Biodiversity Net Gain (BNG) is an approach to development and land management that aims to contribute to the recovery of nature. It will apply from November 2023 for all developments in the Town and County Planning Act 1990, unless exempt, and apply to small sites from April 2024.
It is a step-change in how the government seeks to deal with ever-decreasing habitat. The UK has lost almost half of its biodiversity since the 1970s, much of which is due to the loss of habitat to commercial farming and construction. 72% of UK land is managed for agriculture, with a further 8% of land being built on. This has led to a steep decline in the abundance of wildlife and nature.
Developers
With increasing demand for residential housing and commercial property, measures to reverse this biodiversity loss is essential. Under the Environment Act 2021, all planning permissions granted in England (with a few exemptions) will have to deliver at least 10% biodiversity net gain from November 2023. BNG will be measured using Defra's biodiversity metric and habitats will need to be secured for at least 30 years. This requirement will be in addition to existing habitat and species protections already in place.
Plans will need to show how they will make a net improvement to biodiversity, ultimately leaving the natural environment in a better state than it was before the infrastructure was put in place.
While some developments will be able to enhance biodiversity ‘on-site’, there will be sites with constraints that mean they will need to consider other arrangements to meet the new criteria, such as ‘off-site’ BNG, delivered through habitat creation/enhancement via habitat banks, with public and private landowners. In cases where BNG cannot be delivered on-site, or off-site via the market, as a last resort, it may be possible to purchase statutory credits for large-scale habitat projects. However, it is unclear if local planning authorities will require BNG to be delivered within a specified distance or area, or if some local authorities will require a higher percentage of BNG to be achieved.
Landowners and land managers
‘Off-site’ BNG has created a market for rural landowners to sell biodiversity units to developers, which would also need to meet Defra’s biodiversity metric and be maintained for a minimum of 30 years.
This does bring some complications for the landowner, as the BNG sites will need to be formally registered, managed, monitored, and reported on for the duration of the net gain agreement.
Calculating the value
Natural England’s Biodiversity Metric 4.0 is an accounting tool that can be used by ecologists for the purposes of calculating BNG, which uses habitats as a proxy for biodiversity and compares the habitat found on a site before and after development based on habitat size, type, condition, distinctiveness, and location.
Calculating the value of BNG units
Prices for BNG units will be agreed between landowners and developers, so will likely reflect the local market and depend on factors such as the type of biodiversity that needs to be compensated and the cost of land. Market analysis carried out for Defra in 2021 by Economics for the Environment estimated that mandatory BNG could generate demand for 6,200 off-site units per annum, with a market value of £135m (an average of £22,000 per unit). Other forecasts suggest anywhere between £8,000 to £30,000 per unit.
Considerations
We have seen that there have been a few likely routes to enable these agreements between developers and landowners. From self-managing to using a ‘habitat bank’. Each option will require its own consideration by the parties involved, more so for the landowner.
For the developer, they will need to ensure that the BNG uplift can be delivered in line with the proposal in the planning documents. 30 years is a long time and therefore the developers may seek to use an intermediary to manage the BNG sites over this period.
Critically for developers, they will be able to benefit from making use of excess BNG units generated from an existing site and using this excess on new sites.
Habitat banks are being used as a locator tool for developers to help them find local BNG units and are looking to provide management of these schemes for the develop and the landowners.
In terms of the landowners, they may be entering into a lease which will have income and capital gain tax considerations. They may also be taking responsibility for the continued maintenance of the land inline with the prescribed management plan. There remains uncertainty over the Inheritance tax treatment of land within a BNG scheme – currently landowners would usually benefit from Agricultural Property Relief so the potential loss of this relief may make it an unattractive option. The latest budget confirmed that a potential expansion of agricultural property relief to cover certain types of environmental land management is underway, and we would hope this would provide some clarity for those concerned. How long this may take, is unknown.
How can MHA help
If you are a developer or a landowner, there are business opportunities that come with this change, which need further consideration. Our Construction & Real Estate team work closely with our Agriculture team, so can provide the specialist support to help you navigate the new rules and maximise any opportunities.
We hope you find this insight useful and informative. If you have any questions or would like guidance related to your individual circumstances, please get in touch
