The Labour AM has asked the Welsh Government to re-examine the system after planning inspectors ruled that a property development firm did not have to pay £334,683 to Denbighshire Council for a development of flats on land at Plas Derwen in Abbey Road.
Under Section 106 Agreements developers are bound in contract to deliver a portion of the project in affordable housing or other community benefits such as playgrounds or new roads.
However the economic slowdown is leading to more of these agreements being torn up.
The AM said this pattern could be repeated across Wales leading to a huge loss of funds for local communities.
Mr Skates said: “As a result of the economic slowdown we need to see a change to the way planning law operates in Wales, particularly in relation to the obligations that are enforced on private sector developers to develop affordable housing.
“Up until now planning gain or Section 106 agreements have placed conditions on developers to ensure a certain portion of the build is affordable housing or other facilities such as a new park or playground that would benefit the community.
“However, as we have seen from the Llangollen case, the economic slowdown is leading to more and more developers being released from their contractual obligations.
“If the Llangollen case is being repeated across Wales this is millions of pounds potentially being lost by our communities.
“It’s a difficult situation because whilst we want to get the economy moving again through more housing construction, there is the risk that communities in Wales could lose more of this very valuable funding stream.”
The Welsh Government said earlier this year it will work with councils to revise the Section 106 guidance because "inconsistencies in approach" can act as a barrier to housebuilding.
An investigation back In February by the BBC showed that more than half of Welsh councils were owed nearly £2.3m from private developers under section 106 agreements.
Mr Skates added: “We need to see reform thought through carefully. Whilst there must be room for negotiation of section 106 agreements as economic times get tough, developers must not be released from their obligations lightly and it must always be with the consent of the council, not forced upon them as happened in Llangollen.
“Maybe we could look to more innovative solutions such as having the Section 106 agreement transferred into a long-term loan that the developer could pay back over the longer term? We also need to look at the powers councils have to enforce current agreements.
“Whichever way we go, we must ensure communities don’t lose out and that we maintain confidence in contracts that have been signed in good faith and we don’t undermine transparency in the planning process.
As llanblogger revealed last week, at an appeal hearing in Llangollen Town Hall on September 4, Belgrave Homes (Llangollen) claimed that because the original development of 20 apartments in Abbey Road is set to make a financial loss, an agreement – or obligation - it signed with Denbighshire County Council in 2006 to make cash contributions towards affordable housing and public open space in the town no longer serves a useful purpose.
But the council argued that the sums covered by the Section 106 Agreement - £226,432 for affordable housing and £47, 526 for open space making a total of £273,958, indexed to £334,683 up until last April - should still be payable.
In his official ruling, the inspector, Emyr Jones, said: “The appellants are not in a position to pay these sums and the bank, which has to bear the bulk of the above loss, is not going to make any additional payments on its own volition.”
Allowing Belgrave Homes’ appeal, he said: “In the above circumstances, I am of the view that there is no real prospect of the council recovering the commuted sums and its principal solicitor accepted that the chances of so doing were slim.
“As a result, adopting a pragmatic approach, it can be concluded that the obligation no longer serves a useful purpose.”
· See llanblogger’s full story at: http://llanblogger.blogspot.co.uk/2012/09/inspector-allows-appeal-over-plas.html