In the October 2024 Budget, the Government announced an additional £500 million for the Affordable Homes Programme (AHP), aimed at delivering 5,000 new affordable homes. The specifics of this funding will be revealed in the Spring Spending Review, aligning with the Government’s comprehensive Housing Strategy.
We caught up with Phoebe Clark, Senior Associate in our development agency team, who has called for the prompt release of these details to give stakeholders sufficient time to plan and to enhance confidence in achieving the Government’s ambitious housing targets over the next five years.
“Since its inception, the AHP has provided crucial grant funding to support the delivery of numerous homes across England. However, the same grant funding cannot be utilised for the delivery of Section 106 units.
“Historically, Section 106 agreements have been a major contributor to affordable housing, responsible for delivering around 44% via developer contributions. However, the inability to use AHP grants for 106 plots forces Registered Providers (RP) to rely on cash reserves, which at present are limited.
“This financial strain is exacerbated by the need to retrofit existing stock and in some cases to make any required changes in response to Awaab’s Law and the Hackett Review, leaving many Registered Providers struggling to fund the delivery of Section 106 plots.
“Whilst the recent funding boost is welcomed, it has raised some concerns. The Government’s intention to extend the current AHP for another two years does not yet address the current issues and limitations outlined above.
“The lack of clarity is troubling, as it suggests that the status quo will persist for the short term, potentially slowing the delivery of much-needed affordable housing which is, in certain areas, delaying the delivery of newbuild housing.
“A study by the Home Builders Federation in October 2024 found that there were at least 17,432 Section 106 plots with detailed planning remaining uncontracted, with 139 new build sites delayed as a result of this. An ongoing review by Homes England on the delivery of affordable housing through Section 106 agreements, and the implementation of the ‘Clearing Service’, is yet to yield results, but its findings are critical to avoid stagnation in the development sector.
“The Government has also pledged to enhance the planning system by creating 300 new planning roles, although this falls short of one new planner per local authority. Effective planning officers are essential to expedite the approval process and ensure the timely delivery of housing projects; but resource alone will not solve the problem, and the LPA need to consider solutions that will provide confidence in the system and help the wider delivery of homes, such as utilising cascade systems in situations where a delivery partner cannot be found for Section 106 plots.
“Now we’re in a new calendar year, we expect to see the market evolve as parties adapt to the changes proposed by the Government. That said, looking further ahead, optimism generally remains high.
“Our development pipeline remains robust for 2025 of both consented and strategic opportunities. Results of recent tendering of Section 106 opportunities suggests there are still several parties in the market looking to transact. The tendering process amongst the active parties is creating competitive tension and generating strong bids, which is crucial to the delivery and viability of wider development projects.”
