Biodiversity Net Gain

Biodiversity Net Gain (BNG) is an approach to development that will demonstrate whether the proposed project will measurably deliver better habitats. The principle is that developers must actively improve, rather than simply offset or mitigate any impacts of development on habitats.

From winter 2023, all developments proposed in the UK will have to prove that there is a measurable increase in the biodiversity that there will be on site – no matter how big or small. The 2021 Environment Act will propose a new condition = Biodiversity Net Gain of 10% minimum.

Developers will be encouraged to take on the advice of an ecologist within the design stage of the project to set out a clear plan for the proposed increase in biodiversity on the site. The majority of boroughs will seek 10% on-site; however, if it is proven that this on-site provision is unachievable, there is a chance that a lower onsite % may be requested with the balance to be provided off-site or through ‘credits’ instead.

The calculation for Biodiversity Net Gain is as follows:

Biodiversity Units Created = Post Development Biodiversity Units – Baseline Biodiversity Units

Where the baseline is what was existing on the site prior to any development intervention, and post-development will in effect be a measurement of the landscaping and biodiversity plan for the site.

There is a minimum requirement of biodiversity net gain maintenance of at least 30 years, this can be done through habitat creation or enhancement - for off-site cases it remains the same. According to Defra, it will cost around £20,000 per hectare of land to maintain as well as create new habitats for the required 30 years. It is proposed that developments should follow the ‘mitigation hierarchy’ in terms of limiting the negative impacts on biodiversity. See below for an example strategy:

This will be reinforced as the cost of biodiversity credits or offsite provision is expected to be higher than onsite delivery.

Most projects are expected to avoid creating any form of impact right from the start of the project. However, if it is looking as though there is going to be some form of impact, then minimisation is the path to follow. Developments that are looking to provide biodiversity net gain on-site can take the restoration approach, whereby they restore and enhance current habitats if they cannot avoid or mitigate first. Although, if there are some adverse effects to the biodiversity that is on-site, there is the chance to make up for it through creation or enhancement of off-site habitats, or buying credits elsewhere.

The majority of UK local authorities are expected to set out the minimum 10% Biodiversity Net Gain for each development in the future (Winter 2023 onwards); however, a certain few are proposing a higher BNG. See the table below:

The introduction of biodiversity net gain for developers is likely to set them back c.£19,698/ha in the future, this will purely be maintenance over the 30 years required. A proposed idea is that Defra will sell‘biodiversity units’ for £11,000 per unit, in which developers will be able to purchase so they can offset their biodiversity obligations – this would be good alternative that many developers will likely consider if it is fully implemented.  

However there is uncertainty about the ‘cost’ of biodiversity credits, which will depend in part on the market and supply/demand. Figures up to £50k per unit have been suggested historically.

So why is this important for viability?

Well firstly in cost – when considering the viability of a scheme both currently and most importantly in 2023 onwards when the Environment Bill’s provisions come into play, either a generic high level assumption, or a detailed site-specific assessment will be required to understand the onsite limitations or offsite cash cost of delivering a scheme. This will either limit the amount of development on a site – due to onsite biodiversity delivery requirements – which in turn will limit viability; or alternatively there will be a cash cost of offsite delivery and maximising schemes, which may have a larger impact on viability depending on the cost of credits.

As well as this, there is the impact on land pricing to consider, and thus benchmark land values. Currently habitat rich land or land with potential for rewilding may have very low financial value, but high ecological value. The biodiversity net gain requirements will impact land markets given the associated value of offsite delivery or credit-buying schemes; resulting in changes to benchmark land values on some schemes that must be considered.

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