Unspent developer contributions: Local authority outliers from the national average

Contents

• Background
• Per household analysis
• National overview
• Top 10 councils
• Section 106 contributions
• Community Infrastructure Levy (CIL)
• Council tax bills
• Conclusions and recommendations

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Background

Local authorities require developers to make financial contributions to them via Section 106 agreements and the Community Infrastructure Levy (CIL) as part of the process of granting planning permission. These developer contributions are vital in meeting future demand for services and funding new infrastructure such as schools and health facilities. Furthermore, developer contributions ensure that communities see and feel the benefits of new development in their area, helping to build consent for new housebuilding.

However, previous HBF research estimated that councils hold £8 billion of unspent developer contributions in total, including over £6 billion from Section 106 agreements and almost £2 billion raised through CIL.

The research was based on a Freedom of Information (FOI) survey which received responses from 208 local authorities. Over a quarter of the money is estimated to have been held for longer than five years.

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Per household analysis

The responses to HBF’s FOI request have now been weighted according to the number of households in each local authority area, offering greater insight into which councils hold disproportionately high levels of unspent contributions relative to their size.

While County Councils typically hold the largest sums due to their geographic and population size, the analysis shows that District and Borough Councils often hold more on a per-household basis.

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National overview

On average, local authorities hold unspent developer contributions equivalent to around:

• £210 per household.
• £100 per person.
• 13% of their average council tax bill.

However, this analysis reveals that there are some significant outliers, with certain councils holding far more than the national average. For instance:

• The London Borough of Brent holds £1,517 per household - seven times the national average and equivalent to 100% of the average local council tax bill.
• The Royal Borough of Kensington & Chelsea holds around £1,300 per household, with £88 million held unspent.
• 3 other councils hold around £1,000 per household in unspent contributions.
• Around 45 councils hold at least twice the national average in unspent contributions on a per-household basis.

Therefore, while many councils hold reasonable amounts and will spend their contributions over the coming years, the analysis suggests that some local authorities hold disproportionate amounts and are struggling to spend these sums within appropriate timescales.

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The 10 councils which hold the largest amounts of unspent developer contributions (Section 106 and CIL combined) on a per-household basis are:

Three of the top 10 are in London, where the housing crisis is most acute and there is significant demand for vital infrastructure, particularly Affordable Housing. The other seven councils are in rural areas across different regions of the country and include a mix of unitary, County councils and District councils.

Furthermore, all 10 councils hold at least three times the national average in unspent developer contributions on a per-household basis.

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Section 106 contributions

The vast majority of unspent developer contributions are from Section 106 agreements, with an estimated £6 billion of Section 106 contributions held unspent across the country in total. Section 106 agreements are negotiated between developers and local authorities and can help to make a development ‘acceptable’ in planning terms. The agreements specify contributions that developers will make to mitigate the impact of a specific development.

The five local authorities with the largest amounts of unspent Section 106 contributions on a per-household basis are:

Affordable Housing

Furthermore, an estimated £800 million of Section 106 contributions allocated for Affordable Housing is held unspent across England and Wales in total. This could support the delivery of around 11,000 Affordable Homes (based on Affordable Homes Programme expenditure in Homes England’s Annual Report).

The 5 local authorities with the highest amount of unspent affordable housing contributions per household are:

In Wokingham, where the council is holding £41 million paid for by developers to support the delivery of Affordable Housing in the borough, local house prices are more than 10 times local wage levels. Data released by Wokingham Borough Council showed that in 2022-23, the council spent £680,000 on emergency accommodation for homeless households and a further £200,000 on Temporary Accommodation (WhatDoTheyKnow).

Highways and roads

An estimated £1.1 billion of Section 106 contributions allocated for highways and roads are held unspent. This sum is equivalent to the entire annual Department for Transport capital budget for maintaining the local road network (National Audit Office).

The 5 local authorities with the highest amount of unspent highways and roads contributions per household are:

Schools and education

£2 billion of Section 106 contributions allocated for new and improved schools and educational facilities is held unspent. This could support 126,000 new school places (National School Delivery Cost Benchmarking Report).

The 5 local authorities with the highest amount of unspent schools and education contributions per household are:

The £142 million for schools and educational facilities held by Oxfordshire County Council is by far the largest of any respondent and constitutes around half of the Council’s total unspent contributions. These sums are held unspent even though the Council has itself admitted that in some parts of the county, such as Banbury and Bicester, some schools were required to create extra classes at short notice, and new schools are needed to meet extra demand generated by housing.

Social infrastructure

£873 million in social infrastructure contributions is held unspent. This includes recreation, open spaces and play areas. These unspent sums could fund around 1,000 sports halls and 4,700 community games areas (Sports England).

The top 5 local authorities that hold the most unspent social infrastructure contributions are:

An additional £148.7 million is estimated to be held unspent for health and social care services, an average of £439,000 per council. Furthermore, £1.4 billion is estimated to be either unallocated or allocated to infrastructure that doesn’t fall into any of the above categories.

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Community Infrastructure Levy (CIL)

Almost £2 billion of CIL contributions are also estimated to be held unspent across the country.

CIL is a charge which local authorities can levy on new development. Rather than being negotiated (like Section 106 agreements), CIL is based on a charging schedule and levy rates, which must be published on the local authority’s website. In areas where a CIL schedule has been introduced, the levy is compulsory, and it is estimated that around 160 councils currently have a CIL (Planning).

The five local authorities which hold the most unspent CIL contributions on a per-household basis are:

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Council tax bills

To contextualise these figures, the amounts held per household in each local authority were compared to the average council tax bill for that area. In some areas, the amounts held unspent per household constitute a significant proportion of the average local council tax bill.

Therefore, for some councils, unspent developer contributions sums are equivalent to a significant share of annual council tax revenue.

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Conclusions and recommendations

This analysis has confirmed that some local authorities hold a disproportionate amount of developer contributions relative to their population – with some councils holding up to 7 times the national average on a per-household basis.

Some of the reasons why councils might hold disproportionately high levels of unspent sums include:

• Insufficient staffing and resources within local authorities: Many councils lack sufficient resources and staff to manage, spend and track developer contributions effectively.
• Poor monitoring and auditing: Some authorities fail to maintain clear records of contributions received. For example, it has been reported that West Northamptonshire Council “doesn’t have an overall picture of financial contributions through the community infrastructure levy and Section 106” due to council reorganisation.
• Lack of transparency and accountability: Infrastructure Funding Statements are often obscure and inconsistent, making it more difficult to hold authorities to account.
• Complications in the delivery of infrastructure, such as planning delays and rising costs.

The industry is concerned that a lack of infrastructure delivery by some local authorities leaves residents unsure of the benefits that development has brought to their area and can fuel negative perceptions of house building across the country.

There is an urgent need to address delays in the worst-performing councils and ensure councils are sufficiently resourced to deliver vital infrastructure. HBF’s proposals to mitigate the issue of unspent developer contributions include:

• Infrastructure Funding Statements (IFSs) should outline the reasons why developer contributions have not yet been spent and how long money has been held for. All councils should also provide a publicly available database of their developer contribution funds, as some already do, to increase transparency and ensure effective monitoring and auditing.
• Information on unspent Section 106 and CIL payments, and the length of time monies have been held, should be taken into account when council objections to new planning applications cite concerns over infrastructure pressures.
• Central Government should consider legislative options or stronger guidance to require developers' contributions to be spent by local authorities according to their negotiated purpose and within their agreed time limit.
• Further thought needs to be given as to how local authority planning departments can be placed on a sustainable financial footing. This will help to ensure there are sufficient staff and resources for the monitoring, allocating and overseeing of Section 106 spending.

Ultimately, we hope that more transparency about how developer contributions are monitored and handled by local authorities will increase public understanding of such provision, speed up the delivery of infrastructure projects, and create a more informed, sensible debate about housing supply.