Funding provided as part of planning agreements for new homes intended for improvements to local infrastructure and amenities left idle in council accounts.
Research by the Home Builders Federation estimates that local authorities in England and Wales are now sitting on over £9 billion of developer contributions, intended to fund essential local infrastructure such as schools, public transport and affordable housing. The money paid as part of planning agreements for new housing developments includes £6.6bn from Section 106 agreements and over £2.2bn raised through the Community Infrastructure Levy (CIL).
The findings from a Freedom of Information (FOI) survey, which received responses from 243 local authorities in England and Wales, show that, of the £9 billion estimated to be unspent, around £3 billion has been held for more than five years, despite many agreements requiring funds to be used within that timeframe.
Placing the value of this £9bn of accumulated funding into context, Government’s annual expenditure on Affordable Housing grants is expected to be around £2.5bn to £3bn during the remainder of this Parliament.
The average council holds £19 million in unspent Section 106 infrastructure contributions and £13.9 million in unspent CIL funds. However, the issue is particularly acute in a small number of authorities where the results influence this average. The London Borough of Tower Hamlets alone holds over £260 million in unspent developer contributions, nine times the national average on a per-household basis.
Key takeaways of the report include:
- £800m (9%) increase in unspent developer contributions since HBF last reported on this issue in mid-2024
- Almost £3 billion is estimated to have been held for over five years, despite many agreements requiring infrastructure to be delivered within that period.
- £700m for Affordable Housing and £2bn for schools are waiting to be spent.
- Local authority compliance with reporting of their unspent developer contributions has fallen from 90% to 75%.
- A small number of councils hold disproportionate sums, with Tower Hamlets holding over £260 million.
Local Authorities are reliant on developer contributions, given as part of the process of granting planning permission, which are equivalent to 46% of local government spending on housing and communities, according to the Competition and Markets Authority. However, unspent Section 106 and CIL funds are rising, despite overall developer contributions falling in line with reduced housing supply, compounding concerns about future infrastructure funding. The scale of unspent funds, therefore, represents a significant opportunity cost for communities.
In several areas, particularly in London, the amount of unspent developer funding held per household represents a substantial proportion of the average council tax bill. In Hammersmith and Fulham, which holds the highest level of unspent Affordable Housing contributions at £30.5 million, average house prices are 16 times average earnings, making it the fourth least affordable district in the country.
While many local authorities cite pre-allocated funding structures and limitations in staffing as reasons for delays, the length of time that substantial sums remain unspent raises increasing concerns about inefficiencies in spending and delivery – with a third of Section 106 funds held unspent for more than half a decade, up from a quarter of funds in 2024.
The research also finds that £320 million in developer contributions for new healthcare facilities is sitting unspent. This includes around £128 million held unspent by 17 NHS Integrated Care Boards, who received the funds from councils. In other cases, requests by ICBs for access to the earmarked healthcare fund have been refused or ignored by councils. This highlights a lack of coordination over how developer contributions will be deployed to support local healthcare infrastructure.
Transparency in developer contributions is declining, with a growing number of councils failing to publish Infrastructure Funding Statements (IFSs) by the statutory December 31 deadline. IFSs, which report receipts, spending plans, and unspent funds, are the main way communities can scrutinise developer contributions. While 90% of councils met the deadline in 2020, that has fallen to 75% by 2025, reflecting chronic understaffing, limited capacity, and weak monitoring of how these funds are managed.
While we welcome recent Government announcements such as the Final Local Government Financial Settlement, which, alongside other funding, will support Local Authorities to boost capacity and support community infrastructure, the unspent funds of £9bn are around 55% more than the announced £5.8 bn of new investment in local services.
HBF is urging the Government to support Local Authorities to get on a sustainable financial footing so that they can direct resources to make better and faster use of developer contribution funds, strengthen transparency and accountability in reporting unspent contributions, and invest in local authority capacity and delivery capability. Existing unspent S106 and CIL payments must also be taken into account when council objections to new planning applications cite concerns over infrastructure pressures.
With Government prioritising economic growth and aiming to deliver 1.5 million new homes during the Parliament, unlocking the £9 billion currently sitting in council accounts represents an immediate opportunity to boost much-needed infrastructure improvements in communities and build support for new development.
Neil Jefferson, Chief Executive of the Home Builders Federation, said: “The balance of unspent developer contributions rising to £9 billion in Local Authority accounts provides further evidence of a capacity crisis in local government and should be a major cause of concern for local communities and for ministers.
“This money should be funding schools, healthcare, affordable housing and other essential local infrastructure, yet billions sit idle, in some cases for over five years. Investment in new housing brings huge economic and social benefits, but far too many of these advantages are going unseen by local communities.
“It’s great that Government has, in recent weeks, taken some action in supporting local authority funding, but the underutilisation of developer contributions is a damming indictment on the ability of local councils to deliver to their communities. Urgent action is needed to ensure this money is spent promptly, supporting communities, improving local services, and driving growth.
“New homes should be providing benefits for both new and existing residents, but the ongoing failure of local government to use this money is undermining support for new housing and threatens the Government’s ambition to build 1.5m homes this Parliament.”