Billions of pounds paid by builders to boost local services remain unspent, with more than a quarter of the cash unused after more than five years, new research suggests.
The research by the Home Builders Federation estimates that local authorities in Wales and England are sitting on more than £8 billion of infrastructure payments made by developers, including more than £6 billion from Section 106 agreements and almost £2 billion raised through the Community Infrastructure Levy (CIL).
The research is based on a Freedom of Information (FOI) survey which received responses from 208 local authorities. The responses show that, on average, councils hold £19 million in unspent Section 106 infrastructure contributions.
HBF says that 16 Welsh local authorities responded to the FOI request, out of a total of 22 (73% response rate). This is up from 14 councils last year, it said, adding that the responses from Welsh councils show that an average of £5.8 million of Section 106 contributions is held unspent per council – up from an average of £5.1 million last year.
If extrapolating out to all Welsh councils, around £128 million is likely to be held unspent in total across Wales, HBF says. This is up from £112 million last year.
It added that Cardiff Council holds the most in unspent contributions in Wales, holding £33.4 million, including £10 million for Affordable Housing and £8.2 million for highways and roads.
Councils in Wales with the largest amount of unspent Section 106 contributions, according to the HBF research:
- Cardiff Council – £33.4 million (Amount held unspent)
- Newport City Council – £11.2 million (Amount held unspent)
- Swansea Council – £8.1 million (Amount held unspent)
- Pembrokeshire County Council – £7.1 million (Amount held unspent)
- Monmouthshire County Council – £6 million (Amount held unspent)
Developer contributions are paid to the local authority to fund affordable housing, infrastructure and amenities to improve the local area for new and existing communities, as part of the process of granting planning permission. The principal source of funding from builders comes from Section 106 agreements between the developer and the council detailing what will be provided or paid for, including new Social Homes, new school buildings, GP surgeries, parks and transport improvements.
HBF said that this research, however, demonstrates that a lack of capacity or willingness to spend developer contributions by some local authorities is preventing communities across the country from realising the benefits that have been paid for by the industry. It says this further fuels “misguided objections to development that cite a lack of infrastructure for local communities”.
Furthermore, 26% of the unspent contributions have been held for more than five years, suggesting that around £1.6 billion of vital funds for Affordable Housing and other infrastructure has been sitting in council bank accounts for more than half a decade, says HBF.
The top 20 councils collectively hold around £2 billion, with Oxfordshire County Council holding the largest amount of unspent Section 106 monies among respondents (£288 million), says HBF.
The estimated £8 billion of unspent money includes:
- £817 million in unspent Affordable Housing contributions that could support the delivery of around 11,000 Affordable Homes.
- £1.1 billion in highways and roads contributions across England and Wales, which HBF says is enough to fund the repair of around 12.6 million potholes.
- £2 billion in unspent education contributions, which HBF says could support 126,000 new school places.
- £873 million in unspent social infrastructure contributions, which HBF says could fund around 1,000 sports halls and 4,700 community games areas.
Local authorities in major cities with communities at the sharp end of the housing crisis hold the greatest sums of Section 106 monies allocated for Affordable Housing, says HBF – with six of the top ten councils with the largest Affordable Housing sums unspent being in London.
Section 106 agreements often stipulate that they can be returned to the payee if the sums have been held too long as projects are deemed unlikely to be delivered meaning that communities do not receive all the benefits of development that local authorities have committed to.
The results of the FOI requests showed that 80 local authorities – around a third of all those who responded to this question – have returned Section 106 money to developers in the past five years, with a total of £20.6 million being returned in total.
House builders very rarely track what happens to their Section 106 payments and few seek reimbursement if it is found to have gone unspent, says HBF. The home building industry would always prefer that money provided for a specific purpose is spent accordingly and within good time as this ultimately benefits the residents in the new communities built by the developer, it says.
However, the industry is concerned that inaction by some councils and a lack of local authority capacity to deliver infrastructure, along with “fiery rhetoric about development and developers from some politicians and campaign groups”, is contributing to negative perceptions of house building across the country, says HBF.
HBF is calling for greater transparency so that council Infrastructure Funding Statements (IFS) clearly outline the reasons why infrastructure is delayed and how long money has been held for. Local authority planning department budgets must also be placed on a sustainable footing to ensure there are sufficient staff and resources for oversight and monitoring of developer contributions, it says.
Neil Jefferson CEO at HBF, said:
“Each year developers contribute around £7 billion to local authorities for the provision of local infrastructure, affordable housing and education, recreational and health facilities but some councils are increasingly failing to invest this cash into the services that so desperately need it.
“Investment in new housing delivery brings unrivalled economic and social benefits to communities but too many of these advantages are going unseen by local people. With the Government desperate to find money to invest in infrastructure to drive growth, it is nonsensical to have billions sat in council bank accounts.
“Furthermore, a lack of infrastructure provision is often cited as a reason to oppose development, yet this pipeline of billions of pounds of unspent infrastructure funding is too often underappreciated in debates about the impact of new development.
“Whilst appreciating the pressures and constraints on councils, we simply have to find a better way to ensure this money is spent promptly to benefit local communities, support local services and drive growth.”
