By Keith Cooper

Labour has pledged the “biggest increase” to affordable and social housing “in a generation”. But it will take more than a few billions of pounds in next month’s budget for this ambition to become a reality.

Keir Starmer’s party must also get to grips with a major recent snag in what’s become the main route for affordable housing delivery in recent years.

Since 2015, at least four out of ten affordable homes have been built thanks to so-called section 106 planning deals. Under these deals, councils require housebuilders to deliver a specified number of affordable homes in new developments. These often arcane legal agreements were responsible for a record-breaking 30,189 new homes in 2022-23, almost half of all affordable housing out of the ground that year.

The trouble is that the housing associations which previously bought them from builders are increasingly refusing to take them on.

Hit by huge bills to remove unsafe cladding and fix damp and mould in their buildings, their once-deep pockets now produce just dust and rejection. Or so say the housebuilders with thousands of brand new section 106 homes laying empty and tens of thousands more stuck in planning because no registered provider will take them on.

Councils are privately calling these RP-less properties ‘dormant homes’, as if they’re in some kind of hibernation until a benevolent chancellor refills their pockets and the sun shines again. It could be a long winter.

In the absence of major government intervention, many expect this blockage on section 106 affordable housing delivery to last at least five years. Some say ten. And with roughly half of associations reducing or pulling out of the section 106 market, the number of affordable homes built through this route could easily drop through the floor.

Supply of the cheapest social rented homes, those most suitable for homeless households, could be slashed by 1,700 homes a year, says Savills. That’s not what anyone needs right now, least of all the tens of thousands of families and children already stuck in often poor-quality temporary accommodation.

Besides the huge squeeze of their finances, housing associations say they’re rejecting section 106 homes because they’re too often of the wrong tenure, poor quality, and have the wrong heating systems – gas boilers instead of more eco-friendly alternatives, like air source heat pumps.

Housebuilders, councils and the small army of consultants trying to break this impasse say associations are also rejecting smaller clusters of section 106 homes. They pine the loss of the numerous small local associations which bit their hands off to get hold of section 106 homes and lament the new wave of ‘big boy’ mega-associations which won’t get out of bed for less than 50 homes. This is a particular problem in rural areas, where developments tend to be smaller.

Councils are doing what they can. Larger authorities have made some associations re-think their reluctance with a little gentle leaning. Those with the money and the capacity to manage them are buying up section 106 homes themselves. But neither of these options can be kept up for too long and aren’t suitable for all councils. Something has got to give.

One unfavourable concession, pushed for by housebuilders, is a re-write of the legal agreement which tied them to a specific type of affordable housing in the first place. This is already beginning to happen. Southend-on-Sea and Basingstoke and Deane councils have already agreed to change the affordable rental homes suitable for homeless households – specified in the original section 106 deal – to an ‘intermediate rental’ product for potential homeowners. This might seem a subtle shift in tenure, but it represents another lost opportunity to house a homeless family.

While there have long been niggles and challenges with section 106 deals, this new snag has emerged in recent months, is worsening, and could easily become insurmountable for local authorities without quick thinking and intervention from the government.

Without such action, Starmer’s Labour may well become known as the party that presided over an embarrassing drop in affordable and social housing delivery instead of the ambitious increase it wants.