--- title: "The affordable homes rule fuelling Britain’s housebuilding crisis" type: "News" locale: "en" url: "https://longbridge.com/en/news/282189463.md" description: "The decades-old section 106 policy in Britain, designed to boost social housing, is now blamed for hindering the property market. Housebuilders must provide affordable homes to gain planning consent, reducing their profits. Critics argue this has delayed over 45,000 homes and cost builders £1.3bn in the past year. While the government insists on the necessity of affordable homes, many developers face challenges in securing housing associations for these projects, leading to stalled developments and financial strain on smaller builders. The policy's effectiveness is under scrutiny as housing needs grow amid rising costs and taxes." datetime: "2026-04-09T11:51:28.000Z" locales: - [zh-CN](https://longbridge.com/zh-CN/news/282189463.md) - [en](https://longbridge.com/en/news/282189463.md) - [zh-HK](https://longbridge.com/zh-HK/news/282189463.md) --- # The affordable homes rule fuelling Britain’s housebuilding crisis It may have been designed with the best of intentions, but a decades-old policy to boost social housing has been blamed for strangling Britain’s property market. Housebuilders are required by the Government to contribute affordable homes to secure planning consent for new projects. Such homes are built for lower-income families and priced below local market rates, meaning less profit for the housebuilder. Some view the rule, called section 106 of the Town and Country Planning Act, as a vital safety net to offer low-income households a route into the property market. Others fear it is killing off housebuilding across Britain when it is needed most. According to the most pessimistic estimates, affordable housing requirements have delayed more than 45,000 homes across the country. Meanwhile, the Adam Smith Institute, a think tank, estimates that section 106 has cost builders £1.3bn in the past year alone, based on the grants they are losing out on and the cost of building the homes. That is the equivalent of £13,000 for every open-market home built by a private developer. Andrew Dawber, a founding partner of social housing developer Civitas Investment Management and a senior fellow at the think tank, says the system has become a brake on development of all kinds. “Very few houses are getting started, of all descriptions: open market houses, affordable houses,” he adds. Scrutiny of social housing delivery comes at a crucial time for the country as Labour appears increasingly unlikely to deliver on its pledge to build 1.5 million homes by 2030. Despite this, the Government has so far held firm on retaining section 106. A spokesman for the Ministry of Housing, Communities and Local Government said: “We need more affordable homes and section 106 agreements help to get spades in the ground on housing developments, delivering more than 20,000 new affordable homes last year. “We are introducing reforms to improve the section 106 system so it is simpler and more transparent and we can get on and build the homes and infrastructure this country desperately needs.” Its stance has prompted a renewed dispute over whether the policy is doing more harm than good. Sir James Cleverly, the shadow housing secretary, says: “Excessive section 106 requirements, as we have seen in London under Labour, make development unviable. “Angela Rayner’s legacy means similar demands are being imposed across England. It all means less regeneration and less affordable housing as nothing ends up being built.” When councils approve new private housing, it is usually granted on condition of a section 106 deal, requiring builders to provide a certain number of affordable homes on their developments. These are then typically sold to housing associations to operate. However, small housebuilders in particular are struggling to get affordable homes built because they can’t find housing associations willing to take them on. While housing associations are non-profit organisations, their finances are under pressure from capped social rents, limited government grants and rising maintenance costs. One developer, who does not wish to be named, tells The Telegraph that his business has secured permission to build homes in the South West, a quarter of them affordable. The builder has approached 25 housing associations but has not received any responses. This has left the whole site on hold despite years of pouring money into the planning process, leaving tradesmen without work and potential buyers in limbo. James Hodgkinson, a researcher at the Adam Smith Institute, says: “It’s a system that paralyses development and critically, nobody wins.” The boss of another medium-sized housebuilder, who does not wish to be named, describes how his team has had to start several sites without a housing association on board, posing a significant financial threat. “We are getting extremely low offers when we are able to secure a housing association offer,” he says. “This is further denting margins and putting some developments in a loss-making position. He claims this, alongside tax rises and growing policy costs, is pushing smaller housebuilders to “the verge of collapse”. ## A failing model Introduced in 1990 in the final year of Margaret Thatcher’s administration, section 106 rules evolved over the years and were significantly expanded by Tony Blair’s government. At that point, section 106 was viewed as an attractive way to compel the private sector to put more cash into affordable homes. By the time the Conservative-Liberal Democrat coalition came into power in 2010, the rule had become firmly embedded in the planning process. What had once accounted for under 10pc of affordable housing delivery had grown to represent nearly half of all affordable homes built in the UK by the early 2020s, says Dawber. The shift represented a fundamental change in housing policy, moving from direct investment to a system that relies more heavily on the health of the private market. But that dependence, critics argue, has become the problem. With the open market buckling under mounting taxes, high interest rates and soaring build costs in recent years, section 106 is also suffering. Government data published in November show that in 2024-25, 36pc of all new affordable homes delivered in England were bankrolled by section 106, down from 45pc in the previous year and a peak of 51pc in 2019-20. This marked its lowest share since 2014-15. ## How to fix it The Adam Smith Institute believes the rule should be scrapped and replaced with grant funding through Homes England, the Government’s central housing agency. “Section 106 is a lever that could be pulled quite easily and there’s a big amount of housing that would be unlocked,” says Hodgkinson. Emma Ramell, at the Home Builders Federation, says the system is under serious strain but stops short of endorsing abolition. That is despite acknowledging that “the model has increasingly failed” in recent years, which has led to developments stalling and “much-needed affordable homes sitting empty”. Ian McDermott, the chief executive of Peabody and chairman of G15, which acts on behalf of London housing associations, acknowledges that the system “isn’t currently working” but rejects the idea of scrapping it entirely. “The suggestion that section 106 is a tax on development misses both its purpose and its value,” he says, arguing that the policy must be made to “work better” rather than scrapped. For McDermott, the system is faltering because housing associations are asked to buy homes after key decisions are made, increasing costs down the line. He believes closer collaboration between developers and housing associations would ensure such homes are fit for purpose. But Hodgkinson argues a return to the grant model would encourage more private capital into the affordable homes market. “Incentivise developers to build affordable homes where they are needed and where they are most cost-efficient through flat grants,” he says. “We also want to drastically expand the eligibility criteria because developers can and will probably want to build these affordable homes, but private equity or housing associations might also wish to get in on the action.” Labour has shown little appetite for the type of structural overhaul the think tank is proposing, with a stated focus on long-term reform for the section 106 market. But with housing starts at a fraction of what is needed and Labour’s 1.5 million homes pledge looking further out of reach, the pressure to find more levers to pull will not dissipate any time soon. ### Related Stocks - [HUKX.UK](https://longbridge.com/en/quote/HUKX.UK.md) - [HMCX.UK](https://longbridge.com/en/quote/HMCX.UK.md) - [MIDD.UK](https://longbridge.com/en/quote/MIDD.UK.md) - [L100.UK](https://longbridge.com/en/quote/L100.UK.md) ## Related News & Research - [Why are Britons so fed up?](https://longbridge.com/en/news/286206105.md) - [UK bonds claw back losses as Starmer challenger fails to emerge](https://longbridge.com/en/news/286219986.md) - [15:29 ETSunbelt Builders Show® Celebrates 25th Anniversary](https://longbridge.com/en/news/286652671.md) - [These are America’s most ‘overpriced’ housing markets](https://longbridge.com/en/news/286914202.md) - [08:33 ETTruss Financial Group Launches End-to-End Digital HELOC to Unlock Home Equity in Days, Not Weeks](https://longbridge.com/en/news/286771722.md)