£9bn in developer contributions ‘unspent’ by councils

Funding provided as part of planning agreements for new homes intended for improvements to local infrastructure and amenities is sitting idle in council accounts, according to research by the Home Builders Federation (HBF).

The money paid as part of planning agreements for new housing developments includes £6.6 billion from Section 106 agreements and more than £2.2 billion raised through the Community Infrastructure Levy (CIL).

The findings come from a Freedom of Information (FOI) survey, which received responses from 243 local authorities in England and Wales. Of the £9 billion estimated to be unspent, around £3 billion has been held for more than five years, despite many agreements requiring funds to be used within that timeframe.

The average council holds £19 million in unspent Section 106 infrastructure contributions and £13.9 million in unspent CIL funds. However, the issue is particularly acute in a small number of authorities where the results influence this average. The London Borough of Tower Hamlets alone holds more than £260 million in unspent developer contributions, nine times the national average on a per-household basis.

Local authorities are reliant on developer contributions, given as part of the process of granting planning permission, which are equivalent to 46% of local government spending on housing and communities, according to the Competition and Markets Authority. However, unspent Section 106 and CIL funds are rising, despite overall developer contributions falling in line with reduced housing supply, compounding concerns about future infrastructure funding. The scale of unspent funds, therefore, represents a significant opportunity cost for communities.

Many local authorities cite pre-allocated funding structures and staffing limitations as reasons for delays, although the HBF says the length of time that substantial sums remain unspent raises increasing concerns about inefficiencies in spending and delivery – with a third of Section 106 funds held unspent for more than half a decade.

Neil Jefferson, HBF Chief Executive, said: “The balance of unspent developer contributions provides further evidence of a capacity crisis in local government. This money should be funding schools, healthcare, affordable housing and other essential local infrastructure.”