South Holland District Council is considering a new safeguard for future housing developments after a builder was allowed to withdraw a £685,000 contribution for healthcare and education and remove all affordable homes from a planned scheme near Spalding.
The issue centres on Emerald Homes’ 119-property development at Home Farm in Deeping St Nicholas. The company successfully argued that the project was no longer financially viable, meaning it would make less than 17.5 per cent profit on the cost of construction.
The council has said it may introduce a “clawback clause” in the next Section 106 agreement for the site. Such a clause could allow contributions to be reviewed later if the financial position of the development improves.
What happened at Home Farm
When planning permission was granted, Emerald Homes had agreed to provide £685,000 towards healthcare and education, as well as building affordable homes. Following a viability assessment, the developer was told it did not have to provide either the contribution or any of the affordable housing originally agreed.
The Lincolnshire Integrated Care Board expressed “disappointment” about the loss of funding, saying it was required at Munro and Beechfiled Medical Centre to deal with increased patient numbers.
An independent viability assessor, CPV, agreed that the development was not viable if the Section 106 contributions remained in place. However, its report to the council recommended that a clawback clause should be retained so the scheme’s viability could be reconsidered at a later stage while the project was being delivered.
“We would strongly recommend that this is retained to allow viability considered at a later date, during the delivery of the project,”
Section 106 agreements are used to secure contributions from developers for community infrastructure and other measures linked to planning permission. The report says house builders have increasingly submitted viability studies to seek reductions in contributions they previously agreed to provide.
How a clawback clause could work
A council spokesman said a clawback mechanism would not automatically apply to every development. Instead, it could be agreed through the Section 106 process and assessed according to the circumstances of each application.
“A clawback mechanism is intended to ensure that developer contributions can be reviewed if the financial circumstances of a development improve.”
In the Home Farm case, the council said the viability assessment found that reducing the Section 106 contributions was justified by current market conditions. A later review could potentially require the developer to make additional contributions if those conditions improve.
“A clawback provision would allow this to be revisited at an agreed stage in the development so that if viability improves additional contributions could potentially be made.”
Any future arrangement would need to consider planning policy, the evidence supporting the viability assessment and the particular details of the development. The council said the suitability of a clawback mechanism would therefore be decided on a case-by-case basis.
The authority has not confirmed that a clawback clause will definitely be used at Home Farm or in every future agreement. Its stated position is that it could introduce the mechanism as part of the next Section 106 agreement for the site.