The UK’s housebuilding market faces challenges in response to the introduction of the Biodiversity Net Gain (BNG) requirement under the Town and Country Planning Act 1990. From 12 February 2024, developers in England must deliver a minimum of 10% increase in the biodiversity value found on the site prior to their development as part of planning permissions. While BNG has been celebrated as a significant environmental measure aimed at halting habitat loss and encouraging ecological sustainability, it has also raised concerns in respect of the impact it will have on housing supply, affordability, and market dynamics. There have also been questions as to how this requirement aligns with Labour’s ambitious house building plan of 300,000 new houses a year.
What is Biodiversity Net Gain?
The BNG requirement compels developers to ensure that the biodiversity value of any habitat impacted by a new development is not only replaced but improved by a minimum of 10%. The number of biodiversity units within a habitat will depend on such things as its size, quality, and location. The gains can be achieved through on-site improvements – such as creating green spaces, planting trees, or supporting wildlife. It may also be possible to reach this target through off-site compensation measures, such as paying for habitat restoration elsewhere. By quantifying biodiversity into a measurement that is ascertainable, the government hopes that enforcement will be easier and developer obligations will be clear.
Impact on the Housebuilding Market
- Increased Development Costs BNG implementation undoubtedly raises the cost of housebuilding. Developers are expected to make financial and spatial provisions for biodiversity improvements, which can translate into higher land acquisition costs, the need for specialised ecological expertise, and increased delays in securing planning permission. These associated costs will either be passed directly on to consumers in the form of higher property prices or will result in landowners achieving a lower value for their land on the open market in the longer term. If it is not feasible for developers to enhance and restore the biodiversity on-site, they are required to make biodiversity gains off-site by buying different units on the market. If this also fails, developers will be forced into purchasing statutory biodiversity credits directly from the government. These credits are very expensive and are seen as a last resort.
- Pressure on Housing Supply There is concern that the extra costs and complexities associated with BNG compliance could reduce the number projects which are viable for developers to build across England. This could have the effect of slowing down the rate of housing delivery. The housebuilding market in the UK has underperformed the previous Government’s target of 300,000 new homes a year. It is hard to see how BNG requirements will help achieve the Labour Party’s target of 1.5 million new homes in this parliament. The hurdles associated with delivering the large-scale projects required to hit this target is likely to mean there is a further suppression of housing output, particularly in regions with high house prices, such as London and the South East.
- Housebuilders Large housebuilders, with more capital and greater access to ecological expertise, may be better positioned to absorb the additional costs of BNG. In contrast, smaller developers, who often deliver local or specialised housing projects could find themselves pushed out of the market. Increased market concentration would result in fewer developers controlling larger shares of the housing market and consequently reducing competition and innovation.
