Chris Bryson of Gravis Planning and Drew Nesbitt of Wilson Nesbitt discuss how housebuilders and developers in Northern Ireland can prepare for Section 76.
This year is the 30th anniversary of England and Wales Section 106, over the past three decades it’s become a concrete part of how development and planning take place. In fact, it’s hard to consider entering a planning discussion without Section 106 being a high priority. In Northern Ireland, its equivalent Section 76, is much younger and at only seven years old has been used far more sporadically, but this is all set to change next year.
Following the preparation of new Local Development Plans across all of its 11 councils, Northern Ireland will experience a substantial increase in the use of Section 76 agreements, coinciding with the maturing of Northern Ireland’s development market. The change will mean that housebuilders and developers will have the new responsibility of providing affordable housing if their development is over a certain size.
Whilst the move is a positive one for first-time buyers, key workers and lower-income families who will benefit from more affordable housing opportunities, it will bring with it teething problems for developers who will need to decide who takes the price hit, them or other house buyers? As it’s thought that the new policy will cause a significant impact on the housing market, potentially even up to a 20% increase on existing schemes and costs.
How will Section 76 work in practice?
When it comes into full effect next year each council will set their own requirements and thresholds, but it’s predicted that they will operate in a similar way to Belfast Council, which is adhering to the HOU5 policy.
The guidance from Belfast Council is that any development with over five units will need a planning agreement where 20% of those houses offer affordable or social housing solutions, to broaden the opportunities for those who are of lower income, key workers and first-time homeowners. As part of this affordable housing will be secured by way of a Section 76 agreement, which needs to be in place in advance of planning permission being granted.
It also outlines that affordable housing should be provided as an integral part of mixed-tenure development, integrated with general needs and not readily distinguished in terms of its external design, materials and finishes.
Developers can deliver affordable housing options through a number of different models, which will be agreed upon with the local council. These can include, shared ownership, rent to own, ‘help to buy’ loans, affordable rent and discount market sale housing. However, where developers can demonstrate that it’s not suitable or viable for the development to meet the policy in full, the council will consider suitable alternatives on a case-to-case basis.
It’s likely that some larger housebuilders will be used to meeting similar requirements and financial commitments to the council, so they may not feel the squeeze as much, but the pressure will mount up for small and medium-sized developers who previously haven’t had to consider affordable housing costs.
When does Section 76 come into full effect?
Whilst it’s not officially happening until next year some developers are already experiencing pushback from the local council due to Section 76, especially in Belfast where the council are using it as a draft policy. In fact, even those just in the process of either planning or submitting from here on in, are likely to be assessed against new affordable housing policies and the need for Section 76 agreements.
This is why it’s necessary for any housebuilders or developers of any residential scheme to be aware of Section 76 so that they can see what it means for them. By having a full understanding of the implications they can meet the new requirements, factor in additional costs and make the necessary plans.
We’re already seeing cases where housebuilders have been made to reconsider their plans to be in line with their local council’s affordable housing policies under Section 76 requirements, despite their planning applications being far advanced. This has resulted in developers being landed with higher costs, in some cases up to a six-figure increase, others have chosen to abandon their plans altogether as a result of the new expectations.
Developers and housebuilders who are due to start developing this year and in the years to come should be wary of the change, as it may mean that they have to go back to the drawing board and revisit their plans.
However, it’s not all doom and gloom for those in the industry, because there are now, more than ever, job opportunities and an influx of young educated people in Northern Ireland, meaning there is a greater demand for housing.
The blossoming opportunities are a result of the pandemic, which has left a never before seen pool of younger, highly educated people staying in Northern Ireland and putting their roots down. Following the travel restrictions as a result of the Coronavirus pandemic, more university graduates stayed in Northern Ireland, finding jobs and making a life for themselves enjoying the work-life opportunities Northern Ireland offers and being close to their families, whereas in the previous years the majority of these people would have moved overseas.
There are now more career opportunities for people in Northern Ireland too, particularly in the capital, Belfast, which is home to the expansion of global firms such as PwC and has also been named the number one cybersecurity destination in Europe, with international companies including Black Duck Software, WhiteHat Security, Rapid 7, Proofpoint and Alert Logic establishing operations there.
Another contributing factor to the growing market is that the city is experiencing a huge investment from both of Belfast’s major universities, which are planning to revitalise the city with student accommodation.
The combination of the significant, once in generational opportunities provides a golden goose for housebuilders and developers, the people are in Northern Ireland and the jobs are there too but the question is, will the houses be there?
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