Cllr Andy Hull, executive member for finance, performance and community safety. Photograph: Islington Council

Islington Council has defended holding £34 million of unspent house-building money during a housing crisis, blaming “detailed restrictions” on how the funds can be spent.

It comes after housing groups complained that councils are “sitting on” millions of pounds of Section 106 money which could be spent on building new homes.

Section 106 money is paid by developers to local authorities to lessen a development’s extra burden on public services.

An spokesperson said Islington Council had around £34.3 million of Section 106 money as of April 1 this year.

The council spent £15,854,518 in the financial year 2017/18, roughly a third of what the council had at the time, the spokesperson added.

In April, the Huffington Post website reported that local authorities were holding a total of £375 million in Section 106 money.

James Prestwich, head of policy at the National Housing Federation, an association for social housing providers, told the website: “It is deeply concerning that councils in England and Wales are sitting on a pot worth hundreds of millions specifically earmarked for affordable housing.”

A spokesperson for affordable housing campaign PricedOut told the website: “Although there are many reasons councils might not have spent all of their s106 [Section 106] contributions, the size of the underspend is staggering.”

But Cllr Andy Hull, executive member for finance, performance and community safety at Islington Council, told the Islington Citizen the money was held up by bureaucracy and the council’s taking time to make sure the money is spent wisely.

He said: “At a time of huge, ongoing government cuts to council budgets, we are making sure money from developers is spent on the most important projects for Islington.

“Section 106 funds are subject to detailed restrictions around location and type of infrastructure that money can be spent on, but examples of high-priority projects benefitting from this fund include badly-needed new council homes, new school buildings and improvements to parks.”

Cllr Hull continued: “These high-priority projects will make a big difference to Islington, but some take longer to deliver as they are often more complicated than smaller, simpler schemes that do not deliver as wide a benefit.

“Ultimately, the most important thing is to make sure money goes to the projects that will most benefit Islington, and that is what we are doing.”

Islington Council Leader Richard Watts has promised an “aggressive” house-buidling programme of 550 new council homes and 1,900 new “genuinely affordable homes” by 2022.