threshold has been introduced purely in relation to s106 planning obligations – so it does not impact on the definition of ‘major development’ in other planning legislation. Correspondingly, where development takes place under the 5-unit or 10-unit threshold (as appropriate), it is acknowledged that some planning obligations may still be needed for the development to be acceptable in planning terms. So while obligations should not be sought to contribute to affordable housing or pooled funding ‘pots’, LPAs can still require:
Eric Pickles said: "This will also be a massive boost to the self-build and custom-build sector. Overnight in many parts of England, it will be cheaper to build an extension, a family annex or just build your own home.”
Section 106 Agreements are designed to provide financial benefits for the local community from the granting of planning permission and have traditionally been used to extract incentives from developers. They may take the form of new playgrounds, road crossings and even schools, depending on the size of the development. In recent years, however, many one-off self-builders have found that local authorities are demanding a payment under a 106 agreement before granting planning approval – often in the £1,000s. In one case a self-builder was charged £140,000 (in Dorset) to build their own home.
“This is a massive boost for self and custom build in this country,” says Michael Holmes, Chair of the National Custom and Self-build Association, NaCSBA, which campaigned for the exemption. “To effectively tax people wishing simply to provide a home for their family with none of the profit motive enjoyed by developers was always, in our opinion, a misuse of Section 106s. We can expect to see many more self-builds start as a result of this announcement.”
Jason Orme, Editor of Homebuilding & Renovating, the UK's best-selling magazine and website for self-builders, welcomed the announcement, which took place at the Right to Build Summit at the House of Commons on Tuesday November 25th. “In other countries they incentivise people to build their own homes. This exemption will be a major boost to our readers and means that we are back to the position we were in the mid 2000s when self-builders were not taxed. The Government has been a major positive force for anyone wishing to create their own home.”
The exemption for self-builders (and anyone building less than 10 units) will come into force immediately. The call to exempt self-builders from Section 106 campaigned for jointly by NaCSBA and Homebuilding & Renovating.
You can read the full updated Planning Guidance on Section 106s (and point your local authority to it!)