MHA | What is Biodiversity Net Gain?

What is Biodiversity Net Gain?

Joe Spencer · February 12th 2024 · read

Ivy wall near the building industry

Biodiversity Net Gain (BNG) is an approach to development and land management that aims to contribute to the recovery of nature.

It applies from 12th February 2024 for all major developments (10 or more dwellings or where the site is greater than 0.5 hectares) in the Town and County Planning Act 1990, unless exempt, and will apply to small sites from 2nd April 2024. It will also apply to nationally significant infrastructure projects from late November 2025.

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 January 2024. BNG will be measured using a statutory biodiversity metric tool 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.

There are 3 ways developers can achieve 10% BNG that must be followed in order of priority:

Leaf in circle
They can enhance and restore biodiversity on-site (within the red line boundary of a development site).
Leaf document hands
If developers can only achieve part of their BNG on-site, they can deliver through a mixture of on-site and off-site. Developers can either make off-site biodiversity gains on their own land outside the development site, or buy off-site biodiversity units on the market.
Leaf hand
If developers cannot achieve on-site or off-site BNG, they must buy statutory biodiversity credits from the government. This must be a last resort. The government will use the revenue to invest in habitat creation in England

Points to note:

  1. Developers can combine all 3 options, but must follow the steps in order.
  2. The 10% uplift is required whether or not the development impacts existing biodiversity.
  3. The net gain must be maintained for a minimum of 30 years if making off-site gains, or significant on-site gains.
  4. Developers must try to avoid loss of biodiverse habitat when doing development work

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 the statutory 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 with Natural England , managed, monitored, and reported on for the duration of the net gain agreement, with responsibilities set out in a legal agreement.

Calculating the value

The government have provided a statutory biodiversity metric tool, which supersedes the Natural England’s Biodiversity Metric

4.0 (Guidance on how to copy over from previous versions of the biodiversity metric and the changes since 4.0 will be published in due course). It 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

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 potential income and capital gain tax considerations. There are opportunities for land owners to consider how best to structure the creation and sale of units generated. They may also be taking responsibility for the

continued maintenance of the land in line 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.

Contact the team

This insight was previously published in our Real Estate Matters Spring 2024

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