Planning Obligations, S106, CIL, and the Policy Costs That Shape Your Return

When the Math Don’t Math — The Costs That Can Sink an Uplift Deal

There’s a moment in every development project where you look at the numbers — the land cost, the build cost, the sale value — and you realise:

“These numbers don’t work. The math don’t math.”

It’s not always because the idea is bad. Often, it’s because of planning obligations — hidden costs imposed by policy that eat into your uplift.

In this article, we break down: - What S106, CIL, and other obligations actually are - How they’re calculated in Oxfordshire - What that means for your returns - And how OLD-Homes navigates these challenges to protect investor capital

1. What Are Planning Obligations?

Planning obligations are contributions that developers must make to get planning permission. They fall into three main categories:

1. Section 106 (S106) Agreements

These are negotiated, site-specific commitments. They can include: - Affordable housing quotas - Highway improvements - School or healthcare contributions - Public open space or play areas

2. Community Infrastructure Levy (CIL)

A flat-rate charge per square metre of new development — varies by council and zone. For example: - In parts of South Oxfordshire, CIL is £150–£200/m² for residential - That’s £20,000–£30,000 per flat, just for the privilege of building it

3. Emerging Policy Costs

From 2024, developers in England must also account for: - Biodiversity Net Gain (BNG): New habitats or offset credits - Sustainable construction standards - Carbon and water neutrality contributions

These aren’t optional extras. They’re part of planning consent — and they affect viability.

2. Oxfordshire-Specific Examples

According to the 2024 Joint Viability Study for South Oxfordshire and Vale of White Horse, these policy costs can erode profit significantly: - In higher-value areas, uplift can usually absorb these obligations - In marginal zones, even a modest CIL charge or 20% affordable quota can push schemes below viability

They modelled dozens of site types — small infill plots, conversions, strategic sites — and found: > “Sites under 10 units with full policy compliance were often unviable without reductions in affordable housing or cost inputs.”

In plain English: if you’re not watching the policy line items, you’re building an investment on fantasy.

3. Why This Matters for Private Investors

From your perspective, this matters for one big reason:

Planning obligations don’t show up in glossy brochures — but they can kill your return or the project for the developer.

Let’s say: - You fund a project expecting £250k uplift - CIL = £40k, BNG offset = £20k, affordable quota cuts sales income by £50k

Suddenly your £250k margin is £140k — and that’s before build or sales exit risks.

This is why OLD-Homes front-loads our due diligence: - We consult viability consultants and planners before acquisition - We pre-negotiate obligations where possible - We model worst-case policy outcomes AND plan B AND plan C — not best-case dreams

Because we’re not interested in hope. We deal in reality that returns, that includes fall-back scenarios.

4. “Hope vs. Homework” — Managing Uplift Risk

When newer developers or their investors get excited about planning gain, they often forget these costs. They assume: - “Planning permission = profit”

But unless the residual value accounts for the obligations, your planning uplift might be a mirage.

Our rule of thumb: > If the deal doesn’t work after full policy load — don’t bank on ‘working it out later’.

We’ve walked away from many, many more deals than we’ve taken forward. Why? Because when the math don’t math, you don’t force it.

That’s what protects capital.

5. Local Knowledge Is the Only Real Edge

Here’s the truth: these obligations are often negotiable — if you know what you’re doing.

Examples: - Some zones have CIL exemptions for change-of-use from commercial to residential - Small sites can sometimes negotiate off-site affordable contributions instead of onsite units - Strategic discussions with local housing officers can reduce quotas based on viability

But these conversations only happen when you’re in the room — and when you have a track record.

That’s why investing with a local, Oxfordshire-based team matters. We don’t just quote policy — we understand how it’s applied in real planning meetings.

6. What This Means for Your Investment Strategy

As a third-party investor, you want projects that: - Have already accounted for obligations before you fund - Include headroom for changing costs or policy surprises - Are run by teams who’ve done this before, in this area

At OLD-Homes, every project appraisal includes: - Line-item modelling of all known and likely obligations - Independent checks with QS, planning consultants, and council policy officers - A strategy for mitigation or adjustment if obligations change

That’s how we protect your capital and maintain the viability of the deal.

Call to Action

Don’t let silent costs erode your expected return. And don’t invest in planning gain projects that haven’t dealt with obligations head on.

Want to see a real-life planning obligations model and how we stress test deals? Request a sample viability pack or book a planning-focused investor call today.

Next in the Series:
Case Studies of Value Uplift in Oxfordshire & Comparable Regions