Affordable Housing and Viability: How an FVA Affects Your Section 106 Obligation
Affordable housing is the planning obligation most often tested by viability. When a scheme can’t deliver everything the local plan asks for, it’s almost always the affordable housing figure that’s under negotiation — and a financial viability assessment is what decides how much the scheme can actually carry.
This guide explains what counts as affordable housing, how it’s secured through Section 106, where viability comes into it, and the reforms reshaping all of this in 2025–26. For the mechanics of the assessment itself, start with our complete guide to financial viability assessments in planning.
Key takeaways
- Affordable housing is the obligation most often reduced on viability grounds — but only where an FVA genuinely proves the policy level can’t be delivered.
- It’s secured through a Section 106 agreement, increasingly with a review mechanism that claws back more if the scheme outperforms.
- Social rent generates the least value, so it’s the single biggest pressure on viability.
- Green Belt and ‘grey belt’ schemes face the golden rules: affordable housing 15 percentage points above the local requirement, capped at 50%.
- The framework is mid-reform: the Dec-2025 draft NPPF (Policy DM5) proposes to tighten viability — still a consultation, not adopted.
In this guide
What counts as affordable housing?
Affordable housing is housing provided to those whose needs aren’t met by the market. The NPPF definition covers affordable housing for rent (social rent and affordable rent), discounted market sale (including First Homes), and other routes to home ownership such as shared ownership.
The tenures behave very differently in a viability appraisal because they generate very different values:
| Tenure | What it is | Viability impact |
|---|---|---|
| Social rent | The lowest rents, set by a national formula | Greatest — generates the least value |
| Affordable rent | Up to 80% of local market rent | High |
| Shared ownership | Buyer purchases a share and pays rent on the remainder | Moderate |
| Discounted market sale / First Homes | Sold at a discount to market value (First Homes at a minimum 30% discount) | Lower |
Because social rent produces the least value, a higher social-rent requirement is the single biggest pressure on viability in lower-value areas — which is exactly where these arguments are most common.
How is affordable housing secured?
Through a Section 106 agreement — a legal contract between the developer and the council that ties the affordable housing (and other obligations) to the planning permission.
The S106 sets the amount, the tenure mix, and whether homes are delivered on-site or as a commuted financial sum. It runs with the land, so it binds future owners too. Increasingly, S106 agreements also include a review mechanism: if the scheme performs better than the FVA projected, the council can claw back additional affordable housing or contributions.
That’s now standard on viability-led consents, particularly in London.
Where does viability come into it?
A policy-compliant level of affordable housing is assumed deliverable. An FVA is only the route to less than policy where the evidence genuinely shows the full amount can’t be delivered alongside a reasonable return.
This is the point most coverage gets wrong. An FVA is not a lever to reduce affordable housing on demand — it’s a transparent test, scrutinised by the council’s independent reviewer, of what the scheme can bear once realistic costs, values and a reasonable return are accounted for.
If the numbers stack up at the policy level, that’s what you deliver. If they genuinely don’t, the FVA quantifies the affordable percentage the site can support — and the difference is usually locked behind a review mechanism.
The single biggest reason an affordable-housing viability case fails is the benchmark land value: developers who overpay for a site can’t pass that overpayment to the community as reduced affordable housing.
The ‘golden rules’ for Green Belt and grey belt
Major development on land in, or released from, the Green Belt — including ‘grey belt’ — must deliver affordable housing 15 percentage points above the highest existing requirement that would otherwise apply, capped at 50%, alongside infrastructure and accessible green space.
Introduced in the December 2024 NPPF, these ‘golden rules’ raise the bar significantly for Green Belt and grey-belt schemes. Viability for these sites is still tested through the standard PPG approach — but because the affordable target is higher (and weighted toward social rent), the viability headroom is tighter.
Getting the appraisal right matters more, not less, on these sites.
Vacant Building Credit
Where a vacant building is reused or redeveloped, the affordable housing contribution is reduced in proportion to the existing floorspace. The existing gross floorspace is credited against the new development, and the affordable housing requirement applies only to the additional floorspace.
It’s one of the few legitimate ways to reduce an affordable-housing obligation on brownfield sites. But councils will check the building wasn’t made vacant solely to claim the credit, and whether it’s covered by a recent permission for the same development. Used properly, it can materially change a scheme’s viability.
What’s changing in 2025–26?
The adopted framework is the December 2024 NPPF, with the Planning Practice Guidance on viability refreshed in December 2025. On top of that, a wider reform package is out for consultation — so build any current case on the adopted rules, and watch the proposals.
Live now:
- S106 Affordable Housing Clearing Service — launched December 2024 and run by Homes England, it helps match stalled, uncontracted affordable homes with registered providers and councils. Housebuilders and providers register on gov.uk (England outside London, where the GLA leads).
Proposed (consultation closed 10 March 2026, not adopted):
- The December 2025 draft NPPF introduces Policy DM5 on development viability, aimed at reducing unnecessary site-specific viability assessments and tightening when an FVA can justify a below-policy package.
- It proposes standardised developer returns — 17.5% of GDV for market housing, with views sought on 6% for affordable — and floated a minimum proportion of social rent (around 10%).
On the social-rent floor: this was a consultation proposal, not adopted guidance. The government has since indicated it will not introduce a mandatory social-rent target at this stage. Treat the figures above as proposals and date-stamp any advice that relies on them.
What this means for developers
- Evidence the tenure mix and affordable transfer values as carefully as the market values.
- Get the benchmark land value right — it’s the input most likely to sink the case.
- Expect a S106 review mechanism on any below-policy outcome.
- On Green Belt or grey-belt sites, model the golden-rules requirement from day one rather than discovering the gap late.
If you need an affordable-housing viability case prepared or independently reviewed, see our financial viability assessment service and our affordable housing advice, or get in touch with our team.
Frequently asked questions
Yes, but only where an FVA genuinely shows the policy-compliant level can’t be delivered alongside a reasonable return. The council’s independent reviewer scrutinises the assessment, and any reduction is usually subject to a Section 106 review mechanism that claws back affordable housing if the scheme outperforms.
It’s set by the local plan and varies by area — often between 20% and 40% on qualifying sites. Major development in or released from the Green Belt must deliver 15 percentage points above the local requirement, capped at 50%.
A legal agreement between a developer and the council that secures planning obligations — including affordable housing amount, tenure mix and delivery — and binds the land and future owners.
A reduction in the affordable-housing contribution where a vacant building is reused or redeveloped. The existing floorspace is credited against the new scheme, so the affordable requirement applies only to the additional floorspace.
No. It applies to major development on land in or released from the Green Belt (including grey belt). It’s 15 percentage points above the highest existing requirement, capped at 50%, and remains subject to the PPG viability approach.
Social rent, because it generates the least value. Higher social-rent requirements put the most pressure on viability, especially in lower-value areas.
Need an affordable-housing viability case prepared or reviewed?
Our RICS Registered Valuers prepare and independently review viability cases on affordable housing and Section 106 across London and the South East — evidenced, transparent, and built to stand up to the council’s reviewer.
Or explore our FVA service →