Section 106 and CIL Explained: What Developers Pay and How It Affects Your Land Price

Most landowners never pay a penny of section 106 or CIL. The developer does. But a housebuilder works out what it can pay for land by starting with what the finished homes will sell for and taking off everything it has to spend. Affordable housing, school contributions, road improvements and CIL are all on that list. Every pound of them is a pound that cannot go to you.

That is why two fields that look the same can be worth very different amounts in different council areas. It is also why you will be asked to sign a legal agreement with the council near the end of the planning process, and why your solicitor needs to read it carefully.

This guide explains what each charge is, how they are worked out, why you sign the section 106, and how they flow through to the price of your land.

A section 106 agreement takes its name from section 106 of the Town and Country Planning Act 1990. It is a legal agreement between the council and the people with an interest in the land, made alongside a planning permission. The formal name is a planning obligation.

Its purpose is to deal with the effects of a particular development that cannot be dealt with by planning conditions. Under the Community Infrastructure Levy Regulations 2010 (regulation 122), an obligation can only be taken into account if it is:

• necessary to make the development acceptable in planning terms,
• directly related to the development, and
• fairly and reasonably related in scale and kind to the development.

A section 106 obligation runs with the land. It binds whoever owns the land in future, not just the people who signed it, and it is registered as a local land charge so that later buyers can see it. Planning permission is usually not issued until the agreement is signed.

The agreement can be varied by agreement at any time. After five years, a party bound by it can apply formally to have an obligation changed or removed if it no longer serves a useful purpose.

Affordable housing is normally only sought on major developments, which for housing generally means 10 or more homes or a site of 0.5 hectares or more, although councils in some designated rural areas can set a lower threshold. Smaller schemes usually pay CIL, where the council charges it, and little or no section 106.

Housing on land released from the Green Belt, including grey belt land, has to meet the Golden Rules, which include a higher affordable housing requirement. Our grey belt guide explains those.

CIL is a charge councils can choose to levy on new development to help pay for infrastructure across their area, such as schools, roads, health facilities and flood defences. Unlike section 106, it is not negotiated site by site. It is a published tariff.

Charging Schedules and Rates

Each council that charges CIL adopts a charging schedule setting out rates in pounds per square metre of new floorspace. Rates can differ by type of development and by zone within the district, so housing in a rural village might pay a different rate from housing in the main town. Some types of development are zero-rated. The council has to show, with viability evidence, that its rates strike a balance between funding infrastructure and keeping development viable, and the schedule is tested at an independent examination.

Not every council charges CIL. In London, the Mayor also charges a separate Mayoral CIL on top of the borough's own. You can find your council's charging schedule on its website, usually under planning policy.

What It Is Charged On

CIL applies to development that creates 100 square metres or more of new floorspace, or creates a new home of any size. It is charged on the gross internal area of the new floorspace, with credit given for existing buildings that have been in lawful use and are being demolished or reused.

Indexation

Rates are not frozen at the level in the charging schedule. They are updated each year using the RICS CIL Index, published by the Royal Institution of Chartered Surveyors, so the charge on a scheme depends on the index figure when planning permission is granted.

When It Is Paid and by Whom

CIL becomes payable when development starts. Many councils allow payment in instalments. Normally the developer formally assumes liability before starting. If nobody does, liability falls on the owners of the land at that point. That is one reason to make sure any contract to sell your land deals with CIL clearly, especially if you are keeping land next to the development.

A share of CIL, normally 15%, rising to 25% where there is a neighbourhood plan, goes to the parish or neighbourhood where the development happens.

The two work side by side. CIL pays for infrastructure across the district. Section 106 deals with things specific to the site, most importantly affordable housing, which CIL cannot cover. The rules are meant to stop a developer being charged twice for the same thing, so a council that collects CIL for school places should not also ask for a section 106 payment for the same school places.

On a typical larger housing scheme in a CIL-charging area, the developer pays CIL on the open-market homes and enters into a section 106 agreement for affordable housing, open space, site access and any specific local items. Where the council does not charge CIL, more of the burden sits in the section 106.

The August 2026 NPPF says councils should use national model planning obligations unless there is a strong reason not to. That should make agreements more consistent and quicker to settle over time.

Usually, yes. A section 106 obligation has to be entered into by people with an interest in the land, so that it binds the land itself. If the developer does not yet own the site, which is the normal position under an option agreement or a promotion agreement, the council will want the owner to sign. Any lender with a mortgage over the land will usually need to sign or consent as well.

This worries some landowners, understandably. You are signing up to obligations to build affordable homes and pay large sums to the council. In practice, a well-drafted agreement protects you. Your solicitor should check for these points:

• The obligations only bite when development starts, which you will never do yourself.
• You are released from the obligations once you have sold the land or no longer have an interest in it.
• The developer or promoter indemnifies you against any liability under the agreement.
• The developer pays the council's legal costs and your own solicitor's costs of reviewing it.
• Any land you are keeping is not bound by obligations meant only for the development site.
• Your mortgage lender has been approached in good time, so it does not hold up the permission.

The reason councils insist on your signature is simple. If the permission were issued and the site then sold to someone who was not bound, the council could lose the affordable housing and contributions that made the scheme acceptable. Signing is normal, and refusing to sign usually means the permission is not issued.

The simplified example below compares the same site with and without affordable housing, section 106 and CIL. In reality, a scheme with no contributions would not get permission. The point is to show where the money goes.

Three things stand out. Affordable housing is usually the biggest single cost. Section 106 and CIL come off the land value almost pound for pound. And the land is still worth far more with planning than as farmland, which in this example might be something like £10,000 an acre, or around £74,000 for the whole site.

It follows that a council's policies on affordable housing and its CIL rates are part of what your land is worth. So is the timing. If a council raises its CIL rates or its affordable housing requirement before your scheme gets permission, the land value falls, whatever was said at the start. That is one reason some landowners prefer an agreed price to a percentage of market value. Our guide to option agreements explains the difference.

Sometimes a developer argues that a scheme cannot afford the full policy requirements, usually the affordable housing. It submits a viability assessment showing the numbers, and the council has it independently checked. If the argument is accepted, the council may agree to fewer affordable homes or lower payments, often with a review mechanism so that more is paid if values rise.

Government guidance is clear on one point that matters to landowners. When a council tests viability, the land is valued as its existing use value plus a premium that gives a reasonable incentive to sell, not whatever the developer agreed to pay. The price paid for the land is not a justification for failing to meet policy. The August 2026 NPPF (policy DM5) goes further and says that neither the price paid for land nor the price intended to be paid through an option agreement can justify it.

In plain terms, a developer cannot agree to pay you a very high price and then ask the council to cut the affordable housing to make the sums work. If a buyer offers a figure that looks too good to be true, ask how it allows for full policy compliance. Viability assessments are normally published, so the figures behind a scheme can be seen by anyone.

The Levelling-up and Regeneration Act 2023 created powers for a new Infrastructure Levy, which was meant to replace most of section 106 and CIL with a single charge based on the value of the finished development. You may still see it mentioned in older articles.

In July 2024, the government said it was not implementing the Infrastructure Levy and would instead focus on improving the existing system of developer contributions. At the time of writing (September 2026), section 106 and CIL remain the system in England.

When we review your land, we look at the council's affordable housing policy, whether it charges CIL and at what rate, and the likely section 106 items such as school places and road improvements. Those costs are built into our offer from the start rather than deducted later, and the price we agree with you is a fixed figure, so a later rise in contributions is our risk, not yours.

We negotiate the section 106 agreement with the council and pay for it. When you are asked to sign, we cover the reasonable cost of your own solicitor reviewing it, and the agreement should be drafted so that the obligations fall on the developer, not on you. Your solicitor can confirm that before you sign.

For the tax side of a sale, see our guide to tax when selling land for development. For how the planning route itself works, see how it works.

If you would like to know how your council's policies affect what your land could be worth, ask for a free review.