What is the difference between Section 106 and CIL?

Section 106 is a negotiated, site-specific planning obligation that can deliver affordable housing and targeted contributions. The Community Infrastructure Levy is a fixed charge per square metre of new floorspace set by a published schedule. Affordable housing is delivered through Section 106, never through CIL.

Does every council charge the Community Infrastructure Levy?

No. CIL is optional for charging authorities, so some areas levy it and others rely on Section 106 alone. Where CIL applies, the rate comes from the authority's adopted charging schedule, can vary by zone and use, and is index-linked, so always check the current schedule for the specific site.

How does affordable housing affect development value?

Affordable homes secured by Section 106 transfer to a registered provider at well below open-market value, so they reduce a scheme's gross development value. A higher affordable-housing percentage lowers GDV, which in turn lowers the residual amount available to pay for the land.

When should I work out Section 106 and CIL costs?

Before you agree a land price. Put affordable housing into your GDV as reduced-value units and put CIL and contributions into your costs, then run the residual. Because Section 106 is negotiated, test the bid against a higher affordable percentage or contributions bill so an unexpected obligation does not turn a purchase into a loss.

Section 106 and the Community Infrastructure Levy explained

Threshold Guides · 9 min read · England & Wales

Two mechanisms capture a share of development value for the public: Section 106 planning obligations and the Community Infrastructure Levy. They are often confused, they work very differently, and both are costs that must sit in your appraisal before you agree a price for land. Treat them as an afterthought and you will overpay for the site.

What Section 106 is

A Section 106 agreement (named after section 106 of the Town and Country Planning Act 1990) is a planning obligation: a legal agreement between the local planning authority and the developer, tied to the grant of permission and binding on the land. It is negotiated site by site and can require works or payments that make a specific development acceptable. The classic content is affordable housing delivered on site, plus financial contributions towards the infrastructure your scheme puts pressure on: school places, healthcare, open space, highways and transport, and monitoring fees.

Obligations are not a free-for-all. To be lawful, a Section 106 obligation must meet three tests set out in the CIL Regulations 2010: it must be necessary to make the development acceptable in planning terms, directly related to the development, and fairly and reasonably related in scale and kind. If a request fails those tests, it should not be in the agreement.

What the Community Infrastructure Levy is

The Community Infrastructure Levy (CIL) is a fixed charge, not a negotiation. Introduced by the Planning Act 2008 and set out in the CIL Regulations 2010, it is levied per square metre of net additional floorspace and defined in a charging schedule that each charging authority adopts after examination. Rates can vary by use and by zone within an authority's area, and the charge is index-linked, so the figure you pay reflects construction cost inflation since the schedule was set.

Crucially, not every authority charges CIL: some rely on Section 106 alone. Where CIL applies it is largely non-negotiable, falls due on commencement of development, and is calculated mechanically. There are defined reliefs and exemptions, including for affordable housing and self-build, but you secure them by following the CIL procedure before you start on site.

Simplified CIL liability = CIL rate (per sqm) x net additional chargeable floorspace (sqm), adjusted by an index factor for inflation since the schedule was adopted.

Net additional floorspace deducts qualifying existing buildings, so redeveloping an occupied building can reduce the charge. Because CIL is charged on new floorspace, larger and higher-specification schemes carry more of it regardless of how the values stack up.

How the two differ

Negotiated versus fixed. Section 106 is negotiated for the site; CIL is a set rate from a published schedule.
Site-specific versus area-wide. A Section 106 obligation addresses the impacts of that development; CIL is a tariff applied across the charging area to fund a pipeline of infrastructure.
In-kind versus cash. Section 106 can deliver physical affordable homes and on-site works; CIL is a cash payment.
Affordable housing. This is the decisive one. Affordable housing is secured through Section 106, not CIL. CIL cannot be spent on the affordable homes your scheme provides.
Certainty. CIL is knowable in advance from the schedule; Section 106 is only fixed when heads of terms are agreed, which injects risk into your numbers.

Typical heads of terms

Every deal is different, but a residential Section 106 commonly covers an affordable housing requirement (a percentage of homes, with a tenure split between rented and shared-ownership products set by local policy); financial contributions towards education, health, open space, sport and play, and off-site highways or public transport; on-site works secured by obligation, such as drainage, public open space and estate management; and monitoring and review fees. Larger or longer schemes increasingly carry a viability review mechanism, which revisits affordable housing provision if values move. Read the local plan and the authority's policies before you model anything: the percentages and contributions are policy-driven and vary enormously between authorities.

How they hit GDV and viability

The two mechanisms bite in different places in the appraisal, which is exactly why you cannot lump them together.

Affordable housing reduces GDV. Affordable units transfer to a registered provider well below open-market value, because the price reflects what the homes are worth as discounted-rent or shared-ownership products. A scheme with 30% affordable housing has a materially lower gross development value than the same scheme sold entirely at market prices.
CIL and financial contributions are costs. They come out alongside build cost, fees and finance.

Both routes reduce what is left for land. In residual terms a higher affordable percentage lowers GDV while contributions and CIL raise costs, so the residual land value falls on both counts at once.

Factor them in before you bid

The order of operations matters. Establish the likely policy position first: the affordable housing percentage and tenure mix from the local plan, whether the authority charges CIL and at what rate from its charging schedule, and the contributions that similar nearby schemes have carried. Put affordable housing into your GDV as reduced-value units, put CIL and contributions into your costs, and only then run the residual to a land price. Because heads of terms are negotiated, sensitivity matters: test the bid at a higher affordable percentage or a larger contributions bill, so an unexpected obligation does not turn an acceptable purchase into a loss.

This is also where a viability assessment comes in. Where policy-compliant obligations appear to make a scheme unviable, an assessment can inform what the site can genuinely support, but paying too much for land is not, by itself, a justification for providing less. See our guides to development viability and the residual land value calculation, and use Threshold to build the GDV, drawn from local sold prices (see live per-square-foot values by area), that the whole calculation rests on.

Frequently asked questions

What is the difference between Section 106 and CIL?: Section 106 is a negotiated, site-specific planning obligation that can deliver affordable housing and targeted contributions. The Community Infrastructure Levy is a fixed charge per square metre of new floorspace set by a published schedule. Affordable housing is delivered through Section 106, never through CIL.
Does every council charge the Community Infrastructure Levy?: No. CIL is optional for charging authorities, so some areas levy it and others rely on Section 106 alone. Where CIL applies, the rate comes from the authority's adopted charging schedule, can vary by zone and use, and is index-linked, so always check the current schedule for the specific site.
How does affordable housing affect development value?: Affordable homes secured by Section 106 transfer to a registered provider at well below open-market value, so they reduce a scheme's gross development value. A higher affordable-housing percentage lowers GDV, which in turn lowers the residual amount available to pay for the land.
When should I work out Section 106 and CIL costs?: Before you agree a land price. Put affordable housing into your GDV as reduced-value units and put CIL and contributions into your costs, then run the residual. Because Section 106 is negotiated, test the bid against a higher affordable percentage or contributions bill so an unexpected obligation does not turn a purchase into a loss.

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Data referenced in Threshold is displayed under the Open Government Licence (HM Land Registry Price Paid Data, EPC Register, ONS, UK HPI). All figures produced by Threshold are statistical estimates for site appraisal, not RICS valuations.