What does biodiversity net gain mean for residential development? (2023)

All developments will need to result in enhanced habitats in the future. We explore the land and cost implications

  • What is biodiversity and biodiversity net gain?
  • Delivering BNG
  • The choice of land matters
  • How much land is needed?
  • What’s the cost?
  • Conclusions and considerations

In 2023, biodiversity net gain (BNG) is expected to become a mandatory requirement for all development in England. Some local authorities already have their own policies in place. Those buying land and gaining planning consent for development will need to factor in how they are going to deliver the biodiversity enhancements and the costs involved.

What is biodiversity and biodiversity net gain?

The Environment Bill currently making its way through Parliament aims for development to result in an increase in biodiversity. Biodiversity is the variety of plant and animal life present in an area. It is measured by Defra (the Government’s Department for Environment, Food & Rural Affairs) in ‘biodiversity units’ which are calculated from the area, type and condition of habitats, and length and condition of hedgerows and watercourses.

Biodiversity net gain (BNG) is the net increase in biodiversity after a development has taken place. Once the Environment Bill becomes an Act of Parliament (expected in autumn 2021) and a transition period of two years has passed, it will be mandatory for all developments in England to replace any biodiversity lost and add 10% to provide the net gain. Provision for biodiversity gain will be a condition of planning permission in England – a biodiversity gain plan will need to be submitted and approved by the planning authority to satisfy the condition. BNG is likely to be contracted through section 106 planning agreements, although local authorities also have the option of setting up ‘conservation covenants’ that could endure for longer periods. The net gain will need be delivered by the end of the development and the associated habitat creation or enhancement will need to be maintained for 30 years.

In England, the NPPF already encourages local planning authorities (LPAs) to incorporate biodiversity improvement in new development and many LPAs have BNG policies in place

Lucy Greenwood, Director, Residential Research

The Bill only covers England; however, in Wales, existing regulation requires that development must provide a net benefit for biodiversity. And in Scotland, the 2019 Planning Act requires that planned development secures positive effects for biodiversity.

In England, the NPPF already encourages local planning authorities (LPAs) to incorporate biodiversity improvement in new development, and many LPAs have BNG policies in place. Of those that do, some require no net loss of biodiversity, some require up to 20% net gain, and others require additional S106 payments.

Between 2012–2014, six pilot areas trialled biodiversity offsetting, which has put many of them ahead on the issue. These include: Doncaster, Devon, Essex, Greater Norwich, Nottinghamshire and Warwickshire with Coventry and Solihull. Of these, Warwickshire is often cited as the most progressive, with biodiversity credits for off-site habitat enhancement being commonly traded.

The choice of land matters

The number of biodiversity units needed for the development depends significantly on the starting state of a site. Brownfield sites and agricultural land have fewer biodiversity units than grassland, woodland and shrub, for example.

To illustrate this, we have compared the biodiversity of three different types of site of the same size using Defra’s latest Biodiversity Metric 3.0. This shows that grassland can have five times as many biodiversity units as cropland or a vacant urban site.

How much land is needed?

Defra estimates that 75% of habitat creation could take place on-site. Whether the net gain can be accommodated on-site or not will depend on the design and density of the site, and the amount of biodiversity units at the start. Large strategic sites are more readily able to accommodate BNG on-site due to their size and the lower net to gross ratio of development. However, average-sized sites may need to consider off-site solutions or reduce housing density to accommodate the net gain on-site depending on the scale of the habitat enhancements needed.

Defra estimates that 5,400 ha of land will be needed per year for habitat creation to account for BNG in England based on 2019 housing delivery rates. Assuming 25% of that is provided off-site, 1,300 ha off-site land will be needed each year. To put it in context, this is 20% of the amount of land estimated to be developed for housing in England each year.

If the net gain cannot be provided on-site, the location of land for offsetting is important. In Biodiversity Metric 3.0, land adjacent to the site scores more highly than that further away, making it more advantageous to find sites locally for biodiversity offsetting. Therefore, more land for offsetting will be needed where housing pressures are greatest.

A biodiversity plan needs to be in place as a condition of planning and, therefore, off-site solutions will need to be agreed at this stage. The market for off-site habitat creation is already emerging where BNG is already required. However, it will need to grow to be able to provide enough land needed for offsetting when all developments are required to accommodate BNG.

What’s the cost?

The cost of delivering the enhanced biodiversity relating to a development will depend on how the units are delivered and amount of units needed.

In its 2019 impact assessment, Defra assumed that, based on available market data, a biodiversity unit for typical off-site habitat creation would cost around £11,000. However, there is huge variability in prices agreed to date in this immature market, with some units trading at up to four times this price. This is in addition to any on-site habitat enhancements and management. It will cost c.£20,000 per hectare to create and maintain enhanced habitats for 30 years according to Defra. This cost will need to be factored in when considering the price paid for the site.

To give an indication of the relative cost of these units, we have taken the example of a 10-acre site with a land value of £10m where five off-site biodiversity units and 1 hectare of on-site habitat enhancement to achieve the BNG requirement are needed. In this case, the cost of the enhancements and units would be between 0.8% and 2.2% of the land value (based on £11,000 to £40,000 per off-site biodiversity unit and £20,000 per hectare for on-site enhancements). Although in this example the cost of BNG is not that notable relative to the land value, for sites with greater biodiversity enhancement requirements and lower land values it would be more significant.

Conclusions and considerations

Developers will need to consider how much biodiversity will need to be provided on the sites they buy and reflect it in the price they pay for land. They will also need to consider partnering with ecologists and technical consultants for their planning submissions to ensure they meet the BNG criteria. Although sustainability is essential for the future of our planet, BNG is another requirement that the Government is introducing, which could impact on the viability and supply of housing developments.

From a landowners perspective, there is the opportunity to sell biodiversity units to developers providing and managing biodiversity enhancements on their land. See our previous research on this here:

Biodiversity Net Gain

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What impact is Nutrient Neutrality having on land supply and housebuilding? Take a look at our latest research for more information.

View our latest Development and Planning Insights here.

Check out our environmental exchange here.

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