Securing affordable housing where a scheme is phased
On a phased scheme the occupation trigger decides whether affordable housing actually gets delivered. Here is how the triggers, transfer standards, cascades and step-in provisions should be drafted.
On a phased scheme, the affordable housing schedule in a section 106 agreement is only as good as its occupation triggers. Everything else in the schedule describes what will be delivered. The triggers decide whether it actually is, because restricting occupation of market homes is the one sanction an authority holds that bites immediately and needs no litigation.
Which is why the negotiation that matters is not the percentage. It is the sentence that says how many market dwellings can be occupied before the affordable dwellings in that phase have been completed and transferred.
Why phasing triggers matter
An unphased obligation on a 60 unit scheme is simple: deliver the affordable units, transfer them, done. Split the same scheme into four phases over six years and the questions multiply. Which phase carries which units. What happens if phase three stalls. Whether the affordable units can all sit in phase four. Whether a redrawn phase boundary changes the obligation.
Authorities have learned to answer those questions in the drafting. Expect a phasing plan annexed to the agreement, a table allocating affordable units to each phase by tenure and unit size, and a trigger in each phase that is self-executing rather than dependent on anyone noticing.
The developer's interest is in cash flow and in not being blocked from selling homes that are finished. Those interests are reconcilable, but only if the trigger is drafted around the actual build sequence rather than around a template.
Linking affordable completions to market occupations
The common forms are these.
| Trigger form | Effect |
|---|---|
| No market dwelling in a phase occupied until all affordable dwellings in that phase are transferred | Strongest for the authority, hardest on cash flow |
| No more than 50 per cent of market dwellings in a phase occupied until the affordable dwellings in that phase are transferred | The usual negotiated position |
| Affordable dwellings transferred before the final market dwelling in the phase is occupied | Weak, since the last unit is often the show home |
| Scheme-wide percentage trigger across all phases | Flexible, but allows the affordable element to drift to the end |
The 50 per cent form works because it lets early sales fund the build while keeping a meaningful block of unsaleable stock as security. Where it goes wrong is on phases with an uneven mix. A phase of 18 market houses and two affordable flats in a block that completes last gives you a trigger you will breach, so either move the flats or move the phase boundary.
Pay attention to what the trigger counts. Occupation, practical completion, transfer and first sale are four different events, and the gap between practical completion of an affordable block and completion of its transfer to a provider can be months. If the trigger is transfer, your programme has to allow for the provider's own due diligence.
Transfer to a registered provider
The agreement will normally require transfer to a provider registered with the Regulator of Social Housing, either named or approved by the authority. Nominating the provider early is worth doing, because its requirements shape the design.
Providers have their own standards and they are not identical to planning policy or to building regulations. Expect requirements covering room sizes, storage, accessibility, acoustic separation, boiler and heating specification, external works, parking allocation, service charge levels and a warranty acceptable to their funders. Several of those interact with the appraisal rather than just the drawings, as set out in space standards and accessible housing as appraisal inputs.
Get the provider's employer's requirements before the planning application is submitted where you can. A scheme designed to policy minimums and then offered to providers frequently needs changes that a section 73 application has to carry.
Standards the units must meet at transfer
The transfer provisions are where a well-run scheme loses weeks. A typical schedule requires, before transfer completes, practical completion certified by the contract administrator, building regulations completion certificate, a warranty in an approved form, all services connected and commissioned, external works and landscaping to the phase complete, energy performance certificates, title free of adverse encumbrances, a management company in place for common parts, and the parking and bin and cycle provision allocated as approved.
Two of those cause most of the delay. External works to the phase, because landscaping around an affordable block often waits for the rest of the phase to finish. And title, because an affordable block carved out of a larger title needs the plot boundaries, easements and rights of way drafted and registered, which takes longer than anyone allows for.
Build the list into the construction programme as a set of dated milestones and hold the contractor to them. A trigger breach caused by an uncommissioned heating system is an expensive way to learn this.
Nomination and allocation arrangements
The authority will usually secure full nomination rights for first lettings and a lower proportion for subsequent lettings, with a local lettings plan where one applies. Tenure split between social rent, affordable rent and shared ownership is a policy matter, and it is worth testing early because the values differ substantially and the provider's appetite differs with them.
Where the authority wants units dispersed through the scheme and the provider wants them clustered for management efficiency, that conflict has to be resolved at design stage. Policy usually favours dispersal. Providers usually pay more for clusters. The honest answer is that a compromise of small clusters distributed across the site satisfies most officers and most providers, and arguing it at application stage is easier than redesigning later.
What happens if no provider will take them
Every phased agreement needs a cascade, and a developer who negotiates it properly has removed their largest single delivery risk.
A workable cascade runs as follows.
- Market the affordable units to registered providers for a defined period, at a defined price basis, on terms set out in the agreement.
- Offer them to the local authority on the same terms.
- Offer them to another provider identified by the authority.
- Convert tenure within the agreed total value, for example by substituting shared ownership for affordable rent, with the authority's written approval.
- Pay a commuted sum calculated by a stated formula, as a last resort, with the formula in the agreement rather than agreed later.
Insist that each step has a defined duration and that the price basis is stated. A cascade that says the units shall be offered "at a price to be agreed" is not a cascade. It is a future dispute.
A mortgagee exclusion clause belongs here too, limiting the restrictions that bind a lender taking possession. Funders will require it, and raising it late can delay financial close.
Default and step-in provisions
Illustrative example, not a real scheme: a 140 dwelling scheme in four phases, with 35 affordable dwellings allocated 8, 9, 9 and 9 across the phases, a 50 per cent occupation trigger in each phase, a named provider, a longstop date for the phase four transfer, and a cascade with 12 weeks of marketing at a stated percentage of open market value before the authority's option arises. Phase two's provider withdraws after a funding change. The cascade runs, the authority declines, a second provider takes the units as shared ownership rather than affordable rent, and the trigger is met four months late with the authority's agreement. The agreement handled it because the cascade had durations and a price basis in it.
Authorities also ask for step-in rights, longstop dates and occasionally a bond or parent company guarantee. Resist a bond if you can, because the cost is real and the occupation restriction is already effective security. Where a bond is unavoidable, cap it by phase rather than by scheme.
Remember that the agreement is a local land charge binding successors, so a plot sold on carries the restriction, and a purchaser's solicitor will find it. Keep a compliance file with the transfer evidence for each phase and send it to the authority as each trigger is satisfied rather than when asked.
Phasing also shifts the cost profile of everything else in the agreement, including highway works, which is why the treatment in highway works costs in a development appraisal matters to the phasing decision as much as the affordable housing does.
Set all of this out plainly in the affordable housing statement at application stage, with the phasing plan and the proposed triggers, and support it with a viability assessment where the obligation is contested.
This is general guidance, not legal advice. Check the position with your local planning authority or a qualified professional before relying on it. PlanScope provides AI-assisted draft reports for planning applications. Reports should be reviewed before submission. We do not guarantee planning approval.
Frequently asked questions
What is an occupation trigger in a section 106 agreement?
A clause restricting how many market dwellings can be occupied before the affordable dwellings in that phase have been completed and transferred. It is the authority's most effective sanction because it operates automatically and needs no enforcement action. The usual negotiated form allows up to 50 per cent of the phase's market dwellings to be occupied first.
Can all the affordable units sit in the final phase?
Authorities resist it, and most phased agreements allocate affordable units to each phase by tenure and size in an annexed table. Where a phase has an uneven mix, such as 18 market houses and two affordable flats in a block completing last, the trigger becomes unworkable, so move the units or move the phase boundary at drafting stage.
What delays a transfer to a registered provider?
Usually external works and title. Landscaping around an affordable block often waits for the rest of the phase to finish, and carving a block out of a larger title requires plot boundaries, easements and rights of way to be drafted and registered. Build both into the construction programme as dated milestones rather than treating them as legal formalities.
What if no registered provider will buy the units?
The agreement should contain a cascade: marketing to providers for a defined period at a stated price basis, then an offer to the authority, then to another provider, then tenure conversion with written approval, and only then a commuted sum calculated by a formula set out in the agreement. Each step needs a duration and a price basis.
Should a developer accept a bond for affordable housing delivery?
Resist it where possible, because the occupation restriction already provides effective security and a bond carries a real cost. Where the authority insists, cap the bond by phase rather than across the whole scheme, and tie its release to the transfer of that phase's affordable dwellings rather than to completion of the development.
Sources and further reading
This article is general guidance about the planning system in England and, where stated, the rest of the UK. It is not legal or professional advice. Check your local planning authority’s validation requirements and take professional advice for your specific site.