Biodiversity net gain becomes a reality

The new biodiversity net gain (BNG) requirements are set to come into force from November 2023. This will legally mandate securing a minimum 10 per cent biodiversity net gain from new commercial and residential developments in England, with a few exceptions.

While the requirements - part of the Environment Act 2021 – will have financial and operational implications, the real estate industry has had several years to prepare for BNG.

Many developers are already delivering BNG in anticipation of the new rules coming into force, and while there is currently no legal obligation, some local planning authorities have adopted planning policies requiring a 10 per cent minimum net gain. 

It is hard to argue that the real estate industry has not been afforded enough time to plan for mandatory BNG. However, three months out, the industry is still awaiting secondary legislation and guidance on fundamental issues, including what constitutes irreplaceable habitat and how local planning authorities should approach BNG for phased developments.

On a practical level, a template Biodiversity Net Gain Plan is also still to be published.

In the meantime, let’s recap on what is known about the BNG rules and system that is soon to apply to most new development schemes.

Post-consultation

In a major update earlier this year, the government did publish its response to a consultation on how BNG will be achieved in practice. This was accompanied by national guidance, outlining how BNG affects land managers, developers and local planning authorities.

The consultation addressed key aspects of BNG, spanning delayed starts and exemptions, off-site gains, delayed delivery and habitat banking.

Local planning authorities were the largest single group to provide consultation responses. This is no real surprise considering their role in securing and policing the delivery of BNG.

The successful implementation of BNG hinges on local planning authorities possessing the skills and resources required to take on this new responsibility. This was acknowledged in the consultation response where the need for additional training and capacity was outlined.

Since then, the government has committed £9m of funding to support local authorities in recruiting additional ecologists and specialists, with Trudy Harrison, Nature Minister, saying: “Today’s funding and guidance is the next step towards delivering this important part of our Environment Act, which will come into force later this year.”

In the same announcement, the government also opened applications for ‘responsible body status’ - enabling organisations to enter into conservation covenant agreements with landowners. These covenants will most likely be used when a biodiversity scheme is located away from a development site and outside a local planning authority’s area.

Conservation covenants and Section 106 obligations will help secure the delivery of BNG, either onsite or offsite, with provisions for ongoing monitoring and maintenance for a minimum of 30 years following the completion of a development.

Organisations can now check if they are eligible to become a designated responsible body and create a conservation covenant, with the government outlining three key categories: A local authority, a public body or charity where at least some of its main purposes or functions relate to conservation, and a body other than a public body or charity where at least some of its main activities relate to conservation.

Biodiversity credits

The government’s consultation response did also reaffirm a desire to ‘continue to incentivise a preference for on-site gains over off-site gains’.

However, this is a policy approach rather than legislation. Developers will still be able to deliver BNG either onsite or offsite, or through a combination of onsite and offsite solutions. 

Should onsite delivery not be viable, the Environment Act 2021 introduces ‘biodiversity gain sites’ as a means of securing the delivery of BNG offsite. The market for this is now developing, with the Environment Bank and The Land Trust identifying suitable sites for BNG delivery, and now bringing forward and managing their own schemes. Other private landowners are now also establishing BNG sites that can be utilised by developers.

Where there remains a shortfall or lack of options, developers can purchase biodiversity credits from the government. There was uncertainty around this route, with many predicting that prices would be set higher to encourage onsite or offsite provision in the first instance.

The government has now revealed its statutory biodiversity credit prices, while also providing further information on calculating costs for developers buying statutory credits – stressing that this is a last resort option for developers that are unable to use onsite or offsite units.

A ‘spatial risk multiplier’ will apply to statutory biodiversity credits. This increases the number of credits needed where offsite solutions are being utilised – the aim being to encourage local or onsite mitigation. This can be calculated using the statutory biodiversity metric.

Natural England will be given the responsibility for selling statutory biodiversity credits on behalf of the Secretary of State. The guide prices will be reviewed every six months and price changes will be indicated ‘well in advance to allow developers to plan ahead’.

Developers will, however, be allowed to sell excess biodiversity units. This can help secure offsite gains for another development, provided that the excess gain is registered and there is genuine additionality for the excess units sold. The consultation response acknowledged that this could impose an artificial ceiling on the gains achieved so will be kept under review.

Evolving system

While the government’s consultation response and updates on statutory credits provided clarity on parts of BNG, more detail is needed ahead of the November 2023 deadline.

There are also questions to be answered around how BNG also fits with the government’s shifting stance on the planning system and housing delivery more generally. 

Its decision to double down on brownfield delivery, densification and focussing growth on cities could pose challenges when it comes to achieving BNG onsite, with developers then reliant on the offsite market, which is still in its infancy, or the costly statutory credit route.

All of this is, of course, happening during a period of high inflation and interest rates – factors that are already impacting lenders and causing a slowdown in parts of the market.

These operating conditions must be taken into account. That’s not to say the approach to BNG should be rethought – the real estate industry recognises the importance of implementing these measures as to safeguard habitats and encourage more biodiversity - but rather that clear and timely secondary legislation and guidance is critical to developers and local planning authorities being fully prepared for November and BNG coming into force.

The government must also continue to take the industry’s views and recommendations into account. Issues will no doubt arise as a result of the requirements being enforced, especially as other legislation is brought in, including the Levelling Up and Regeneration Bill.

Maintaining good lines of communications between the government and real estate industry is also an opportunity to identify ways to improve the BNG system in the long-term.

Despite being years in the making, BNG must keep evolving post-November 2023. This is key to delivering the biodiversity enhancements, while sustaining a viable housing market that is capable of delivering the homes the country so badly needs.

Will Thomas is a principal associate and planning specialist at Shoosmiths