S106 – A route to unlocking new homes in London

London continues to face a well-documented, significant shortage of affordable housing, with delivery slowing sharply due to market pressures including high interest rates, rising build costs, and viability challenges. The GLA has introduced several interventions to address this, most notably the Accelerated Funding Route (AFR) published in December 2024, intended to increase certainty, streamline grant access, and unlock stalled development sites.

However, the 2024 AFR did not have the desired effect and in late 2025, the GLA issued further updates proposing emergency measures to accelerate delivery and widen access to grant funding. Specifically, by allowing grant to be used for S106 affordable housing units above the first 10% of total homes, creating a major shift in policy direction.

Under the 2021–2026 Affordable Homes Programme, the GLA removed grant eligibility for any units defined as “affordable” under a S106 agreement. The rationale was replicated via Homes England’s position that S106 obligations should be delivered without grant, and that funding should instead target land‑led schemes and more challenging sites.

This led to many registered providers (RPs) shifting their approach from S106 opportunities to delivering new homes and land led opportunities. However, over the last few years this has led to greater exposure to wider development market pressures including, rising build costs, procurement delays and regulatory pressures (e.g., post‑Grenfell building safety requirements). This, in addition to RP specific pressures: increased repairs and maintenance liabilities, and viability issues meant RPs increasingly withdrew from the market altogether.

This absence resulted in developers struggling to secure RP partners, which in turn stalled development pipelines. There are thousands of S106 units sitting uncontracted, delaying housing delivery across the country. As of February 2026, less than 8,000 homes have been started in London, approximately 41-44% of the reduced Affordable Homes Programme target, and only 22% of the original 35,000 starts on site target.

The new 10-year rent settlement, 10-year affordable housing programme and the GLA’s updated approach to enable grant funding on S106 units aims to increase affordable housing starts, unlock stalled development sites, reduce pressure on the planning system, improve flexibility and support social rent delivery and support RP confidence and participation.

Its decision to allow grant funding on S106 affordable housing units marks a significant and timely policy shift. By restoring funding access and introducing clearer,  predictable grant routes, London stands to unlock stalled sites, increase affordable housing starts, and bring greater stability to a strained development system.

At Newsteer, we have already supported several registered providers in preparing competitive bids for the new funding round which opened on 24 February 2026 and securing S106 acquisitions as part of their development strategies. Early indications show strong RP appetite to incorporate S106 opportunities into their funding submissions, and we expect this to translate into a meaningful uplift in housing starts over the coming years.

A major shift is expected once the National Housing Bank becomes operational in April 2026 – supplying very low-cost loans to RPs (60% of its capacity being allocated to London), which should support RP’s new development pipelines. This, alongside the recent confirmation of the emergency measures to support housebuilding in London and the new LPG signal a positive coalescence of factors to aid affordable housing delivery in the short to medium term.

While the policy is widely welcomed, its long‑term impact on land values, market behaviour, and RP acquisition strategy will need monitoring, especially given the drastic softening of land prices in recent years and the looming energy crisis caused by the conflict in Iran. Overall, however, the reforms represent a pragmatic response to London’s housing crisis and a meaningful step towards boosting delivery in the short to medium term.

Geena Bains is a development consultancy senior surveyor at Newsteer