Section 106 housing — the affordable homes that a developer is obliged to deliver under a planning agreement — has been quietly difficult to dispose of since the middle of 2024. Where the previous market reliably absorbed completed S106 stock through a small number of well-resourced Registered Providers, the market in 2025 has fragmented, slowed, and become decidedly more selective.

The practical consequence for the developer with a completed phase to sell is a wider bid-ask spread, longer due diligence periods, and a different cast of potential purchasers. None of this is insurmountable, but it changes the appraisal — and ought to change the engagement strategy.

The widening spread

Across the eight S106 disposal instructions the practice has handled in the last twelve months, the average gap between developer expectation and the best offer received has widened from approximately 3–5% in 2023 to 8–15% in 2025. The variance is wider on smaller phases (eight to fifteen units) and on schemes with mixed tenure obligations.

Two structural factors lie behind the change. First, the major Registered Providers have, in many cases, paused or slowed acquisition programmes in the face of building safety, fire safety and decarbonisation capital demands. Second, the calculation of fair value under the relevant planning obligation now competes with the RP's own development pipeline at a moment when build costs are still recovering from the inflationary period.

Where the patient purchasers now sit

Three groups of purchaser have emerged as the most consistent acquirers of S106 stock in 2025:

  • Smaller, regionally-focused Registered Providers. The medium-sized RPs with concentrated geographies — typically operating across a county or pair of counties — are buying steadily, particularly where the scheme fits an existing management area.
  • Pension-fund-backed PRS aggregators. A small number of well-capitalised aggregators have moved into the S106 market with specific mandates around social and intermediate rented stock. Their decision-making is slower but their commitment, once given, is reliable.
  • Local authority housing companies. The wholly-owned housing companies established by a growing number of councils have taken on a meaningful share of acquisitions, particularly where the scheme is in their direct administrative area.

The terms they will agree

Across these three groups, three points of negotiation now recur:

Due diligence periods of 8–14 weeks have become standard, against the 4–6 weeks of two years ago. Phased completion linked to occupancy is increasingly common — particularly with PRS purchasers, who may take stock in tranches of 20–40% over a 12-month period. Partial deferred consideration — typically 5–10% held back against snagging or affordability evidence — is now a feature of most negotiations.

The S106 market has not disappeared. It has matured into something slower and more particular. The developer who plans for this market gets through it.

What developers should do differently

Three practical adjustments separate the developers who are completing S106 disposals smoothly from those who are not:

Engage potential purchasers earlier in the planning cycle, not later. Pre-planning conversations with target RPs — sometimes 18 months ahead of practical completion — set expectations on specification, tenure mix, and management arrangements that materially shape the offer.

Build a wider haircut into the development appraisal. The 3% allowance that was conservative in 2022 is no longer enough. An assumption of 8–10% against gross development value at the S106 disposal line is now defensible and, in most cases, prudent.

Consider direct lettings as a fallback. Where the disposal market is genuinely thin for a particular scheme, retaining and letting the S106 stock — on a market or affordable basis, depending on the obligation — preserves cash flow and creates time for the disposal market to reopen.

The practice acts for developers and Registered Providers on Section 106 disposals across the South West. A conversation is welcome at any stage of the development cycle.