What does net gain mean for developers?

The planning system in England will support the government’s environmental mission statement under the new Environment Bill. The Bill requires all new developments that are granted planning permission to provide a 10% net gain in biodiversity.  The Bill follows the release, in July 2019, of the government’s response to the 2018 consultation on biodiversity net gain in development. In that consultation, views were sought on whether a biodiversity net gain should be mandated, and how such an approach could be implemented effectively. What is biodiversity net gain? Biodiversity net gain is the principle that habitats for wildlife must be enhanced and left in a measurably better state than they were prior to development. Section 40 of the Natural Environment and Rural Communities Act 2006 provides that local authorities must “have regard” to conserving biodiversity when exercising their public functions. The National Planning Policy Framework states that planning policies and decisions made by local authorities should “contribute to and enhance the natural and local environment by… minimising impacts on and providing net gains for biodiversity”.  The government’s 25 Year Environment Plan recognises that this duty should be “strengthened” and substantiated to make sure that environmental net gains can be properly delivered. The Environment Bill will be a step in this direction.  How will biodiversity net gain be incorporated into legislation? Section 90 and Schedule 14 of the Environment Bill insert provisions into the Town and Country Planning Act 1990 which make biodiversity net gain of 10% a mandatory condition of planning permissions. Developments must be able to maintain the biodiversity gain for at least 30 years after the completion of the works.  Which developments will be affected? Almost all developments, with the exception of nationally significant infrastructure projects (NSIPs) and marine projects, will be affected. The consultation sought views on whether there should be any exemptions. Although many respondents, particularly members of the public and conservation organisations, objected to there being any exemptions at all, there were many responses indicating that permitted development and householder applications should not have to comply with the net gain requirements.  As a result, the government has announced that it will not “introduce broad exemptions from delivering biodiversity net gain, beyond those exemptions already proposed for permitted development and householder applications such as extensions, and will instead introduce narrow exemptions for the most constrained types of development”. How will it affect development on brownfield sites? The consultation acknowledged that there could be cost implications for the redevelopment of brownfield sites, and said that the government will be addressing this by a targeted exemption for brownfield sites that meet a number of criteria, including that they don’t contain priority habitats and face genuine difficulties in delivering viable development.  Brownfield sites will have to be examined on a case-by-case basis. Where there are very few wildlife habitats, a 10% net gain may be very simple. However, where the abandonment of the site has allowed wildlife to thrive, a 10% net gain could be difficult to meet. Developers may start to carefully appraise the market before acquiring sites, to ensure that a 10% net gain can be achieved with minimal cost. What happens if on-site net gain cannot be achieved or would be very costly? The consultation asked whether it would be appropriate to allow certain types of sites to use off-site compensation without fully considering on-site options. Unsurprisingly, the reactions to this question were split – developers thought that this should be an option; planning authorities and conservation authorities disagreed.  The government does not, therefore, intend to exclude any development from the requirements. However, it will use guidance to stress the need for planning authorities to continue to be proportionate in their application of planning policy. The government’s hope is that this will mean that the development of sites, where reasonable prospects of on-site delivery do not exist, will not be unnecessarily delayed.  Although on-site or local creation or enhancement of habitats is the priority, where suitable local projects are not available, the Environment Bill envisages the creation of national “statutory biodiversity units”. Developers will be able to invest in these if local projects are not available. It is possible that some landowners may consider offering sites specifically for the purpose of providing habitats that could be offset against losses on development sites and secured by way of section 106 agreements.  What else will developers need to be aware of? Although developers are accustomed to providing public space in their schemes, it won’t be possible to use this for on-site habitats in all cases. Therefore, the provision of a generous area of public open space may not achieve the 10% net gain required.  Natural England has published Biodiversity Metric 2.0, which provides a way of measuring and accounting for biodiversity losses and gains resulting from development or land management change. This was available for testing and feedback until 29 February 2020. Another issue for developers is going to be the requirement to maintain the biodiversity gain for at least 30 years from completion of the works. This is going to be a particular issue for residential developers, who generally pass on maintenance of open space following completion of a scheme.  This is usually done in one of two ways – either by having it adopted by the local authority, or by setting up a management company (with residents as shareholders) that takes responsibility for maintenance.  Developers seeking to take either of these routes will need to consider: n Will it be more expensive to have these areas adopted by the local authority owing to the management regime required? Indeed, will local authorities be willing to adopt them at all? n If the management company route is taken, will residential purchasers be willing to take on these responsibilities? If they are, do they have the relevant expertise to do so? It may be that we see a growth in companies that take on these responsibilities. Passing these duties on will, however, lead to further costs for developers. Katherine Evans is a partner and Alexandra Holsgrove Jones is a senior professional support lawyer at TLT