Biodiversity Net Gain: friend or foe?

The 10% mandatory Biodiversity Net Gain (BNG) requirement for new developments is fast approaching.  Defra (Department for Environment, Food and Rural Affairs) confirmed last month that enforcement is expected to commence from November 2023. Whilst some of the detail is awaited in secondary legislation, the ongoing consultation period has revealed how this might affect developers in practice.

The government’s aim to is ‘to leave the natural environment in a measurably better state that it was beforehand’ by embedding BNG considerations at the earliest stage of development[1].

Although not yet in force, several local authorities already impose BNG requirements. Others, such as all of the London boroughs, have yet to embrace the move despite many having declared a climate emergency.

This legislation will compel developers to consider BNG from the outset by requiring that planning applications are accompanied by a "biodiversity gain plan" outlining the strategy for delivering and maintaining BNG. Whilst smaller sites may not see this enforced until 2024, all developers should be preparing now.

How will BNG be measured?

Defra have developed a metric for calculating BNG and the calculation involves a comparison between the "baseline" biodiversity value of the site (which has been arbitrarily chosen as being the biodiversity value of the site pre-development) and the anticipated post-development biodiversity value.

The measurement of biodiversity value at each stage will take into consideration the distinctiveness, condition and strategic significance of three types of “biodiversity units”:

1. Area habitats – such as grasslands, woodlands and mudflats
2. Linear hedgerows and lines of trees
3. Linear rivers and streams

Developments will need to report separately for each unit type. 

How can developers deliver BNG?

BNG can be achieved through an on-site approach, an off-site approach or a combination of the two.

On-site solutions may come in the form of already familiar green walls, brown roof space or blue infrastructure such as wetlands and ponds. Developers will also have the option of tapping into habitat banks to secure gains from the start.

Where on site gains will not be sufficient, the legislation allows for off-site mitigation. This could bring good news (and possibly windfalls) to private landowners who will be able to capitalise on the new legislation through what people are calling the "off-site unit market." Natural England will be running a national register of biodiversity units on which landowners (and local authorities) can list land they have enhanced for developers to purchase or let.

Through this, landowners can realise financial gains by selling and leasing land to developers, brokers and local authorities, allowing developers to generate quick biodiversity gains from using the grassland reserves of adjacent farmers, for example.

This market will also provide an opportunity for developers to monetise any excess of BNG beyond the 10% target.

For those in areas of concentrated development and limited green space, such as Cambridgeshire, this will certainly be a sellers’ market.

In the meantime, whilst this market establishes, the government will be offering a statutory biodiversity credits scheme. Where developers cannot achieve BNG gains either on or off-site, these credits could provide a final fall back. However, it is clear these are to be considered a last resort with a heavy price tag.

Beware of ongoing obligations

One of the most important points for all developers to remember is that this is not just a matter to be resolved during the development phase. BNG must be maintained for a minimum of 30 years post-completion, which is expected to be enforced via Section 106 obligations and Conservation Covenants[2] depending on the location of the site. Developers could seek to offset their ongoing liabilities post development with the (likely costlier) off site option.

How should developers prepare?

1. Chance favours the prepared
There is no doubt that BNG will add to the already overstrained planning system, increasing timeframes and costs for all involved.

When designing or appraising a development, ecological surveys of the site will be required along with the preparation of the new BNG Statement to accompany the planning application. Full details of what this statement should contain are not yet clear.

In terms of maintaining BNG post-completion there, will be requirements for ongoing site surveys and ensuring the maintenance of BNG. Early preparation will be crucial to ensure cost-effective solutions and this could be achieved, in part, by scoping out all on and off-site options as soon as possible. Particularly, given funding for the 30+ year maintenance of BNG will be secured by way of pre-commencement conditions.

Unanticipated changes to the biodiversity of a site caused by, for example, underperforming habitats, whether as a result of plants dying or drought-induced hosepipe bans, could easily threaten the realisation of net gains. Plans will need to account for such contingencies and guard against developments falling foul of the 10% threshold on reaching completion.

Developers should be warned to already have this in mind now for their pipeline and prospective projects.

2. Know your site

Know the land, know its value - and know it early.  Lands such as grassland, brownfield and OMH which are particularly ecologically rich present a risk. Developing on such irreplaceable habitats should be avoided in the interest of preserving those net gains. The challenge will be balancing development goals whilst maximising the biological value of the land a developer has. Ecologists should be involved from the outset.

3. Master the metric

Understanding the metric will be key to making sure that developers achieve the required BNG in the most efficient way. Some important points to note are:

• The metric provides a greater BNG for local off-site biodiversity gains compared with off-site gains made outside of the local authority of the development site.
• The metric favours the early establishment of any new habitats created.
• Connecting into existing infrastructure such as sustainable drainage systems, nutrient mitigation land and SANG land could help deliver net gains.
• Developments in areas already enforcing BNG requirements should be aware of the need to review assessments under any previous metrics to ensure the calculations under the new metric don’t result in a different outcome.

It is hard to argue against the aims of BNG in restoring the UK’s natural habitats and tackling climate change. However, it is equally hard to envisage a scenario in which this does not add further pressure on the planning system. With the housing crisis intensifying and planning reform desperately needed in a way that reduces the burden on the system, there are understandable concerns on how BNG will impact this.

FURTHER INFORMATION

If you have any questions about any of the real estate issues covered in this blog, please contact Daniel Clyne or any member of the real estate team

 

ABOUT THE AUTHORs

Daniel Clyne is a Senior Associate in our Real Estate team. He advises clients on commercial real estate transactions with experience acting on acquisitions, disposals, asset management, pre-lets and lettings, financings and developments.