By Andrew Morgan


Published 25 April 2024


This article was first produced for the HBF Policy Conference.


Andrew Morgan, Head of Planning and lead for ESG for Real Estate at international law firm DAC Beachcroft, looks at how enhanced environmental regulation is becoming a permanent feature of the planning regime.

In a planning system many see as already riddled with cost and complexity (and they would be right) BNG may be regarded as yet another ‘hoop’ for developers to jump through. Unlike the sorts of reform we are accustomed to seeing as part of different political parties’ attempts to reduce red tape and boost the supply of housing, BNG is set to remain a permanent feature of land use planning control and mandatory regulations signalling a new era in planning.

Mandatory BNG may appear to be a recent addition to UK planning regulation, but it realises an ambition which originates from the Government’s 25 year Environmental Plan published in 2018 – making a firm commitment to arrest the decline in native species and improve biodiversity. The Environment Act 2021 became the statutory basis for BNG and as of 12 February this year regulations make all permissions for major development (with only a few exceptions) subject to a condition requiring 10% BNG to be demonstrated before development can progress.

Although the proposition of achieving net gain in biodiversity value through development of land is a relatively simple one, the size, location, nature and condition of sites for new housing present numerous challenges. By far the most significant is whether it is possible to achieve the requisite gain within the boundaries of the development or existing land control, failing which some off-site solution will be necessary. The need to demonstrate a solution prior to commencement makes development particularly sensitive to their availability and cost. Inevitable evolution of the DEFRA biodiversity metric tool will also require contingencies to be included.

While the Government operated scheme of statutory BNG credits may provide a solution to some, the need for off-site credits is expected to be met by a fast emerging market for privately operated BNG schemes. As has been the case for nutrient off-setting arrangements in affected areas, this gives rise to creative solutions – such as monetising the cessation of phosphate generating activities (e.g. fish farms). Although the establishment and operation of qualifying BNG schemes is controlled by local planning authorities (i.e. by s106 planning obligations), pricing of BNG credits is unregulated, so values in areas where opportunities are limited may swiftly see bidding on a finite number of credits. This concerns not only sites currently working their way through planning but potential housing allocations and optioned strategic land. We will likely also see recognition of BNG generating schemes across local planning authority boundaries, in recognition of the spatial constraints of certain areas.

The Government does recognise that for the largest housing schemes it will not always be possible to specify the ultimate BNG strategy from the outset. The more flexible treatment of those ‘phased’ schemes therefore allows developers to satisfy their initial pre-commencement condition by demonstrating an ‘Overall Biodiversity Gain Plan’ aimed at achieving the minimum 10%, with ‘Phase Biodiversity Gain Plans’ coming forward at each reserved matters phase – demonstrating how that plan sits within the overall. This will however necessarily attract corresponding phase pre-commencement conditions.

Beyond demonstrating how the net gain will be achieved, there is also the question of resourcing compliance for a minimum of 30 years. For on-site BNG this poses the challenge of sustaining a level of landscape and ecological management which is likely to exceed the usual estate management role – and at a cost significantly greater than a residential service charge would typically fund. The increasingly prescriptive approach to private estate management through planning obligations is therefore only set to increase the rigour around the sustainability of BNG plans allied to resident funded stewardship arrangements. The fact that BNG compliance endures well beyond the occupation of developments raises important questions about the policing and meaningful enforcement of those arrangements if the reason for default is any failing in estate management model – whether operational management, adequate funding or both. 

On the theme of yet further legacy planning, there is also the prospect of the new face of Environmental Impact Assessment - in the form of Environmental Outcomes Reports. At present regulations (pursuant to the LURA 2023) are still awaited. If enacted EORs would represent not only obligations to assess the impacts of development on the natural environmental (as well as a broader spectrum of effects), but will also require potentially long term, local authority monitored, combinations of measures to mitigate or compensate for adverse environmental impacts. Criminal sanctions for non-compliance give a clear indicator that the Government is serious about the non-regressive purpose of this prospective regime. Compliance with EORs would no longer simply represent the cost of resourcing voluminous environmental statements to identify significant effects but would require the approval of measures to actively address harm as a pre-requisite to the grant of planning permission. As with BNG, the need to demonstrate the long term implementation of those measures becomes an immediate commercial consideration.

Finally, net zero carbon. The Climate Change Act 2008 commits the UK to net zero green-house gas emissions by 2050. Unlike BNG and EIA/EOR, which add to the complexity of delivering an existing business model adopting largely traditional methods, net zero carbon will challenge virtually every aspect of the status quo – from establishing the price for land, working with new fabric, design and technologies, monitoring the performance of new homes, to a very different experience for the customer. The Future Homes Standard (i.e. enhanced Building Regulations) is set to come into effect in 2025 and will be the first mandatory step change towards achieving net zero for house-building through fabric and energy efficiency.

Navigating this environmental regulation is going to be challenging, but the creativity and determination of this sector will undoubtedly provide the solutions for a successful evolution.