Biodiversity net gain: are government policies at odds with housing targets?

Earlier this month Cara Groves and Derek Ching of our Development and Housebuilding Team, were among a range of other property professionals, that attended a roundtable event hosted by IB Architects focused which sought to discuss the following proposition:

“Will BNG stand in the way of 1.5 million new homes?”

It’s clear that the biodiversity net gain (BNG) policy – while well-intentioned – presents significant challenges for developers. The policy, requiring developers to increase biodiversity on or around development sites by a minimum of 10%, could unintentionally stand in the way of much-needed housing supply. We have summarised some of the issues explored at the roundtable and why they matter for developers.

Biodiversity net gain issues for developers

1.    A numbers game over quality

The current BNG metric is heavily quantitative, lacking much flexibility to account for the ecological quality of habitats being created. Under this system, habitats are assigned values, enabling developers to calculate a site’s baseline value and work out how to achieve net gain. However, these values are largely determined by factors such as size, distinctiveness, rarity, and condition, which may overlook whether a given habitat is beneficial or sustainable within the local ecosystem. For instance, a woodland scores highly in the metric, yet it may be unsuitable for a specific area where a native heathland would provide greater ecological value and resilience. This metric thus risks promoting a checklist approach, potentially missing the mark on true ecological enrichment.

2.    BNG’s limitations in stacking contributions

BNG contributions currently cannot easily be "stacked" with other similar requirements, such as Suitable Alternative Natural Greenspace (SANG). As a result, developers often face overlapping contributions - increasing land requirements, costs, and planning complexity for developers, potentially delaying projects and reducing profit margins. This separation of contributions can also lead to an overburdened system. This limitation calls for flexible guidance to help balance environmental protections with housing development needs.

3.    The rising cost of development

BNG adds yet another financial burden to a developer's balance sheet. With construction costs, financing, affordable housing requirements, SANG, Strategic Access Management and Monitoring (SAMM) contributions, and other s.106 obligations, developers face increasingly narrow profit margins. Unlike with affordable housing, there is no opportunity to dilute the BNG commitment on grounds of impact on viability. Despite public perceptions, developers play a vital role in solving the housing crisis, yet the financial barriers may deter them from pursuing projects, undermining government targets.

4.    Local provision challenges and the incentive for off-site BNG

BNG policy prioritises on-site biodiversity improvements, but this often proves impractical, especially for developments where space is at a premium. Developers are incentivised to meet BNG targets on-site, yet this can result in a significant reduction in the number of housing units they can deliver - jeopardizing both project viability and the government’s housing targets. If on-site BNG isn’t feasible, developers must turn to off-site provision or biodiversity credits, but the penalties for off-site provision can be steep. For example, if a developer meets BNG targets outside the local authority, they’re often required to “double” the biodiversity units - a costly undertaking.

Interestingly, the discount provided by the metric (for placing units closer to the development) may not be enough to encourage this closer positioning. For example, the cost savings from placing the units in the north, where land is cheaper, can outweigh the discount for locating them nearer to the site. This can unintentionally encourage developers to fulfil BNG requirements in more distant locations, where land is far cheaper. For instance, a developer might secure both the required 10% net gain and the penalty in a northern region, where meeting the same criteria costs significantly less than doing so locally. While this approach meets regulatory requirements, it can undermine the policy’s ecological goals by shifting biodiversity improvements far from the development site. The result is a “tick-the-box” approach that satisfies the letter of the law, but may do little for local ecosystems that would benefit more directly from nearby enhancements.

5.    Big sites vs. small sites

BNG requirements are a real headache for smaller sites, which often don’t have the space to fit in both the biodiversity improvements and the number of homes they want to build. Larger sites have the advantage of more land, so they can more easily meet both housing and biodiversity targets. But for smaller developments, the options are tough - either scale back on housing to make room for nature or risk penalties for not hitting the BNG targets.

The financial impact on small developers can be much bigger too. The costs of meeting BNG on a smaller site are harder to swallow, and without the economies of scale that bigger projects get, it can make or break a project. Cutting down housing numbers to meet the biodiversity targets can also tip the project into being financially unviable.

The sheer financial and administrative burden of having BNG baseline assessments carried out and dealing with the processes to demonstrate 10% BNG uplift places a disproportionate burden on SME developers, who lack the resource that the large PLCs enjoy. On a small site, the costs of compliance will represent a significantly higher percentage of the overall construction costs compared to the larger sites.

Larger sites have more flexibility, but for small sites, there needs to be more room for adjustments based on the project’s size and what’s possible on the ground.

6.    Clarity (or lack thereof) in habitat management and monitoring

BNG policy requires Habitat Management and Monitoring Plans (HMMPs) for developments with “significant” on-site biodiversity improvements, but what qualifies as “significant” is foggy and lacks consideration of the reality. For instance, a site with a base low-biodiversity value might technically meet the “significant” threshold with minimal enhancements - like planting a single tree (half-joking… but you get the idea!) - which could then trigger a 30-year management obligation.

This lack of clarity around “significant” contributions can lead to costly, protracted commitments that may be out of proportion to the ecological impact, adding complexity and expense to projects. Additionally, developers question whether local planning authorities (LPAs) have the resources or expertise to enforce these management plans effectively, raising doubts about the true benefit of these obligations.

7.    Under-resourced local planning authorities (LPAs)

Last…but most definitely not least - LPAs are overwhelmed! Our developer clients frequently report lengthy delays in planning, and BNG risks adding yet another layer to an already congested system. Moreover, LPAs often take a restrictive approach, issuing refusals readily and contributing to rising appeal costs. The pre-application process, intended to streamline planning and increase the chances of a successful planning application, has in many cases become rationed by cash strapped authorities and when available represents an additional hurdle, further burdening developers. If similar attitudes are adopted toward BNG requirements, refusals will continually be issued with equal readiness.

Developers are a critical part of the solution to the housing crisis. Yet the complex, costly requirements imposed by current BNG policies may hamper their efforts to deliver on the government’s 1.5 million (or even a figure remotely close to this) home target. Balancing ecological preservation with housing needs will be crucial to making this policy sustainable and effective.

How we help

Our Development & House Building Team specialises in acting for developers, land traders, landowners and funders in connection with the acquisition, disposal and funding of development sites across the country as well as advising on construction and planning arrangements and plot sales.

Contact us on [email protected] to learn how the team can assist you throughout the development process.