Unlocking housing delivery: section 106 scheme bids – key considerations for RPs

With the growing challenge of housing delivery, the launch of Homes England’s s106 Clearing Service was anticipated to ease that burden by making s106 plot bids between developers and Registered Providers (RPs) more accessible. While this scheme has aided visibility, there remain conflicting elements which form obstacles to housing delivery.

Let’s look at how we can navigate these conflicts to unlock housing delivery under the current Affordable Homes Programme (AHP) 2021–2026 (prospectus awaited for the next phase at the point of publishing).

Planning Restrictions and Grant Compliance

RPs should also be mindful of the planning obligations and conditions that could make homes ineligible for funding under the CFG. These include:

• Nomination rights inconsistent with national policy;
• Restrictions that make homes unmortgageable;
• Conditions personal to one RP or excluding others;
• Constraints on grant recovery or recycled grant use.

Some local authorities attempt to introduce such provisions indirectly—an approach that may not only affect grant eligibility but also future funding, sales, and mortgageability.

Practical Steps for RPs:

• Liaise with Homes England - confirm whether a scheme is grant-eligible under the AHP, particularly schemes in the Clearing Service which already have planning.
• Early review of planning documentation – in conjunction with the scheme-focussed Homes England discussions, we are happy to consider whether the planning would be restricted under the CFG as a starting point. In addition, we can consider whether the planning documentation is suitable generally for other funding purposes (your funders may need to review also) and consider maximising value.
• RPs should take independent legal advice on compliance with their governance and funding arrangements, and their funders may also review the planning documents.
• Homes England audit preparation – with the growing regulatory requirements for RPs at every stage of the development process, speak to the developer early on to ensure that any planning subsidy is clearly documented and evidenced for potential audit and Homes England review.

What about ‘additionality’?

So, you have unlocked your s106 bid and the developer has ‘additionality’ plots they would like to sell to RPs as AH. While checking planning and title obligations for tenure flexibility early is key, so is consideration of Community Infrastructure Levy (CIL) implications.

Where social housing CIL relief is being claimed, recent case law (notably Stonewater) highlights the importance of understanding whether the AH provision in the s106 agreement is a fixed cap or a minimum. This distinction is particularly relevant where additional AH units are being proposed (“additionality”) — a common interest for RPs and grant providers alike. RPs should consider how the agreement is worded, as this may affect relief eligibility as ultimately should relief not be available this may result in the scheme not being viable for the RP to continue. If the s106 is restrictive, seek amendments to enable grant-funded units.

If grant funding is not available, what about other funding streams?

While there are a number of different funding streams available to RPs (particularly in the current climate), to unlock value in existing and new stock, careful consideration of planning agreements, by way of a planning review, is an effective method of unlocking funding capacity for RPs and lenders alike. The exercise of valuing housing stock plays a vital role in facilitating] reinvestment in, and maintenance of, housing assets. 

Maximising value?

Affordable Housing may be valued on the basis of ‘existing use value - social housing’ (EUV - SH) and ‘market value subject to tenancy’ (MV - STT). In the context of AH, the former is based on properties remaining under affordable rent restrictions, unable to be sold with vacant possession, and the latter is based on properties being capable of being released for sale on the open market.  

Mortgage Protection clauses: the benefit of achieving MV-STT valuation

Where MV-STT is applied, housing stock attracts a higher value for charging purposes, potentially unlocking capital for reinvestment. In order to ensure that the MV-STT valuation can be achieved, the AH requirements in any related Section 106 Agreement must include a Mortgage Protection Clause (MPC) in a form acceptable to the lender. This operates to ensure that, in the event that it is forced to exercise its security, the lender can dispose of the AH units on the open market within a reasonable period of time should they not be able to transfer them to another Registered Provider.

Best practice is to include the model MPC endorsed by the National Housing Federation (NHF), which is generally accepted to allow for valuation on the MV-STT basis, and the majority of Local Planning Authorities (LPAs) will now accept its inclusion in Section 106 Agreements. However, it is not uncommon for LPAs to request variations to the NHF model, in which case careful consideration needs to be given to the potential implications. For example, a seemingly minor change from ‘reasonable endeavours’ to ‘all reasonable endeavours’ (in the context of seeking to dispose of AH units to a RP) could be deemed too onerous to allow a lender to value the stock at MV-STT.

The recent decision by the Chancery Division in Westminster City Council v Gems House Residences Chiltern Street Ltd and another company [2025] EWHC 1789 (Ch) offers some guidance as to the interpretation of MPC clauses. The case related to the de-registration of an RP and whether the appropriate time to consider whether the RP was ‘Registered’ was upon the date of the mortgage or the disposal of the interest. If the latter applied, then the lender was no longer a mortgagee of a “Registered” Provider after registration and could not take advantage of the MPC. 

The judge found that in fact the clause operated as intended and that protection was afforded to the mortgagee from the date of the grant of the mortgage. Lenders may take comfort in Judge Hodge KC stating that:

‘such a temporal restriction is required if mortgagees are to be encouraged to lend to registered providers, so as to enable them to acquire and develop the affordable housing in the first place. No lender would be prepared to run the risk of subsequent deregistration imperilling the value of their security.’ 

Whilst lenders can take comfort from this, the judge did allude to the fact that the Mortgage Protection Clause could have been better drafted, highlighting the requirement for diligent and precise drafting. The overarching message is to take particular care over the drafting of the MPC in planning agreements – not doing so can have costly consequences.

Conclusion

While s106 bids remain a vital tool for delivering AH, the interplay with grant funding is complex. Early engagement between developers, RPs, funders, and Homes England is critical to avoid delays and ensure the scheme’s financial viability and ultimate delivery.

Of course, our experienced team is on-hand to discuss such schemes with you early on. Working together to unlock housing delivery.