Could the obligation for developers to leave the environment in a better state than they found it lead to opportunities for landowners?
Michael Gove may have departed Defra to lead no-deal Brexit planning, but his fingerprints are set to remain on the department’s policy for decades to come. In countless speeches during his 773 days as Secretary of State for Environment, Food and Rural Affairs, he referred to his ambition for this Conservative government to “be the first generation to leave our environment in a better state than that in which we inherited it”. His influence is almost certain to shine through in the Environmental Bill when it eventually enters Parliament, and his agenda in planning policy has the potential to create opportunities for landowners.
"With a target of 300,000 new homes every year, there are going to be opportunities for landowners to get involved in offsetting the impact of developments.”
A new obligation for developers to demonstrate a 10% net gain in biodiversity on most sites they build on is the latest example. “Previously, there should have been no loss to biodiversity caused by development, but Defra’s research found that simply replacing anything that was impacted wasn’t enough,” explained Kieron Gregson, associate in Carter Jonas’ London development team. “If you cut down a tree, you had to replace it – but that approach was not working, and now the government wants more. Now there is a requirement for developers to assess the potential harm of proposals to habitats, and to provide an overall improvement on the environmental value by a minimum of a 10% gain in biodiversity. If the developer is unable to mitigate or compensate on site, it would be made to pay into a central fund allocated for nature improvements elsewhere in England.”
This guidance has been laid down in the National Planning Policy Framework, but will be built into the Environment Bill which, at the time of writing, was scheduled for Parliamentary discussion in September. “The emerging position coming forward will be what the value is of farmland that could serve to offset the biodiversity impact,” Kieron said. “If you sell land for residential use there is a significant uplift in value compared to bare agricultural land, but what value will developers attach for providing it for biodiversity offsetting? There may also be opportunities to rent it for 30 years rather than sell it; that’s another conversation that needs to be had. We don’t yet have all the details, but there is certainly an opportunity there which needs exploring.”
The government has committed to a target of 300,000 new homes a year – requiring about 7,000 hectares of land to come forward for development. Greenfield sites are generally favoured by house-builders due to the often-prohibitive cost of remediation works for brownfield sites. Kieron added: “The significant amount of building that’s required to meet the new homes target is going to create a significant biodiversity impact that will need to be mitigated. The intention of this guidance, which is set to become legislation, is that the biodiversity offsetting is done on-site with the provision of measures such as tree planting and the installation of swales, green roofs, green walls and hedgerow corridors, for example.
“However, it’s unlikely that this will be possible in every location, which potentially opens the door for landowners to get involved.” From 2012 to 2014, Defra piloted offsetting to achieve biodiversity net gain in six local authorities across England: Coventry, Solihull & Warwickshire; Essex; Nottinghamshire; Devon; Doncaster; Greater Norwich. No offset sites were created during the two years, although the timeframe was considered too short to secure suitable sites. By the end of the programme, 16 applications were expected to result in Section 106 planning agreements to mitigate impacts, including by offsite compensation – for example, improving biodiversity on land away from the development site.
Whether landowners benefit from either the sale or letting of land to developers offsetting their environmental impact will ultimately depend on whether the returns are better than income from other land uses. While the concept of biodiversity net gain was embedded by some local authorities years ago, it will be new to the majority – and the value assigned to this type of land use will take some time to be established. Kieron said: “We work with estates all over the UK and there is a lot of land which is never going to be suitable for development and perhaps doesn’t yield particularly well from agricultural use either. Therefore, selling to a developer to offset their biodiversity impact, or managing it on their behalf for a rent, might have more value. Currently it’s hard to put a per-hectare value on anything, and that’s the question everyone will be wanting the answer to.”
There are wider considerations, too. Offsetting must be carried out for a minimum term of 30 years. And with little clarity on how agriculture and environmental schemes will shape up post-Brexit, there may well turn out to be better, more profitable options available to farms and estates. “For example, a site near a settlement might not currently be suitable for housing but, in 15 years’ time, it might be. Things change,” Kieron continued. "If you sign up for biodiversity net gain offsetting for 30 years now, you could be waiving your ability to realise the development value of that land in 15 years’ time. It’s a long-term play, and needs plenty of consideration.”
“It will be a long-term play, so landowners need to understand the potential of their landholding”
Kieron advises landowners who may be assessing the development potential of their land – or who would consider engaging with a developer – to provide land for biodiversity offsetting to first establish their position. “From the outset you need to look at land you would consider viable for a project such as this,” he said. “It may be that marginal farmland is not yielding enough of a return to warrant it being kept in
food production. Assessing its baseline score on current habitat is the starting point. Once you know its current position, you can begin to establish what would need to be done in order to register a 10% increase in net biodiversity.” Defra’s biodiversity unit calculation is based on habitat distinctiveness, condition and area.
Getting into a good position
To calculate baseline biodiversity units before development, distinctiveness and condition are given ‘scores’ which are multiplied, together with hectares or kilometres of habitat. Risk multipliers are introduced to account for difficulty of habitat creation, distance of offset from development and time for created habitats to reach target condition. Each risk multiplier is assigned a numerical ‘score’ enabling post-development biodiversity units to be calculated. A 10% improvement on the pre-development score must be demonstrated.
Off-site compensation is agreed as a last resort, and local authorities will review developers’ plans to ensure they deliver compensation through local habitat creation projects. Councils want to see enhancements on-site or nearby and, if this cannot be achieved, the developer could face a financial penalty. The result of a consultation held earlier this year estimates that a tariff set between £9,000 and £15,000 per biodiversity unit would stop a payment being preferable to investing in improving biodiversity.
Mandating biodiversity net gain will accelerate activity in this area, and those who have suitable assets and are in a position to move forward may well stand to gain most. Kieron said: “We have expertise across a multitude of disciplines within Carter Jonas and are working on a number of significant strategic land developments with developers, who will be looking at all the options in front of them. “Landowners, particularly those near settlements or near proposed strategic developments, can talk to us about the potential of their farms and estates to keep engaged in the conversation.”
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