Section 106 and CIL: Managing Planning Obligations

18 May 2026 · 5 min read · Planning

Planning obligations — Section 106 agreements and the Community Infrastructure Levy — can add £50 to £400 per m² to a residential development's cost line. Yet they're frequently treated as a late-stage surprise rather than a modelled cost. For developers, understanding and quantifying planning obligations at appraisal stage is the difference between an accurate residual land value and a costly overpayment for the site.

Section 106 vs CIL: What's the Difference?

Both mechanisms extract financial contributions from development, but they operate differently:

• Section 106 (S106) is a negotiated agreement between the developer and the local planning authority, attached to the planning permission. It is site-specific and can include affordable housing, education contributions, transport improvements, healthcare, open space, and other obligations tailored to the development's impact.
• Community Infrastructure Levy (CIL) is a fixed, non-negotiable charge per m² of new floorspace, set by each local authority in its charging schedule. CIL funds strategic infrastructure (transport, schools, green energy) across the authority area, not project-specific mitigation.

Both can apply to the same development. S106 addresses site-specific impacts; CIL addresses broader cumulative impacts. Crucially, CIL cannot double-count what S106 covers — but both can be substantial.

The Affordable Housing Negotiation

Affordable housing is typically the largest single S106 contribution. Requirements vary by authority:

• London — typically 35–50% affordable housing, subject to the Fast Track Route (if policy-compliant) or Viability Route (if not).
• South East and major cities — typically 25–40%.
• Rural and lower-value areas — typically 20–30%, or nil where viability doesn't support it.

The affordable housing percentage is negotiable, but the negotiation is evidence-based. A robust viability assessment — demonstrating that the policy requirement would make the scheme unviable — can reduce the percentage. But the NPPF's strengthened presumption in favour of development means authorities are under pressure to hold the line. Prepare for a fight, and make sure your viability assessment is bulletproof.

Common S106 Contributions

Beyond affordable housing, typical S106 obligations include:

• Education — per-pupil contributions based on projected child yield from the development. Typically £5,000–£15,000 per primary pupil place and £10,000–£20,000 per secondary place.
• Transport and highways — sustainable travel contributions, highway improvements, car club membership, cycle parking. Range: £500–£5,000 per unit.
• Healthcare — per-resident contributions to local GP capacity. Increasingly common; typically £200–£500 per unit.
• Open space and recreation — on-site provision or off-site commuted sum. £1,000–£3,000 per unit.
• Biodiversity net gain — mandatory 10% BNG from November 2023. On-site delivery, off-site delivery, or statutory biodiversity credits (£42,000 per unit in 2026).
• Carbon offsetting — in London, £95 per tonne of CO₂e over 30 years for any shortfall against the carbon target.

The Viability Escape Valve

Where the full S106 package would render a scheme unviable, the developer can submit a viability assessment demonstrating that the return on development value falls below acceptable thresholds (typically 15–20% profit on cost for residential). If the assessment is accepted, S106 obligations may be reduced.

However, the landscape has shifted:

• Increased scrutiny — local authorities now have dedicated viability officers and access to district valuer support. Optimistic appraisals are routinely rejected.
• Review mechanisms — many S106 agreements now include review clauses that trigger additional contributions if the scheme outperforms the viability assessment at completion.
• NPPF changes — the strengthened presumption in favour of sustainable development makes authorities less inclined to accept reduced obligations, as the default position favours granting consent.

Practical Steps Now

1. Model S106 and CIL in the appraisal from day one — not as a flat contingency, but as itemised cost lines based on the authority's published requirements. Underestimating these is the most common appraisal error we see.
2. Engage with planning before submitting — pre-application discussions should include S106 heads of terms. Understanding the authority's position early avoids surprises at committee.
3. Prepare a viability assessment — even if you intend to meet policy requirements, having a viability assessment prepared demonstrates professionalism and provides a fallback if the authority's demands exceed policy.
4. Check for exemptions and reliefs — first homes exemption, self-build exemption, social housing exemption, and charitable relief can all reduce CIL liability. Many developers miss these.
5. Factor in S106 monitoring fees — authorities now charge monitoring fees (typically 3–5% of the S106 value) for administering the agreement. Include this in the cost plan.
6. Programme for S106 negotiation time — 3–9 months from resolution to grant is typical. During this period, interest accrues on the land acquisition. Include it in the finance cost line.

Sources: Town and Country Planning Act 1990 (S106); Community Infrastructure Levy Regulations 2010 (as amended); NPPF (December 2024); GLA London Plan Affordable Housing and Viability SPG; MHCLG planning obligations guidance (2025); RICS viability assessment guidance; NorthEight project data. This article is for general guidance only and does not constitute planning or legal advice.