·         Costly ‘Section 106’ agreements could be pricing small developers out of the market

Developers were forced to pay £2.1 billion to local authorities last year in order to grant planning applications – up from £1.7 billion five years ago says Lendy, Europe’s leading peer to peer secured lending platform and new title sponsor of Lendy Cowes Week.

 Lendy explains that the figures relate to payments made via Section 106 agreements. These are made between developers and local authorities, theoretically in order to compensate for any negative impact the building work has on the local area or community.

 Some Section 106 requirements can incorporate a range of requirements or measures for developers to meet, including landscaping or contributions to affordable housing projects.

 However, Lendy says that developers will often be asked to make a lump-sum payment to the local authority without any clear indication on how the money will be spent. 

 Concerns have been raised that the cost of these agreements is too high for many developers to bear and they may be stopping some developments from getting off the drawing board.

 Lendy says that some agreements can reach up to £10 million or more. For example, agreements worth over £345 million were secured in Vauxhall over the last five years in connection with the Nine Elms development.

 Liam Brooke, Co-founder of Lendy comments: “Typically, if you put a tax on an activity, you’ll get less of it.

 “It’s no secret that there is a housing shortage in the UK. More needs to be done to help support developers – allowing them to get spades in the ground and houses built.

 “Agreements with local authorities for planning permissions can be both complex and costly for developers.

 “You can argue that Section 106 agreements can be beneficial in ensuring the local community benefits from developments, however, the fact that smaller developers are being priced out of the market by these added costs is a real concern.

 “Not only can the costs be high but they also tend to be unpredictable as there is very little transparency on how the agreements are calculated.

 “For smaller developers who are already struggling to find funding for their developments, these added costs can be the final nail in the coffin.”

 Lendy explains that peer-to-peer lenders, such as Lendy, have stepped in to fill the funding gap left by banks and other traditional lenders. For developers looking for funding for their next project or a quick injection of cash to cover unexpected costs, peer-to-peer lenders can often provide funding quickly and efficiently.

 Liam Brooke continues: “If developers are faced with high costs from local authorities they may need to recoup some of their profits which could mean higher house prices or corners being cut during construction.”