A week later, the Environment Act made it a legal requirement for all new development to provide a minimum 10% biodiversity net gain (BNG).
The prospect of a new development tax has also moved forward, with the potential introduction of a new Infrastructure Levy outlined in the recent Levelling Up and Regeneration Bill.
While the new policy announcements have always been viewed quite separately, BNG can be considered a form of land value capture in itself: a financial consideration for developers which has the potential to either reduce other contributions (for affordable housing, infrastructure, community benefits) or to drive down land values – or both.
And yet there is potential that BNG can create monetary value rather than functioning as an additional development tax and reducing viability is through any additional open space associated with the BNG adding ‘amenity’ and placemaking value to developments.
Impact on developers
Potentially, developers can benefit from ensuring schemes incorporate attractive, biodiverse sites which appeal to house buyers. This is already common and is a proven benefit, often delivered in combination with the SUDS strategy. The interplay with the push towards zero carbon development is also likely to change the dynamic of the discussion over time.
On the other hand, developers (even local authorities) may struggle with the requirement to manage land for 30 years (as required by the Environment Act) because of the management challenges and maintenance liability. This can represent a significant cost. Community ownership is often mooted as a solution, but its benefits are constrained by the need for an underlying entity to provide certainty.
Over time, it is likely that developers and landowners will find innovative ways in which to address the requirement on developments to provide BNG and on farmers to meet environmental targets, to the benefit of both – but in the meantime the cost is unclear.
Impact on landowners
With everything else being equal, the increased cost of providing BNG suggests that land would change hands at a lower price, to the detriment of landowners.
However, BNG represents some benefits to landowners. For many, the principal impact is that of legacy: landowners who are selling land which borders their own estates will welcome well-managed and attractive green spaces. Those with particular social/ecological/environmental aspirations will welcome the potential for the land to address climate change and protect or regenerate native species.
Furthermore, with farming subsidies increasingly moving from production to environmental targets, this change sits well with farmers’ new objectives and business models.
To minimise any impact on land values (and indeed, to potentially grow them), our advice to landowners is that they adopt a creative approach, rather than relying on the mechanisms within a standard land agreement. This typically means taking a longer-term view of land promotion. Many major estates, corporates and local authorities see the benefit of agreeing reduced upfront land receipts on the basis that they share in longer-term returns. In some cases they choose to remain actively involved in the creation of new developments, delaying the financial return on investment until the point at which the value has risen, while also maintaining a role in the evolution of the scheme – something that is proving popular with landed estates in particular.
Biodiversity net gain is undoubtedly an additional challenge to the development industry, but it is one which, given appropriate consideration, can be turned around to benefit individual developments, their neighbours and the environment more generally.
