The problem with Biodiversity Net Gain

One year on from new legislation making biodiversity net gain (BNG) a legal requirement for developers, research shows it has delivered less than half the habitat expected. David Richardson looks at what’s holding BNG back.

It is around a year since England made history by becoming the first country in the world to make biodiversity net gain (BNG) a legal requirement for all new developments.

The legislation, part of the Environment Act 2021, came into effect for major developments last February and for smaller developments in April. It means that, more than just showing that a development does no harm or that any harm is mitigated, it actually improves biodiversity by at least the mandatory 10%.

The theory behind it is to help tackle the alarming and widely reported decline in biodiversity. But how is it working in practice? Not as well as hoped according to research by the Wildlife and Countryside Link, a network of environmental organisations, which suggests that the habitat it has created so far is not even half of the minimum expected by Natural England.

Although there is likely an under-reporting by local authorities, as of February this year just 773 hectares of land had been secured for habitat (680 offsite and 93 onsite) according to a series of freedom of information requests.

As Richard Benwell, CEO of the Wildlife and Countryside Link, puts it: “BNG is full of potential, but it’s also full of holes.”

A slow start

Under the new legislation, developers cannot break ground until their Biodiversity Gain Plans have been submitted and approved by the local authority, a requirement that is secured by a mandatory (deemed) Grampian planning condition. Failure to factor this in at an early stage will inevitably lead to delays, which is why Planning Practice Guidance (PPG) recommends that conversations about BNG happen during the progression of an application, rather than just at condition discharge stage.

The most straightforward way for developers to fulfill their BNG requirements is by creating habitat onsite within the red line boundary of their intended developments, but that is not always possible. The most popular and cost-efficient alternative is to buy units from offsite ‘habitat banks’, whether owned by a third party or on other land the applicant may own or control. It is this need to find and acquire units that is partly responsible for why the national BNG scheme has got off to a slow start.  

For those setting up habitat banks, they must have all the relevant consents in place, such as planning permission for the habitat establishment works and a section 106 agreement or conservation covenant to ‘secure’ the habitat bank. The site must also be registered on the Gain Site Register operated by Natural England in order for BNG units to count towards a development’s BNG. All these things take time.   

At the outset there was a shortage of available sites producing the BNG units or sites in favourable locations, an issue for developers as the cost to acquire the necessary units rises if the habitat bank does not fall within the same local authority area as the development. However, more sites have now been and continue to be repurposed by individual landowners, or by unit providers who are creating a network of sites from which they can create the necessary units, both in terms of location and type of unit.

Whilst there may have been some uncertainty from habitat bank providers about the viability of their schemes, that appears to have been dispelled now, and business is booming, with the Environment Bank reporting that sales in January this year alone matched the last six months of 2024. 

Developers can also buy statutory biodiversity credits from central government if they can demonstrate that a committed effort to deliver BNG onsite or via offsite units has failed. Not only is this considerably more expensive, but strict government guidance dictates that credits should only be used as a last resort. Take up has therefore been limited, which is no bad thing.

Monitoring and enforcement

Biodiversity is a long-term commitment – the law states that developers must manage and maintain the habitats they create for at least 30 years.

It is early days as far as monitoring and enforcement are concerned, but the government has warned that there will be penalties for breaches.

Monitoring and enforcement provisions are one of the meatier aspects of s106 agreements and conservation covenants. The Planning Advisory Service has made available model s106 obligations regarding on and offsite BNG, and these have been taken up by many authorities. They do, however, raise the slightly thorny issue of whether performance bonds should be required as a financial guarantee should they default on their obligations, with LPA resources already quite constrained.

Ultimately, this is a decision for each Local Planning Authority (LPA) to make, but we understand that the bond market is not yet fully developed in terms of offering 30-year bonds for BNG schemes, and of course adding a bonding requirement to a planning obligation increases the financial burden on the development. Further, it isn’t necessarily in the LPA’s capacity to price the potential costs of having to ‘step in’ and deliver the obligations via a call on the bond. Developers will not necessarily have carried out that quantification exercise either.

Another area that local authorities may have to monitor closely is where planning applications claim to be exempt from BNG requirements. There are a number of exemptions including developments of less than 25 square metres of onsite habitat and 5m of onsite linear habitat such as hedgerows.

Recent research by software provider Terraquest suggests that the number of applications trying to rely on this exemption rose sharply following the introduction of BNG for smaller developments in April last year. It is for those smaller developments where we may see buying offsite units grow even more in popularity in the future.

Creating habitats onsite may be the most straightforward in the short-term, and we may even see red line site boundaries adapted to bring BNG onsite to avoid the need to have registered offsite gains. However, buying offsite units means that the long-term monitoring and reporting obligations and liability if targets are not met is taken on by the habitat bank provider. Whilst it may not be the cheapest route, this is increasingly being seen by developers as the lowest risk.

Local planning teams are already overstretched and under-resourced, leaving them little time to get to grips with this new legislation, and government guidance does not detail how monitoring and enforcement will be carried out. If non-compliance is to be enforced, however, then investment will be necessary, for example, in the services of a qualified ecologist to accurately assess the BNG element of applications and monitor developments in the long-term.

It will take time to see the benefits of this new legislation, but those benefits will only be maximised if local planning teams are given the resources to implement, monitor and enforce it properly.

David Richardson is head of the planning and infrastructure consenting team at Ashfords.