Unlocking the £9bn Developer Cash Stuck in Local Government

£9 billion of ‘community contributions’ paid to councils by builders to fund projects in the vicinity of new developments are sitting in borough coffers with apparently no intention of being spent, a major source of discontent in the housing market, an industry body said. The Home Builders Federation (HBF) complained that some local authorities were demanding ever more from property developers, with the effect that some have accumulated more than a decade’s worth of cash in a funds pot intended to be used for projects in the area. This has become a point of contention between manufacturers, councils and those hoping to buy a home, with sites often being blocked as a result of stalling over issues of who pays what.

Money paid by property developers, which is branded a “contribution” or Section 106 fund or Community Infrastructure Levy (CIL) is intended to be a benefit to current and future residents. You might have read that it is paid for a new school, or road improvements, or open spaces, or community centre, and it therefore must benefit the residents of your area. If it is being used for the intended purpose it can have a dramatic and positive effect on an area, helping to manage and mitigate the consequences of increased population pressure on critical local infrastructure. But if the money is just being socked away as a revenue reserve in the Town Hall then there’s no real benefit to residents at all.

There’s a lot of anger being directed towards house builders from homeowners who are not seeing the benefits which were promised when they first bought their new property off the plan. The lack of real tangible benefits has resulted in a cycle of dissatisfaction with new housing estates which is killing off any benefits for local residents to the site and is also having a knock on impact on future development approvals. It’s likely that residents have good grounds to be unhappy as councils may not be adequately developing the process to disperse the contribution and equally may not be considering the level of fund sufficient to provide any meaningful impact.

This is a pretty big deal for homebuyers. It’s unlikely that any new communities will be ready for residents with all of the amenities that builders tout. It may be several years before any new schools or community centers are built. And while new housing can lead to more affordable options in the short-term, it can also lead to longer-term quality of life issues for homeowners who are forced to use existing schools and community centers because the new ones haven’t been built yet. Ultimately, a home is not just a house and there are quality of life issues that homebuyers should be thinking about.

This could be one way of bringing pressure to bear on local authorities. The HBF calls for improved monitoring and clearer rules and specifications in relation to affordable housing funding, to ensure that it is actually delivering benefits for local residents – be they buyers or renters. The funding should be closely monitored as authorities should be able to bring various districts in their area forward for development and improve communities with the £9bn available.

Practical Takeaways for Buyers:

1. Ask your developer or agent if the new homes have secured community contributions and what the contributions will be spent on.
2. Check how often your local council records its spending of developer contributions Looking at the council’s past spending of developer contributions will help you work out whether they are being active in recouping payments from landowners and builders, or doing little and allowing charges to build up and become more expensive.
3. Community Amenities Such as Schools, Public Transport & Parks will impact your lifestyle and potential capital gain of your property.
4. Local Plan meeting or development update Follow any local plan meetings and watch for any updates or developments in relation to any highway improvements that may be proposed to accommodate new housing.

The Final Takeaway:

In some areas in England, up to £9 billion of local budget is being left unspent, holding back the creation of vibrant, sustainable communities, with new housing developments being built on just bricks and mortar instead of safe and welcoming neighbourhoods. Better use of this local budget could turn any new house into a real home.