What Is a Section 106 Agreement? A Developer’s Guide

The Role of Section 106 in the Planning System

Section 106 agreement, named after a clause in the Town and Country Planning Act 1990, are legal obligations negotiated between local planning authorities and developers as part of the planning permission process.

They exist to make developments acceptable in planning terms where they would otherwise be refused. In practice, this often means providing affordable housing, paying financial contributions to local infrastructure, or delivering site-specific improvements.

Key elements include:

• Legal agreements tied to the land and enforceable on future owners
• Trigger points based on stages of development or occupation
• Planning obligations tailored to each site’s location, use, and scale

Local authorities typically require that these agreements meet three tests: necessity, direct relevance to the development, and proportionality.

How Section 106 Differs from the Community Infrastructure Levy (CIL)

While both s106 and CIL relate to developer contributions, they function differently and are often misunderstood.

Section 106 agreements are negotiated individually, offering flexibility but requiring careful appraisal. CIL, by contrast, is a fixed tariff charged per square metre under a published charging schedule.

Understanding the differences:

• CIL covers general infrastructure (e.g. roads, schools) and is non-negotiable
• Section 106 is used for site-specific needs (e.g. affordable homes, local bus stops)
• Both can apply to the same site, but double charging for the same item is not permitted
• CIL funds can’t replace obligations already secured via Section 106

Some councils do not charge CIL at all, which places more emphasis on bespoke s106 agreements during planning discussions.

Common Planning Obligations Developers Should Expect

While no two agreements are identical, several obligations appear frequently across residential and mixed-use schemes.

These may include:

• Affordable housing contributions (often onsite, sometimes via commuted sums)
• Transport improvements, including junction upgrades or travel plan measures
• Healthcare and education contributions based on projected population growth
• Open space provision, ecology enhancements, or sports facilities
• Monitoring fees for local authority oversight

Smart developers increasingly use platforms like Zoopla to benchmark local property values and infrastructure contexts, helping estimate likely contribution levels when assessing land opportunities.

Why Section 106 Needs to Be Factored in Early

Treating Section 106 as a post-permission legal task is risky.

From a strategic standpoint, obligations should inform feasibility studies, land valuations and bid pricing. They also affect project phasing, unit mix, and financial modelling.

Development teams can benefit by:

• Reviewing local planning authority infrastructure funding statements
• Engaging early with planning officers and policy teams
• Including s106 assumptions in all early-stage viability models
• Identifying where Vacant Building Credit or other reliefs may apply
• Factoring potential renegotiations into programme timelines

Early integration of s106 into your decision-making process helps prevent costly surprises later and positions your scheme for smoother planning consent.

Implications for Funding and Delivery Strategy

Section 106 obligations extend beyond planning, they shape how a scheme is funded, built, and sold.

For example:

• Lenders and investors assess the financial impact of planning obligations during due diligence.
• Drawdown schedules can be influenced by trigger points such as “payment upon commencement” or “first occupation”.
• Exit strategies may need to account for ongoing obligations transferred to housing associations or future asset managers.
• Variations to legal agreements might be needed if the site is phased, subdivided or subject to ownership changes.

Poorly timed or overly burdensome obligations can stall delivery. Conversely, a well-aligned agreement supports viability, fundability, and long-term success.

Using Market Data to Inform S106 Negotiations

When negotiating obligations, evidence matters.

Tools like Hometrack’s Housing Market Intelligence and Comparables Data help developers back up viability assessments and counter overestimated contribution asks.

Our data helps:

• Benchmark expected affordable housing costs relative to market values
• Model absorption rates to justify reduced obligations
• Support negotiations with planning authorities on deliverability and scheme design
• Test different unit mixes based on affordability thresholds and demand metrics

This evidence-led approach leads to fairer, more realistic agreements and gives both developer and authority a shared basis for decision-making.

Embedding Section 106 Into Early-Stage Viability Modelling

In an environment of rising build costs and tighter lending terms, integrating Section 106 obligations into your viability modelling isn’t optional, it’s essential.

Yet many feasibility appraisals still treat planning contributions as generic allowances, rather than data-informed forecasts tied to location, policy, and scheme type.

What smart developers are doing instead:

• Benchmarking contributions using historic s106 data from similar sites in the same local authority
• Cross-referencing Infrastructure Funding Statements to spot patterns in education, transport or healthcare asks
• Adjusting appraisals dynamically to account for emerging policy shifts, such as changes to affordable housing targets or net gain requirements
• Modelling multiple s106 scenarios, including full obligation, partial relief, or phased delivery, to understand sensitivities

Bringing Section 106 into your earliest financial assumptions helps you avoid overpaying for land, streamlines lender conversations, and prepares you for negotiation with local authorities.

Final Thoughts: Navigating Section 106 With Confidence

Section 106 agreements are no longer a back-office concern, they’re a central part of development strategy.

They shape land bids, scheme design, financial modelling, and project timelines. And increasingly, they influence whether funding is secured and delivery is viable.

At Hometrack, we support developers, lenders and consultants with the tools to understand, model and manage planning obligations effectively.

To learn more about how real-time data can strengthen your strategy around Section 106, explore the Hometrack Data Hub or speak to our team for tailored support.