A year after the mandatory Biodiversity Net Gain (BNG) policy was introduced under the Environment Act 2021, national property consultancy Carter Jonas has released a comprehensive analysis titled Biodiversity Net Gain: Navigating the Evolving Market.
The report sheds light on how this pivotal change in legislation is impacting developers, landowners, and local planning authorities (LPAs) across England.
Implemented on 12 February 2024, BNG requires that all new developments result in a measurable increase in biodiversity – typically a minimum 10% gain – with most LPAs enforcing this threshold.
Carter Jonas’ research, which examined over 3,300 hectares of development sites, revealed that the average habitat baseline value stands at 3.45 biodiversity units (BU) per hectare. For a standard 10-hectare development site, this means developers must enhance or create habitats to secure at least 37.95 BU.
OFF-SITE SOLUTIONS
The report found that 54.7% of developments deliver BNG entirely on-site. However, off-site solutions – including purchasing biodiversity units from landowners or the national statutory credit scheme – are becoming essential, especially as regional variations in habitat bank availability emerge.
Regional disparities: The East and South East have more established habitat banks, while other regions face shortages.
Habitat types: The difference in biodiversity baselines between greenfield (3.60 BU/ha) and brownfield sites (3.17 BU/ha) was smaller than anticipated.
CHALLENGES AND OPPORTUNITIES
Despite positive industry engagement – with 69.4% of proposed schemes identifying BNG solutions at the planning stage – the report highlights key challenges.
INVISIBILITY OF DEMAND
According to David Albrough, Joint National Lead of Carter Jonas’ Natural Capital Services Team, developers struggle to predict their biodiversity unit needs, making it hard for landowners to gauge whether their habitat projects will find buyers. This uncertainty is slowing investment in habitat creation.
He says: “The industry has been slowly getting to grips with mandatory BNG over the past year and there are a couple of key issues coming through. Firstly, the invisibility of demand to potential suppliers. Developers of all types are having real difficulty in predicting their likely demand. This means that it is not clear to the likely providers if there will be a market for the units they want to produce. Thus, in some cases, they are not committing to schemes.
“Secondly, this bias in the regulations towards on site mitigation is already causing problems, especially for smaller developers and developments. With the additional costs and risks being passed on to the owners of the houses which in turn will make them harder to sell, this risks making some developments unviable.
“To solve these problems, firstly developers can use the research we have carried out to give them an estimate of their likely demand. They can then take this information to the market and let the market work out how to deal with any fluctuations. Secondly, government needs to review the bias towards on-site BNG for small developments because in reality impacts are far better mitigated off-site. If we can get this right, we will be on the way towards a properly functioning market which is in all our interests.”
FUTURE TRENDS
The evolving BNG landscape presents both risks and opportunities. The government’s target of building 1.5 million homes over the next five years is expected to heighten demand for biodiversity units, potentially outstripping supply in some regions. Richard Holliday, Associate at Carter Jonas’ Leeds office, warns that this could affect housing density and project viability.
Additionally, two major developments are on the horizon. Local Nature Recovery Strategies (LNRS) are expected to roll out nationally and could push biodiversity unit prices higher.
And from November this year Nationally Significant Infrastructure Projects (NSIPs) will also be subject to BNG requirements, further intensifying demand for biodiversity units.
DEVELOPMENT STRATEGY
Carter Jonas emphasises that engaging with BNG should be a strategic decision. Lucy George, Senior Natural Capital Advisor, points out that habitat banking involves long-term land use changes and must be carefully weighed against other priorities like food security and economic growth.
