Why BNG policy needs to prioritise off-site measures

A change in approach is needed in the provision of environmental measures to compensate for the damage done by development, by making off-site measures the priority, says a report out this week.

The sentiment is backed by many others who see current biodiversity net gain (BNG) policy as a missed opportunity for nature restoration.

It is argued that this would go further in achieving the government’s commitment to provide 500,000ha of nature recovery by 2030 than the current framework for BNG, which prioritises on-site mitigation.

See also: Kent landowner’s BNG project highlights the market’s challenges

It would also significantly expand the market for habitat units created by landowners and others for sale to developers.

It is estimated that between 80% and 90% of BNG is being met through on-site provision, which is subject to far less stringent legal requirements than off-site plans.

In general, on-site measures are covered by planning conditions. 

Only measures considered “significant” habitat enhancements are subject to a more robust Section 106 agreement or conservation covenant.

What is judged “significant” is for the local planning authority (LPA) to define.

Ineffective monitoring and reporting

In addition, the monitoring and enforcement of on-site schemes is ineffective.

This is mainly because of a lack of financial resource and expertise among LPAs, but also because it is at the discretion of the LPA, say critics.

This, they say, will result in on-site mitigation failure to deliver the desired nature outcomes.

Written by legal and other advisers to landowners, developer and habitat banker input, the report, The comparative value of on-site vs off-site Biodiversity Net Gain for restoring nature says: “In short, whilst government has so far designed BNG with a preference for on-site BNG delivery, there are significant issues with respect to enforcement.”

Contrast with off-site regime

In contrast, all off-site BNG measures are subject to either a Section 106 agreement with the LPA, or a conservation covenant monitored by a responsible body.

There is a regular monitoring and reporting schedule at, for example, five-year intervals.

The landowner or other habitat bank provider of off-site measures is legally bound to provide those measures over the 30-year period, and action can be taken to enforce this.

In the case of a Section 106 agreement for off-site provision, the LPA has what is known as “step-in rights”.

This enables it to carry out any operation on the land in question and to recover the cost of this from the person under the obligation to provide the habitat.

“The powers of LPAs to enforce off-site BNG delivery are much more legally straightforward and hence more robust, thereby offering lower risk of challenge to LPAs than on-site provision,” says the report.

It points out that step-in rights are not always in place in respect of on-site BNG failures and LPAs have limited avenues to secure rectification in the case of failure.

“There are also potential cost risks to LPAs if they do try and enforce on-site BNG if there is an appeal.”

Developer liabilities handed over

Once a development is complete, it is common for long-term liabilities for the BNG measures to be handed over to a management company or resident’s association, which may not understand the liabilities.

In addition, since there is no enforcement, there is little incentive to maintain the BNG habitat, says the report. 

Dr Sophus zu Ermgassen, a postdoctoral researcher at Oxford University, has studied the BNG regime closely.

Dr zu Ermgassen says that if a developer is clearly not delivering habitat management that is compliant with their net gain proposal, then ultimately it is the responsibility of the local authority to enforce that non-compliance.

Strained LPA capacity

“Local authorities were never designed to do this kind of monitoring and enforcement of relatively subtle differences in habitat within developments, and within their capacity constraints it’s extremely hard to see them fulfilling this function effectively,” says Dr zu Ermgassen.

“It’s a known gap, it’s a really fundamental governance problem at the heart of the BNG system.

“There’s a lot of BNG that has been promised that will not be delivered because of these laws in the short term.

“The problem is that this just means there is a really easy mechanism to bypass the means for delivering BNG credibly because you can just make over-ambitious promises within the built environment and there is a very low probability that you’ll be held accountable.”

Nature and people

A further argument against prioritising on-site measures is the likely conflict between people, their pets and activities and the desired habitat creation and maintenance.

Also, the big gains in nature conservation come from creating as large a site as possible, connected to other habitats and landscapes in a continuum, says the report.

“Interconnected parcels of habitat within a landscape generally hold a greater species number than those that are isolated,” states the report.

Landowner caution

Landowners remain cautious about committing to 30 years of environmental obligations, says James Maxwell, partner in the rural property team at law firm Farrer & Co.

He is working with several landowners, about half of whom are setting up their own habitat bank, with the remainder working with a natural capital partner under differing structures.

“The very fact that there has been a consultation on the small sites has made landowners more cautious,” he says.

“It’s as if the government is struggling to square the circle of being pro-development and also meeting its environmental targets.

“Another major blocker is the lack of clarity and guidance on the tax aspect, in terms of how the payments for BNG will be treated – is it income or capital, and if it is income, is it trading or non-trading income?”  

Depending on that tax treatment, it could radically change someone’s view on whether to enter BNG provision or not, and there is also a degree of uncertainty about the VAT treatment of unit sales, says James.

Consultation outcomes awaited

Much is riding on the outcome of consultations on the delivery of biodiversity net gain (BNG) on small, medium and brownfield sites and nationally significant infrastructure projects (NSIP). The consultations closed last week.

The main proposals of the small and medium sites consultation have been rejected by many environmental and wildlife groups as well as by some landowners.

They would exempt developments of fewer than 10 houses on small sites, and relax or “streamline” the rules for developments of up to 50 houses.

The NSIP consultation is largely expected to deliver a big increase in demand for off-site habitat units.

Devastating consequences

In its consultation response on the small and medium sites, the UK Environmental Law Association (UKELA) condemns the suggested removal of the BNG obligation from sites of nine houses or fewer as a move that would have “devastating consequences” for the BNG policy
as a whole, both in terms of nature benefits and the market for units.

The removal of the BNG obligation for developments of up to nine houses appears to be a very significant removal of development caught by the regime, says UKELA, and there is insufficient evidence to justify a change of this significance, which would invite site splitting to avoid the BNG obligation.

Exempting minor development would also lead to a reduction in demand for the off-site market, it says. Individual transactions for minor developments require fewer units than the average, and are on average for lower unit values but represent 80% of transactions. 

“This new market is an important lever to drive private investment into nature, including meeting the goal for at least £500m of private investment to flow into nature recovery every year by 2027, rising to £1bn by 2030,” says the CLA.

The consultation also questioned whether the current statutory biodiversity gain hierarchy requiring developers to deliver on-site habitat improvements in the first instance, then off-site measures, should be relaxed for small sites.

For medium sites (up to 49 houses), it posed the question of equalising the priority for off-site mitigation with on-site measures.

CLA split on small sites exemption

The CLA’s policy committee was split on blanket exemption for small scale developments, as it represents both landowners who want to develop and those who want to supply the market by providing BNG habitat units. 

It supports elements of the consultation such as the proposal to exempt developments whose primary purpose is to enhance biodiversity, which would help projects like pond creation that have clear benefits for nature but are currently not viable with the cost of BNG.

While the committee agreed that BNG poses challenges for minor applications, particularly for affordable housing, farm diversification, and agricultural development, there was little appetite for a blanket exemption without careful consideration.