When large residential developments receive planning permission, local authorities typically require a proportion of the new homes to be provided as affordable housing. This requirement is set through a Section 106 planning obligation and means that new estates contain a mix of market-rate and below-market-rate homes alongside each other.

The Planning Obligation

Section 106 of the Town and Country Planning Act 1990 allows local authorities to negotiate obligations with developers as conditions of planning permission. On residential developments, the most common obligation is the provision of a percentage of affordable housing units. The required percentage varies between local authorities, typically between twenty-five and forty percent of the total number of homes. The affordable units are sold or transferred to registered providers, typically housing associations, at a discounted price to allow them to let or sell the homes at below-market rates.

Types of Affordable Housing

Affordable housing on new build estates includes social rent, where rents are set according to the government's social rent formula at significantly below market rates; affordable rent, where rents are set at up to eighty percent of market rent; shared ownership, where buyers purchase a share and pay rent on the remainder; and First Homes, a discount market sale product introduced in 2021 where homes are sold at a minimum thirty percent discount to local first-time buyers. Each tenure type has different eligibility criteria and costs for occupants.

Pepper-Potting vs Clustering

Planning authorities typically require affordable units to be pepper-potted across the development rather than clustered together, so that affordable and market homes are interspersed throughout the estate rather than creating distinct zones. Pepper-potting creates a more socially mixed community and avoids stigma. In practice, affordable and market homes on the same estate are often indistinguishable externally, with identical design and materials.

Impact on Market Home Buyers

The presence of affordable housing on a new build estate is generally not a negative factor for buyers of market-rate homes. Studies of house prices on mixed-tenure estates do not consistently show a value penalty from the proximity of affordable units. The overall quality of design and management of the development, the demographic of occupants, and the location are more significant value drivers than whether some homes on the estate are social or shared ownership.

Summary

Affordable housing on new build estates is provided through Section 106 planning obligations, typically comprising twenty-five to forty percent of total units, in social rent, affordable rent, and shared ownership tenures. Units are pepper-potted across the development. Affordable and market homes are typically indistinguishable externally. The presence of affordable housing does not consistently negatively affect the value of adjacent market homes.