Biodiversity Net Gain: FAQs for Developers and Lenders

Imagine a future where new developments are legally required to enhance the natural world. For developers submitting new planning applications for major developments in England, that future commenced on 12 February 2024 with mandatory biodiversity net gain (BNG). For small sites, there is bit more time with a delay until 2 April 2024.

If you are a lender providing development finance and/or a developer, use these FAQs to get up to speed quickly with BNG on new developments and the exemptions from the requirements.

What is BNG?

• BNG requires developers to submit a biodiversity gain plan which must be approved by the local planning authority before development can lawfully commence.
• The plan is designed to ensure that the biodiversity gain objective is met.
• The objective will be met if the biodiversity value attributable to the development exceeds the pre-development biodiversity value of the onsite habitat by at least 10%.

What planning permissions will BNG apply to?

• New applications for planning permission for major development made on or after 12 February 2024 or for small sites on or after 2 April 2024.
• Deemed permissions or permissions granted by a local development order will not be subject to mandatory BNG.
• If you vary a planning permission received before 12 February 2024 (for major developments) or 2 April 2024 (for small sites), the variations will not be subject to BNG.

What are major developments?

• Residential developments with 10 or more dwellings.
• Where the site is greater than 0.5 hectares/5,000 square metres.

What are small sites?

• Residential development of between 1 and 9 dwellings or the site area is less than 0.5 hectares/5,000 square metres.
• Commercial development where floor space created is less than 1,000 square metres or the total site area is less than 1 hectare/10,000 square metres.

What should the biodiversity gain plan include?

• Information on steps to minimise the adverse effect of the development on the biodiversity of the onsite habitat and any other habitat.
• The pre-development and post-development biodiversity value of the onsite habitat.
• Any registered offsite biodiversity gain allocated to the development and the biodiversity value of that gain in relation to the development.
• Any biodiversity credits purchased for the development.

When will the LPA approve the biodiversity gain plan?

• The LPA can only approve the biodiversity gain plan if the biodiversity value attributable to the development exceeds the pre-development biodiversity value of the onsite habitat by at least 10%.
• So if the site is worth 40 biodiversity units pre-development, it should be worth 44 units at completion of the development.

What is the biodiversity value?

• The total of:
  • Post development biodiversity of the on-site habitat
  • The biodiversity value of any registered offsite biodiversity gain allocated to the development
  • Biodiversity value of any biodiversity credits purchased for the development.

How is biodiversity value of any habitat or habitat enhancement calculated?

• Biodiversity units using the biodiversity metric.

How do you use the biodiversity metric?

• Use the metric to identify the site boundaries.
• Divide the site into parcels of different type of habitat.
• Input the information about the habitat type, condition and size of each area of habitat.

What does the metric assess?

• The quality of the site based on habitat distinctiveness, condition, strategic significance and connectivity.
• It quantifies the value of the site by translating the information into biodiversity units.
• Scarce and declining habitats will usually score more highly than more common habitats.

When will a development achieve BNG?

• If the site has a higher biodiversity score after development (considering the value of any enhanced or newly created habitats) than before development.

What is the pre-development biodiversity value?

• The onsite habitat is used as the baseline.
• It is calculated as at the date:
  • Of the planning application, where planning permission is granted on application
  • Of the grant of planning permission in any other case
  • Earlier by agreement between the applicant and the LPA.

What is the biodiversity gain site register?

• It records biodiversity enhancement for registered off-site biodiversity gain.
• A biodiversity gain site is land where:
  • A person is required under a conservation covenant or planning obligation to carry out works for the purpose of habitat enhancement
  • A person is required to maintain the enhancement for at least 30 years after the completion of those works.

What are statutory biodiversity credits?

• You can purchase credits from the Secretary of State to meet your biodiversity gain objective.
• The credits will be equivalent to a gain in biodiversity value, which can be included in a biodiversity gain plan.
• To buy credits, you will have to demonstrate that you cannot deliver habitat onsite or via the off-site market.

What is habitat banking?

• Habitat created or enhanced after 30 January 2020 will be eligible for registration and sale of the associated biodiversity gains, provided it meets the other criteria of the biodiversity gain site register.
• It will allow developers to sell the excess biodiversity units as off-site gains for another development, provided that this excess gain is registered and that there is genuine additionality for the excess units sold.

What are the exemptions?

1. Development below a de minimis threshold

• This exemption applies to development that does not impact a priority habitat and impacts less than 25 square metres of non-priority onsite habitat or 5m for non-priority onsite linear habitats.

2. Householder development.

• This exemption applies to development of an existing house.
• For example, ground floor kitchen extensions.
• Applications for change of use of a house or to change the number of dwellings in a building is not covered by this exemption.

3. Small Scale Self-Build and Custom Housebuilding

• This exemption applies to development that:
  • consists of no more than 9 dwellings
  • is carried out on a site which has an area no larger than 0.5 hectares/5,000 square metres
  • consists exclusively of dwellings which are self-build or custom housebuilding.

4. Off-site biodiversity gain sites that require planning permission

• Developments which solely enhance biodiversity to achieve the BNG planning condition for another development through off site enhancements of habitat.
• Development undertaken to fulfil the BNG planning condition and for the purpose of permitting the public to access or to use the site for educational or recreational purposes without the payment of a fee.

5. High Speed Railway Transport Network

• Development which is part of or ancillary to the remaining phases of the high-speed transport network.

What are the impacts of BNG on developers?

• Developers need to integrate biodiversity considerations at the project’s inception.
• Implementing BNG will likely lead to increased costs and extended project timelines. Developers may need to acquire additional land for habitat creation or enhancement, and the process of assessing and ensuring biodiversity net gain can be time-consuming.
• Non-compliance with BNG requirements can lead to project delays, fines, or enforcement actions.
• Successfully integrating BNG can serve as a market differentiator, enhancing a developer’s reputation for sustainability and potentially attracting environmentally conscious buyers and investors.

What are the impacts on lenders?

• Lenders will need to adjust their risk assessment models to account for the additional costs and potential delays associated with BNG.
• The feasibility of a project may be affected by the requirements to achieve biodiversity net gain.
• Lenders might see new investment opportunities in projects or companies specialising in biodiversity enhancement, ecological consulting, or green infrastructure.
• The emphasis on BNG aligns with the growing trend towards sustainable and green financing.
• Lenders could leverage this by offering favourable terms for projects that excel in achieving or surpassing BNG requirements.
• Enhanced due diligence will be required to ensure that borrowers comply with BNG requirements, to mitigate the risk of non-compliance and associated financial penalties.

To summarise…

• Both developers and lenders must adapt to the changes arising from BNG.
• Developers will need to embed habitat considerations into every stage of their projects and lenders will need to adapt by revisiting their risk assessments and investment strategies.

How can Newmanor Law help?

Here at Newmanor Law we offer a bold new style of legal and business advice for developers and lenders in the commercial property and real estate finance world.

If you are a developer or a lender and you would like to work with a team who take ownership of transactions and push deals forward quickly, please contact:

James Dakin on +44 (0)7733 264 800 or email james.dakin@newmanor.com

Karen Mason on +44 (0)7899 301 919 or email karen.mason@newmanor.com