On this page 9 sections
- 01What Is a Section 106 Agreement?
- 02What Do Section 106 Agreements Cover?
- 03How Section 106 Negotiations Work
- 04Viability Assessments: When Developers Can't Afford It
- 05Section 106 vs Community Infrastructure Levy (CIL)
- 06Monitoring and Enforcement
- 07Modifying or Discharging S106 Agreements
- 08What Happens to the Money?
- 09Frequently Asked Questions
A Section 106 agreement is a legally binding obligation under the Town and Country Planning Act 1990 that requires developers to make financial contributions or provide infrastructure — typically affordable housing (at the percentage set by the local plan's policies), education, highways, and open space — as a condition of planning permission. Planning obligations agreed and CIL levied in England were valued at an estimated £7.0 billion in 2018/19, two-thirds of it (£4.7 billion) affordable housing, according to the government-commissioned study (the latest national estimate; it measures what was agreed, not what was delivered). If you're a developer, S106 can make or break a project's viability; if you're a homeowner or community member, it's how your area benefits from new development. This guide explains how S106 works, what it pays for, and how it differs from CIL.
What Is a Section 106 Agreement?
What is the difference between S106 and CIL?
Section 106 agreements are negotiated on a case-by-case basis for specific developments, typically requiring site-specific contributions like affordable housing and access roads. CIL (Community Infrastructure Levy) is a fixed-rate charge per square metre of new floor space, set by the council, funding general infrastructure. Both can apply to the same development.
A Section 106 agreement (often shortened to "S106") is a legally binding agreement between a developer and the local planning authority, made under Section 106 of the Town and Country Planning Act 1990.
These agreements require the developer to do certain things — called planning obligations — to make a development acceptable in planning terms. Without these obligations, the planning application would be refused because the development's negative impacts wouldn't be adequately mitigated.
The Legal Tests
Since the Community Infrastructure Levy Regulations 2010 (reg. 122(2)), a planning obligation can only be a reason for granting permission if it meets three legal tests. They must be:
- Necessary to make the development acceptable in planning terms
- Directly related to the development
- Fairly and reasonably related in scale and kind to the development
If a planning obligation fails any of these tests, it cannot lawfully be required. This is important — developers can challenge unreasonable demands, and councils must justify each obligation.
What Do Section 106 Agreements Cover?
Affordable Housing
The single biggest use of S106 agreements. Most local plans require developments above a certain threshold (typically 10+ dwellings) to provide a percentage of affordable housing, set by the local plan's policies, so it varies by area.
Affordable housing can be provided in several ways:
- On-site: Building affordable units as part of the development
- Off-site: Contributing land or building affordable units elsewhere
- Commuted sum: Paying a financial contribution for the council to build affordable housing
The type of affordable housing is also specified:
- Social rent (lowest rents)
- Affordable rent (up to 80% of market rent)
- Shared ownership
- Discounted market sale homes, including First Homes (at least 30% off market value; introduced in 2021). The 2026 NPPF no longer names First Homes: its affordable housing definition covers discounted market sales housing at least 20% below local market value (NPPF Annex B)
Education
New housing generates demand for school places. S106 contributions fund:
- Primary school expansions or new schools
- Secondary school places
- Early years provision
- Special educational needs facilities
Contributions are typically calculated per dwelling based on the expected number of children generated by the development type and size.
Highway Improvements
Increased traffic from new development may require:
- Junction improvements
- New access roads
- Traffic calming measures
- Pedestrian and cycle infrastructure
- Public transport contributions (bus stops, route subsidies)
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Healthcare
The NHS and Clinical Commissioning Groups (now Integrated Care Boards) increasingly request S106 contributions for:
- GP surgery extensions or new premises
- Dental practice capacity
- Mental health services
Open Space and Recreation
Developments must often provide or contribute to:
- Public open space (parks, playing fields)
- Children's play areas
- Allotments
- Sports facilities
- Maintenance funds for these facilities
Other Common Obligations
- Biodiversity offsetting: Where on-site biodiversity net gain isn't achievable
- Employment and training: Local employment targets, apprenticeships during construction
- Travel plans: Measures to encourage sustainable transport
- Public art: Contributions towards public art installations
- Community facilities: Libraries, community centres, places of worship
- Environmental mitigation: Noise barriers, air quality measures, flood prevention
How Section 106 Negotiations Work
The Process
- Policy requirement: The council's local plan sets out what obligations are expected for different types and sizes of development
- Pre-application: Developers discuss likely obligations with the council before submitting
- Application submission: The application is submitted, often with a draft S106 heads of terms
- Consultation: Statutory consultees (highways, education, NHS) request specific contributions
- Negotiation: The developer and council negotiate the specific obligations
- Committee resolution: The planning committee resolves to approve "subject to S106"
- Legal drafting: Solicitors draft the legal agreement
- Signing and completion: All parties sign; planning permission is then issued
The Timeline
S106 negotiations are one of the biggest causes of delay in the planning system. After a committee resolution to approve, it commonly takes 3-6 months (and sometimes over a year) to finalise the legal agreement. During this time, the developer cannot start building.
Who Pays the Legal Costs?
The developer typically pays both sides' legal costs — their own solicitors and the council's legal fees for drafting and negotiating the agreement. Council legal fees are usually £1,000-£5,000 for standard agreements, but can be much more for complex multi-party agreements.
Viability Assessments: When Developers Can't Afford It
One of the most contentious aspects of S106 is the viability assessment. If a developer claims that providing the full policy-compliant S106 obligations would make the development unviable (i.e., unprofitable), they can submit a viability assessment to argue for reduced contributions.
How Viability Works
The developer provides a financial appraisal showing:
- Gross development value (what the completed development is worth)
- Build costs (construction, fees, finance)
- Land value (what the developer paid or expects to pay)
- Developer profit (planning guidance suggests 15-20% of GDV may be a suitable return when testing plan viability: PPG 10-019)
- S106 and CIL costs
If the sums don't add up, the developer argues that some obligations should be reduced — most commonly affordable housing.
Controversy
Viability assessments are widely criticised:
- Developers may inflate costs or deflate values to reduce contributions
- Many assessments are done in private, lacking transparency
- The system allows developers to profit from the affordable housing they don't provide
- Communities feel short-changed when developments offer reduced contributions
The NPPF (August 2026) says development that accords with up-to-date plan policies should be assumed to be viable, and a viability assessment at application stage may be justified where it shows the scheme cannot proceed on a policy-compliant basis, for example because the development or site is materially different from what the plan's viability work assumed, or because circumstances have changed significantly since (NPPF DM5(1)–(2)). The price paid for land is no justification for failing to meet plan policies (DM5(3)).
Section 106 vs Community Infrastructure Levy (CIL)
There's sometimes confusion between S106 and CIL. They serve different purposes:
Section 106
- Negotiable: Terms are agreed case-by-case
- Site-specific: Obligations relate directly to the development's impacts
- No pooling limit (since 1 September 2019): Contributions can be pooled from multiple developments (SI 2019/1103 reg. 11)
- Used for: Affordable housing, site-specific infrastructure, bespoke obligations
Community Infrastructure Levy (CIL)
- Fixed rate: Set in advance by the council's charging schedule
- Generic: Charged per square metre of new development
- Non-negotiable: The rate is the rate (with limited exceptions)
- Used for: General infrastructure — schools, roads, health, open space
Many councils use both S106 and CIL. Typically, CIL funds generic infrastructure while S106 handles affordable housing and site-specific requirements. Some councils haven't adopted CIL and continue to use S106 for everything.
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Monitoring and Enforcement
How Are S106 Obligations Enforced?
A planning obligation is a local land charge (TCPA 1990 s.106(11)) and is enforceable against the person who entered into it and anyone deriving title from them (s.106(3)). This means it binds not just the original developer but anyone who subsequently acquires the land or the development, unless the agreement releases owners who have parted with their interest (s.106(4)).
Councils are responsible for monitoring compliance. Common enforcement mechanisms include:
- Trigger points: Obligations are linked to development milestones (e.g., "before occupation of the 50th dwelling")
- Financial bonds: Developers may be required to deposit money as security
- Injunctions: Any restriction or requirement in a planning obligation is enforceable by injunction (s.106(5))
- Doing the works: If a required operation isn't carried out, the council can enter the land, do the works and recover its reasonable costs, after giving at least 21 days' notice (s.106(6)–(7))
A breach of a S106 is not a "breach of planning control": that term covers only development without permission and breaches of planning conditions (TCPA 1990 s.171A), so enforcement notices are not the route.
Monitoring Fees
Councils increasingly charge monitoring fees to fund the officer time needed to track compliance. Since 1 September 2019 the law expressly allows them, provided the fee is fairly and reasonably related in scale and kind to the development and does not exceed the council's estimate of its monitoring cost (CIL Regulations 2010 reg. 122(2A)).
Modifying or Discharging S106 Agreements
Section 106A: Modification and Discharge
A S106 can be changed at any time by agreement between the council and the people bound by it. Failing agreement, after 5 years the person against whom the obligation is enforceable can apply to the council to have it modified or discharged, and the council decides whether the obligation still serves a useful purpose (TCPA 1990 s.106A).
Common reasons for modification:
- Changed economic conditions making contributions unaffordable
- Infrastructure already provided by other means
- Changes to the development that alter the impact
- Obligations that have become impossible to comply with
Section 106BA: Affordable Housing (Historical)
Between 2013 and 2016, a special provision allowed developers to apply to reduce affordable housing obligations on the grounds of viability. This has now expired, but some applications from this period are still working through the system.
What Happens to the Money?
S106 financial contributions must be spent on the purposes specified in the agreement. Many agreements also set a deadline for spending and require unspent money to be repaid to the developer, sometimes with interest; whether that applies depends on the wording of the agreement.
Councils that receive developer contributions must publish an Infrastructure Funding Statement on their website by 31 December each year (CIL Regulations 2010 reg. 121A), showing:
- How much S106 money was received
- How much was spent
- What it was spent on
- How much is unspent and allocated
- What infrastructure is planned
These statements are public documents — you can check how S106 money is being spent in your area.
Frequently Asked Questions
Does Section 106 apply to small developments?
Most S106 obligations are triggered by developments of 10 or more dwellings (or sites of 0.5 hectares or more). Smaller developments generally don't attract affordable housing obligations, but in Designated Rural Areas local plans may set affordable housing requirements for schemes below the major-development threshold (NPPF HO5(1)(a)(i)).
Can I see the S106 agreement for a development near me?
Yes. S106 agreements are public documents. You can request a copy from the council's planning department. Many councils now publish S106 agreements online alongside the planning application documents.
How much does Section 106 typically cost a developer?
This varies enormously. For a small housing development, S106 costs might be £5,000-£20,000 per dwelling. For major schemes, affordable housing alone can be a large share of the total development (the percentage is set by the local plan), with additional contributions of £10,000-£30,000+ per dwelling for infrastructure.
Can residents influence what S106 money is spent on?
Indirectly, yes. Parish and town councils are consulted during planning applications and can request specific contributions. Community groups can lobby their ward councillors. Neighbourhood plans can also influence how contributions are directed in the local area. If you want to engage more directly, our guide on how to object to a planning application covers how to raise concerns about inadequate S106 provisions during the consultation period.
What's the difference between S106 and CIL?
S106 is negotiable, site-specific, and used mainly for affordable housing and bespoke infrastructure. CIL is a fixed-rate charge per square metre used for general infrastructure. Many councils use both. You may read that S106 cannot fund infrastructure on the council's CIL list. That restriction (regulation 123 of the CIL Regulations) was abolished in England on 1 September 2019 (SI 2019/1103 reg. 11), so the same infrastructure can now be funded by both. Each S106 obligation must still pass the three legal tests in reg. 122(2).
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