Will the government’s biodiversity plans prove a net gain for the housebuilding sector?

Almost six years after Michael Gove as environment secretary first promised to make protecting the natural world go “hand in hand” with building more homes, the government’s compulsory biodiversity net gain policy will finally be introduced later this month. Under this policy, all development projects will have to ensure that they generate an increase of at least a 10% in biodiversity, either on site or by off-setting.

At the time, Gove said that his biodiversity net gain (BNG) plan, which became enshrined in the 2021 Environment Act, put “the environment at the heart of planning and development”. Now as housing secretary, overseeing its roll-out across the sector, he says it will ensure that developers “enrich local wildlife when delivering new homes and infrastructure”.

Either way, it is hard to underplay its significance to the industry, potentially fundamentally affecting how developers design, landscape, value, manage and market their sites, and adding a big new layer of complexity into the planning process at a time when the system is already buckling under the strain of a resourcing crisis. “It’s something that’s had a fundamental effect on the way we approach sites,” says Neil Beamsley, group head of biodiversity at listed builder Bellway.

While the final details of the mandatory scheme have only just emerged, the biggest developers have largely been able to skill up, look ahead and do their best to adopt BNG ahead of the game. But huge questions remain over how it will work in practice, and the readiness of smaller developers and local authorities for its introduction. So, what will it mean for the sector?

“Hugely positive”

The principle of BNG is straightforward – to leave a site with better biodiversity after a development than before. Some local authorities have had policies requiring biodiversity net gain – or at least no net loss – for a few years, and some developers that have experience of that, and have positively adopted net-gain strategies, have said it can produce benefits at little cost.

Listed London-based giant Berkeley Group, for example, an early adopter of BNG which claims to have delivered net gain on 54 projects, says it successfully uses images of its biodiverse landscaping in the front and centre of its marketing efforts to drive buyer interest. Louise Clarke, group head of sustainability for Berkeley, says: “As long as you think about biodiversity early in the process, it shouldn’t really cost you more – you need to think of it as part of your design and landscaping. And, in planning terms, offering net gain is seen as hugely positive.”

Developers like Berkeley and Bellway, with the resource to employ in-house specialists and ecologists, have developed processes to ensure net gain is considered even at the point of buying land. Beamsley says he signs off on the net gain assessments made on behalf of Bellway’s land teams before purchase or option agreements are signed, to ensure that no offsite credits will be required.

Rachel Danemann, who as a planning manager at the Home Builders Federation (HBF) has been leading on the BNG policy for the trade body, says the “bigger builders” are “fairly comfortable with BNG”.

Clearly, therefore, there is the potential for Gove’s vaunted win-win here, as net gain done properly could make a substantial difference to habitat loss. Ben Kite, MD of environmental consultancy EPR, which works with local authorities, landowners and developers, says there is a prospect for it to be a vehicle through which councils can fund improvements they want to make in the environment, if they do work up front to identify and allocate strategically located sites for habitat banks in local plans and local nature recovery strategies.

“I’m in favour of trying to deliver biodiversity on site,” he says. “But, where you can’t, the opportunity is to make councils’ nature recovery strategies, which otherwise might sit on a shelf, something that developers can fund when they buy BNG credits.”

Too much too soon

But, as Kite’s comment indicates, the straightforward desired outcome of improving biodiversity belies huge complexity in the detail of the scheme design (see: How will BNG work). And it is that complexity, rather than the principle of it, which is causing some major concerns.

Chris Carr, MD of Cleethorpes-based SME developer Carr & Carr Builders and national president of the Federation of Master Builders, says the reams of regulation combined with a lack of preparedness at local authorities mean that it will be impossible for smaller firms to manage. “It’s too much, too soon and it’s too complex,” he says.

The HBF’s Danemann says that, while some firms are undoubtedly getting totally behind net gain, “some fear it could still become a nightmare. We need to ensure the guidance and local authority resource are in place.”

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Rico Wojtulewicz, head of policy at the House Builders Association (HBA), an offshoot of the National Federation of Builders which represents SME developers, says his organisation was an early supporter of net gain when it was first discussed over a decade ago – on the basis that it was brought forward in a way that small firms could cope with. But he says this has proved to be anything but the case.

An HBA policy document he produced last year said: “Our only caution throughout the process was that it did not turn into an offsite tax harming SMEs […] Unfortunately, our worst fears have been realised.”

Wojtulewicz adds: “It’s the only time I feel guilty for the work I’ve done for my members. We tried to do the right thing, but BNG has been developed in a way that’s completely perverse, and our members are going to be really badly hit.”

Sites of fewer than 10 units will at least benefit from a delayed introduction to the scheme – to April 24 – and be able to use a simplified metric, but Wojtulewicz says this will not be a significant assistance, helping only the very smallest firms.

Prohibitive

For SMEs, concerns remain over viability and deliverability. Despite Clarke’s assertion that delivering net gain need not cost much, the testimony emerging from experience is that costs are wildly variable, and particularly dependent upon whether net gain can be generated on site or not.

Bellway’s Beamsley says the cost impact is very variable “on a case by case basis”, and that while “a significant proportion” are within viability, there are a minority of sites where costs can be “more prohibitive”.

He adds: “It’s only going to be a small number of cases. But most challenging are going to be small sites that have a decent existing biodiversity value, where you’ll inevitably lose a lot in the development. With bigger sites, you have more luxury in getting that back.”

Nuala Wheatley, senior planner at planning consultant Lichfields, says: “Cost impacts will depend on a case-by-case basis on the value of habitat existing on a site, and the space within the site.” On some sites, for example, she said that builders may need to acquire more land or have to reduce the available developable area.

It is unsurprising, therefore, that SMEs, which work predominantly on smaller sites, are more worried about these costs, particularly as they fear that it will not be easy to access the market for off-site credits.

Brokers are marketing off-site credits at an expensive £20,000-£30,000 per biodiversity unit (BDU), says the HBF’s Danemann, but availability is patchy and, says Bellway’s Beamsley, the market remains “very immature”, with a likely 18 to 24 months before it is properly established.

More than that, the FMB’s Carr says, brokers are not keen to sell to SMEs because they are looking for chunkier deals – which might force small builders to rely on buying the backstop credits from the national habitat bank, at upwards of £60,000 per BDU. “For small builders, the national bank might be their only resort,” Carr says, therefore hitting viability.

Lichfield’s Wheatley says: “Should developers need to buy statutory credits, then costs could be extremely high, with published indicative prices ranging from £42,000 for certain grassland and wetland areas up to £650,000 for lakes.”

Added to this is the lack of a brownfield exemption, which Carr says could be particularly damaging, given that sites can often score highly on the habitat metric if they have been left derelict for some time – putting an even higher hurdle in front of getting tricky brownfield sites built out.

“Net gain has totally wiped out the chances of developing one of our sites, Chapman’s Pond in Cleethorpes, for 300 homes which has been derelict and is now full of trees,” he says. “We could never ever make it viable now.

“The policy’s got to be wrong if you can make money on greenfield land, but you lose money on brownfield.”

Delays

There are other issues. Occupying Danemann’s mind since the government dumped the final set of net gain guidance and regulations on the sector at the end of November, is whether the system is likely to cause huge delays in processing applications. This is because the government has made clear that developers must submit their biodiversity gain plans “no earlier than the day after planning permission has been granted”, with councils then having eight further weeks to consider them.

“This will hold up delivery if you can’t get this approved. It’s potentially building in an extra delay into the process in the context where local authorities are already short of staff,” she says.

Neil Beamsley agrees: “It’s very much a concern”. Bellway is also worried about the lack of guidance of how to deal with phased developments, he adds.

More subtle than these big policy concerns, perhaps, are fears about how the policy will play with customers. After all, landscaping new housing developments with the wild flowers, long grasses, shrublands, ponds and woods that will score you highly under the metric might not be popular with customers looking for somewhere to have a barbecue or kick a football abouit with their family.

Berkeley’s Clarke says her experience gives her confidence that homebuyers “love” the biodiverse landscaping designs once the purpose of it has been explained, particularly as Berkeley has been able to retain more traditional amenity space as well. “People have seen wildlife come back, like herons. We’ve had no issues on sites – it’s very popular,” she says.

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Carr, however, about to embark on a major development in the village of Waltham, near Grimsby (see box, below), is less sure. “You plant a flower meadow and it’s nice for about six weeks a year,” he says. “But, for the rest of the time, it’s shrubland, and it’s not going to look great and is likely to attract vermin. It does worry me because I think it will put people off.”

Whether developers can balance the competing demands of customers, wildlife, regulation and the bottom line will only really become clear in the next few weeks and months.