Community Infrastructure Levy (CIL) and Section 106 (S106) both create financial obligations on development.
But they behave very differently.
Confusing the two is one of the easiest ways to misprice land.
The simple distinction
- CIL is formulaic.
- Section 106 is negotiated (within policy frameworks).
That difference is structural.
It affects certainty, timing, negotiation risk, and ultimately residual land value.
CIL: The Predictable Layer
CIL is set by a charging schedule adopted by the local authority.
It is calculated as:
Net additional floorspace × published rate × indexation
In most residential schemes:
- The rate is fixed by zone and use class.
- Affordable housing is exempt.
- The indexation basis is clear (BCIS All-in Tender Price Index from schedule adoption date).
- Instalments policy is published in advance.
From an underwriting perspective, CIL is:
- Quantifiable at appraisal stage
- Verifiable against public documents
- Rarely negotiable
- Rarely a source of delay risk
The only real variables are:
- exact floorspace calculation,
- exemption eligibility,
- and indexation timing.
CIL belongs in the appraisal as a defined line item.
Section 106: The Negotiated Layer
Section 106 obligations are:
- Site-specific
- Policy-driven
- Often subject to viability discussion
- Tied to planning permission
Common S106 heads of terms include:
- Education contributions
- Highways works
- Open space contributions
- Affordable housing
- Monitoring fees
- Ecological mitigation
- Recreation / SANG / SAMM (in affected areas)
Unlike CIL:
- Rates are often expressed per dwelling
- Caps and triggers vary
- Indexation bases differ by authority
- Payment timing depends on triggers (commencement, occupation thresholds, etc.)
S106 is not random — but it is not formulaic.
It sits somewhere between policy expectation and site negotiation.
What This Means for Land Pricing
When pricing land, developers need two things:
1. A fixed cost layer (CIL)
This can be modelled with high confidence.
If you get the floorspace right, CIL should not surprise you.
2. A precedent-informed range (S106)
This cannot be assumed from thin air.
It must be grounded in:
- Comparable agreements in the same LPA
- Similar use class
- Similar dwelling count band
- Recent decision dates
This produces a low / mid / high per-dwelling range.
That range is what belongs in the residual land valuation.
Not optimism. Not worst-case panic. Observed precedent.
Where Deals Go Wrong
Land is often mispriced because:
- CIL is included precisely.
- S106 is either ignored, guessed, or assumed from a single past scheme.
That creates false certainty.
If the S106 outcome lands materially above the assumed rate, the residual disappears.
If it lands below, you were overly conservative — but that is rarely how land deals are bid.
What Lenders Should Look For
When underwriting a residential scheme, a lender should expect:
- CIL calculation shown separately from S106.
- S106 broken down by obligation type.
- Per-dwelling rates evidenced from comparable agreements.
- Indexation basis clearly stated.
- Triggers mapped to projected cashflow.
The question is not:
"What is the S106?"
The question is:
"What is the evidence behind the S106 assumption?"
How PlanSureAI Treats the Difference
PlanSureAI treats CIL and S106 as separate exposure objects:
- CIL: calculated deterministically from published schedules.
- S106: extracted from executed agreements and structured into comparable-based per-unit rates.
No prediction. No guesswork.
Just:
- Published rates (CIL)
- Observed precedent (S106)
- Transparent calculation logic
That distinction matters.
Because one is a formula.
The other is a negotiation bounded by policy.
Run the free constraints check on the homepage. When you have the agreement, generate a structured S106 annex.