Biodiversity net gain: future of sales and investment trends | Hogan Lovells

The need for mandatory biodiversity net gain will be dealt with through the planning system, with the introduction of a new pre-commencement planning condition which will require a biodiversity gain plan to be approved. It will be measured by way of “biodiversity units” which use a specified metric to calculate units by reference to the type, extent and condition of habitats.

While there are clearly benefits that will be associated with these proposals, developers may be concerned about the impact these requirements will have on their developments and how they can implement them. Importantly, the regulations will allow for the biodiversity net gain to be delivered on-site, off-site or (as a last resort) through statutory biodiversity credits. This will give developers the opportunity to plan according to the proposed site and the suitability of that site’s environment.

On-site

While not all sites will be suitable, the most straightforward way for developers to achieve the mandatory net gain increase will be to deliver this on-site. If net gain can be achieved on-site then developers will not need to consider any off-site enhancements. Early planning will be key to this and developers should consider how best they can utilize their site in line with the new requirements.

For phased developments, we expect the government to require biodiversity gains to be “front-loaded” into earlier phases of a development to avoid subsequent phases failing to proceed or achieve their targets. Forward planning will be key for developers to ensure that they can satisfy local authorities in this respect.

Off-site

While the preference is for developers to deliver net gain on-site, given the nature of certain developments this may not always be achievable. Developers will be permitted to create or enhance off-site habitat, which will be managed through a conservation covenant or planning obligation and registered on a proposed ‘biodiversity gain site register’.

There will be different ways to achieve this, but we expect to see:

  • the development of a market of biodiversity units where landowners (including planning authorities) who can create or enhance habitats, sell the biodiversity units to developers; and

  • developers off-setting biodiversity gains within their own wider portfolio (with necessary land acquisitions to facilitate this), using one or more sites to off-set a lower biodiversity net gain on another site.

Both of these options create an incentive to use land for conservation purposes, something that has arguably been lacking previously. How will this impact the market for biodiversity units? Will it end up as a multi-tiered system with different prices for different areas in England depending on demand? Or will it rely on market forces and stay as a single system?

Being able to use sites on a portfolio basis may also prove to be a great tool for developers. By allowing developers to off-set a lower biodiversity net gain on another site, it may provide an incentive for sites to be used for a purpose best suited to them, rather than shoehorning development or conservation where it does not maximize potential.

The requirements may also spark a change in how local authorities consider land within their local authority area. Will land be allocated for conservation and / or off-setting in future local plans?

From a practical perspective, developers will need to consider:

  • dealing with multiple authorities when offsetting between sites: while the government has indicated that it expects to prioritize net gain offsetting within the local area, it will be possible to offset outside those areas where there are insufficient local opportunities for developers; and

  • acquisition strategies and portfolio management: offsite properties used for biodiversity off-setting will need to be maintained for at least 30 years after completion of works to create or enhance the habitat. Developers should think carefully about how best to acquire and manage such sites to ensure that they are not in breach of any associated conservation covenants or planning obligations.

Statutory biodiversity credits

As a last resort, the government is expecting to establish a process of selling statutory biodiversity credits. This is to avoid delays in the planning system if developers are unable to achieve net gain on-site, off-site or by purchasing biodiversity units. We expect this option to be intentionally uncompetitive with the biodiversity unit market and to be phased out at the earliest opportunity.

Summary

It remains to be seen how the requirement for biodiversity net gain will work in practice. To stay ahead in the market, developers should be assessing their internal or third party resources to ensure that they will have the knowledge and ability to deal with these requirements and start to account for biodiversity net gain in their future business strategies.

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