Affordable housing rules could be abandoned in favour of a new levy on developments.
Under proposals being considered by housing secretary Michael Gove, section 106 provisions would be scrapped and replaced with a locally-raised levy that would generate £7bn for council projects.
If the plans are approved by the cabinet, a formal consultation on the proposals could be launched within weeks.
The proposal would involve cutting section 106 of the Planning Act, which gives councils the power to order developers to take measures to benefit the local community in return for permission to start new developments.
Property developers and representatives of the industry warned in a letter last year that an infrastructure levy could cause cashflow issues as developers would have to pay councils up front.
Representatives including the heads of the British Property Federation and the Home Builders’ Federation said in the letter sent to Gove on his appointment as housing secretary that the system should be improved, not scrapped.
About 10% of homes should be affordable on major developments, the National Planning Policy Framework says. More than 52,000 such properties were built on these developments in the 2020-21 financial year.
If the levy costs developers the same amount as the existing arrangements, it would raise an extra £7bn for councils, developers said. It is not yet clear whether the money would be ring-fenced, but the funds could be used for roads and schools as well as housing.
