Local councils have called the changes “insane”, which were announced by the Department for Communities and Local Government at the end of 2014.
In very rural areas, sites of five homes or fewer will not face the charge, the government said.
Previously under section 106, housing developers could face an average bill of £15,000 per home in affordable housing contributions and tariffs, with some councils charging up to £140,000 on single properties.
The government predicted the changes would provide six-figure savings for small-scale developers in some parts of the country.
Speaking to the Guardian, a Westminster city council senior official estimated the changes could lose the borough as much as £1bn in housing payments.
“There will be some sites where we get absolutely nothing. On a forthcoming scheme we agreed that £9.1m was viable and we would lose all of that as a result of the vacant building credit. On just three schemes we consented [in a planning meeting] on 13 January we lost £29m. It is insane,” he said.
According to figures from the National Housebuilding Council, the number of small and medium-sized builders has halved, from 5,167 in 1997, to 2,832 by 2012.
Housing minister Brandon Lewis said: “Our reforms are helping the country’s small house builders and overnight in many part parts of England it is now cheaper to build an extension, a family annex or a home. On average this will take £15,000 off the cost of building a home, with some councils charging up to £145,000 on a single property.
“By getting rid of these charges, we will build more homes and help provide more low-cost and market housing. This is all about helping hard-working people including small house builders who were hit by the 2008 crash, as well as boosting local jobs and constructions.”
Property developers had previously criticised the section 106 charges as costly red tape which has hampered the growth of housebuilding.
In December, Leeds Building Society started lending on properties restricted by the agreements, applying the changes across its whole mortgage range, including shared ownership.
