“If you preach market values, then you also have to preach them even when it’s not in your interest,” an exasperated Sophus zu Ermgassen tells me over the phone. “This is the point of competition.”
Zu Ermgassen is an ecological economist at Oxford University, and I have just shared with him a summary of what the UK’s biggest developers have been saying to DEFRA in their responses to the Biodiversity Net Gain Regulations (BNG) and Implementation consultation earlier this year. He’s not impressed.
The documents, obtained under the Freedom of Information Act, show how the billion pound industry is seeking significant changes to the incoming biodiversity net gain requirements, which are set to ensure that developers deliver a 10% BNG on most new developments from November 2023.
They reveal a number of the industry’s biggest companies pressing upon DEFRA that they are set to be “held to ransom”, and that the national housing crisis will be worsened as a result. The solution they propose to the impending crisis they describe is for a more relaxed approach on where biodiversity gains can be found, cheaper access to government green ‘credits’, and broader exemptions to the policy.
BNG is a cornerstone of how the government intends to meet some of its more ambitious nature recovery goals - including the target to halt the decline of species by 2030 - and is written into the Environment Act. However, DEFRA’s finalised BNG policy has yet to emerge, despite it being less than a year before the requirement is set to become law.
ENDS obtained the BNG consultation responses submitted by Barratt Developments, Persimmon, Bellway Homes, and Taylor Wimpey, who between them built more than 56,200 houses in 2021, generating huge profits.
So what do they want? Key themes emerge throughout the responses, with some notable differences between the companies.
Thunderous warnings
As DEFRA’s policy stands, developers will have to follow a ‘sequential order’ when planning how to meet the BNG requirement, where they must show how they have first tried to avoid environmental damage, before then seeking to deliver BNG through onsite mitigation, followed by off-site, and only then through the purchase of statutory credits.
This order is supported by many green groups and local authorities, who have emphasised the importance of keeping biodiversity gains on or as close as possible to development sites as part of the incoming policy, because of the social importance of access to green space.
However, a push back against this hierarchy, and strong advocacy for the government to provide cheaper statutory credits, is one of the strongest themes to emerge from the consultation responses, with a majority of the firms - which have all turned in billions of pounds worth of revenue in the last year - seeking greater flexibility.
Summary process diagram for proposals as they would apply to Town and Country Planning Act 1990 development. Image: DEFRA
“We would…strongly advocate for the removal of the sequential approach to delivering BNG enhancements,” Bellway says in its submission to DEFRA. Instead, it writes that it would like for “all solutions to be considered and acceptable in the first instance” in order to “remove issues over the ability of identified housing sites to deliver the number of homes required, through the retention of developable land, and avoid further compounding the national housing crisis”.
Later in its response, Bellway says that there must be “maximum flexibility” in how developers are able to procure and deliver off-site credits “in order to avoid a cliff edge scenario in late 2023 and avoid situations like nitrate and phosphate neutrality which caused market paralysis in parts of the country”.
Taylor Wimpey can also be seen urging DEFRA to take a more flexible approach to how much BNG must be found on development sites - though it does not cite the nutrient neutrality crisis.
“The BNG metric that is currently under review is heavily weighted towards mitigation in close proximity to the development site. We recommend that this is reviewed to ensure that policy and guidance encourages off-site contributions towards the enhancement of identified priority habitats and strategic nature recovery strategies.”
On the part of Persimmon, the developer states in its response that it is “fully committed” to delivering BNG and that it has made commitments in its Group Sustainability Report “to proactively prepare for the introduction” of the policy. A spokesperson also told ENDS that a number of its sites are “already delivering to – or even above – the intended standard”.
However, Persimmon also emphasises in its response to DEFRA that it does not think local planning authorities should be able to set policies requiring contributions in excess of the statutory 10% BNG. “Going beyond 10% should be purely optional for developers on particular sites,” its response reads.
Elsewhere in its response, the developer emphasises that not all BNG can be delivered onsite, saying that there is a “strong consensus in the development industry that delivering all BNG onsite will be very difficult or produce unfavourable viability outcomes for many sites”.
In this context, Persimmon writes that it is “particularly interested in how biodiversity units can be delivered offsite,” and although in an “ideal world” BNG would be introduced alongside local development plans, with mitigation needs planned more systematically, the fact that BNG will be introduced as a stand-alone legal requirement taking effect prior to local mitigation plans being in place means this cannot be the case.
“As a result, we support flexibility in how much gain can go offsite, where it can be located and who can deliver this. Such an approach will be critical in generating significant supply, particularly in the early years of mandatory BNG where inevitably there will be a shortfall of units as the land market adjusts and the planning system catches up.”
‘Scaremongering’
The framing of the BNG proposals as a threat to the delivery of much-needed new homes has not impressed many that ENDS has spoken to, with Zu Ermgassen sceptical that the incoming policy will cause paralysis - even if it may initially prove more expensive than the developers would like.
There is a “strong policial incentive to make building happen”, he said, adding that the image painted by the developers does not match with what he has seen in his research.
Based on the councils he has sampled, which have adopted BNG policies early, he said that the vast majority of BNG units or mitigation is happening onsite within well-planned developments - even if the reality of how these ‘gains’ are to be monitored leaves something to be desired.
“So the idea that the whole housebuilding industry will be held back by a lack of biodiversity units created by the biodiversity unit market, [is] not really borne out in the data of what's happening already."
Zu Ermgassen continued: “The point of [BNG] is to internalise the cost of harming nature into the development process. And if those costs are high, it’s because you're causing a lot of damage”.
Richard Benwell, chief executive of the green group coalition Wildlife and Countryside Link (WCL), added that talk of market paralysis sounded like “irresponsible scaremongering”.
“Net gain has been in the National Planning Policy Framework for a number of years. Those companies which have taken it seriously have a good handle on how it can be delivered.
“The idea that it could somehow setback housing development when developers are sitting on consent for a million homes, and just haven't been rolling out the build-out, is playing into the government’s worries about house numbers, for strategic gain.”
The apparent push to encourage more offsite BNG has not impressed the Local Government Association (LGA) either. Councillor David Renard, the LGA’s environment spokesperson, told ENDS that “the design of BNG must ensure that net gain is delivered on the site of development or as close by as possible”.
He added that councils should be able to retain credits to improve the communities’ nearby development, “rather than biodiversity credits being collected by government and redistributed nationally”.
A spokesperson from the Home Builders Federation (HBF) appeared to agree that achieving BNG onsite should not represent a significant problem: “Achieving net gain onsite can be relatively straightforward and would always be a developers preference because issues can emerge when finding offsite solutions.”
However, they added that the approaches adopted by different LPAs and the costs of securing credits “can vary and become difficult to plan for”, but said “these are still relatively new processes and procedures for all parties involved and delivery mechanisms will become smoother over time as they mature”.
“HBF members are entirely supportive of the principle of BNG and of handing over to homeowners developments that are more ecological enriched than was the case when a particular site secured planning permission. Indeed many HBF members have adopted the 10% net gain standard well ahead of the statutory deadline,” they said.
Cheaper credits
Overhead aerial view of newly built detached homes in Hertfordshire. Image: Getty
In its consultation, DEFRA outlined that it would not want to prejudice the emerging marking for habitat banks by making government credits a cheaper, or equivalent, option to those on offer from businesses. However, some of the developers can be seen to push for a system where government credits represent a more competitive option.
Taylor Wimpey’s consultation response says: “Future price inflation of BNG units could have a significant impact on development viability and delivery…. One potential solution is for the government to ensure statutory credits are available at a level that would not prejudice development viability and would be available to developers who are required to purchase offsite units to achieve BNG.
“This would require a revised approach to the current proposal that considers statutory credits as a last resort rather than a realistic alternative to the purchase of local units.”
Persimmon, meanwhile, invokes the nutrient neutrality crisis in its discussion of BNG unit and credit pricing, suggesting that it offers “an important lesson in terms of how the market can operate when developers are forced to purchase offsite mitigation with little supply, and gaining planning permission is fully reliant on this”.
The developer, which turned in revenue of £3.61bn in 2021, continues: “It is critical that safeguards are put in place which prevent developers being held to ransom over the price of units/credits. There is the potential for credit suppliers to collude on price, particularly in strong market areas.” The idea of developers being held to ransom is a theme Persimmon regularly returns to.
It suggests that the price of £20k - £25k per unit, cited in the BNG market analysis by consultancy Eftec, should be “used as a cap so that unit suppliers cannot charge higher than this”.
It is true that the prospect of the biodiversity unit market not being adequately established by the time the BNG requirement becomes mandatory has been noted as a risk by others. In January 2022, Eftec’s analysis also raised a number of concerns about how the emerging market for BNG units might function, due to the low levels of trust in how it would be regulated, the potential pitfalls in the government’s current plans to act as a seller of credits as a last resort, and a projected shortfall in landowners entering the market.
Barratt, which stands apart from the other developers as broadly supportive of government BNG plans, also notes that there needs to be “some assurance in place that [government credits being intentionally uncompetitive] wouldn't artificially drive the price of offset units delivered on the private market once the statutory credit system is phased out”.
“Will the Office for Environmental Protection act as a regulator of the offset market?,” the developer asks - a question which remains unanswered despite the months which have elapsed since the consultation closed.
'The reason we’re not getting a pipeline going is because no one knows on what basis it will operate... delays across DEFRA’s portfolio are leading to this uncertainty’
Richard Benwell, WCL
Zu Ermgassen said that one of the current problems with establishing the BNG unit market was that not enough landholders are coming forward to deliver it, but that the idea of bringing down the price of the statutory units as a result seemed “a bit of a cop out” for such a profitable industry.
“What you're basically saying there is ‘we're not willing to pay the actual price of restoring biodiversity’, so we want a cheaper price for restoring biodiversity. But that kind of gets around the point of it.”
Benwell acknowledged that there was still an absence of detail around the rules which will underpin the BNG unit market, and that this needed addressing by DEFRA - something which the developers raise in their responses. However, he said that while this could mean developers need to find more biodiversity gains onsite to begin with, or will have to initially rely more on government credits, once the market rules were in place he would expect to see the market “come to maturity”.
“The reason we’re not getting a pipeline going is because no one knows on what basis it will operate,” he said, adding that the “delays across DEFRA’s portfolio are leading to this uncertainty”.
The LGA’s Renard added: “Credits must not become the preferred option for developers,” and that they “should be restoring nature in the areas they are developing.”
Responding specifically to criticism of its consultation response views on BNG credits, a Taylor Wimpey spokesperson said that it agreed with the government that biodiversity credits have a critical role to play, but that “varying approaches adopted by LPAs and biodiversity unit providers can become difficult to plan for”.
“Our consultation response puts forward pragmatic recommendations for BNG credits that are aimed at improving outcomes for nature. For instance, our suggestion to increase flexibility to achieve off-site mitigation aims to ensure BNG is targeted towards the right places, prioritising need where there is an identified issue.”
Exemptions
DEFRA has proposed that brownfield sites such as this abandoned oil refinery site should be included in the BNG requirement. Image: Getty.
It is in discussion of which types of development should be exempt from BNG proposals that some distinct divergence is seen between the big four. The DEFRA consultation proposed that brownfield sites should not be exempt from BNG requirements, which sets a number of the developers’ responses alight.
Barratt - which reports having built 17,908 homes in the 2021 financial year - gives a particularly short, and anomalous, answer agreeing with the proposal: “Most brownfield sites should find it relatively easy to deliver a BNG and therefore exemption would be unnecessary”.
This is not the case for the other three. Persimmon says that while it “fully appreciate[s] the desire for all sites to deliver mandatory net gain we can also see the case for providing an exemption on brownfield land so that BNG can be encouraged but also balanced with a range of other policy objectives and deliver the best outcome for individual schemes”.
Bellway strongly disagrees with the proposal to require BNG on brownfield sites, noting that the remediation often required on such sites necessitates “the loss of the majority, if not all, of the brownfield habitats”.
The developer says that the additional land pressures created through the provision of a 10% net gain “will result in significantly increased cost burdens placed on the development of brownfield sites leading to fewer brownfield sites being viable for development”. It goes on to warn that this would impact the ability of the housing market “to deliver the homes needed and prohibit opportunities for regeneration and urban renewal, thus compounding key government objectives”.
On Taylor Wimpey’s part, while the company initially says it agrees with the DEFRA proposal for brownfield sites, it recommends that the government introduces “some flexibility or exceptional circumstances test to allow consideration to be given to the wider benefits of proposals and [in] accordance with national and local planning policy objectives as a whole”.
However, it is Bellway that stands out in its response on exemptions as the only one to propose more of them. It argues that residential schemes which could potentially be rendered unviable or undeliverable as a result of net gain requirements, should be able to argue for a reduction in the 10% BNG or other financial obligations.
Bellway is also the only developer of the big four to explicitly disagree with the proposal that development within statutory designated sites for nature conservation should be subject to BNG.
“[This] should be exempt from BNG requirements as the cost of providing [them], alongside those mandated for the statutory designated sites, are likely to add further financial restrictions on the ability of such sites to come forward for development”.
The firm goes on to suggest in their response that “at the very least” a mechanism needs to be introduced “across BNG requirements to allow for financial obligations [...] to be challenged and/or offset in circumstances where those obligations could render a scheme unviable”.
A Bellway spokesperson told ENDS that the company was committed to delivering BNG and that its strategy from July 2023 onwards is for every new planning application submitted to deliver no net loss plus at least a 10% gain in biodiversity. “This is in addition to other planning requirements and legislation including environmental mitigation. The delivery of BNG is a core commitment made within our sustainability strategy and puts us ahead of the statutory requirements which are not due to be fully mandated until November 2023.”
The developer said it has appointed a group head of biodiversity who is working with its divisions “to ensure that we are ready and able to achieve the requirements”, and that it also has BNG “champions” within the business, which “also sits alongside an extensive programme of biodiversity training and support being provided”.
‘Sterilised’ land opportunities
How long BNG sites should be maintained is a cause of contention. Image: Getty
DEFRA has proposed that biodiversity gain sites must be maintained for a minimum of 30 years, as stated in the Environment Act. The consultation asked how the UK government could “encourage or enable'' developers and landowners to secure them for longer than this.
While some developers, such as Barratt and Bellway, suggested ideas such as “establishing clear market prices and/or caps” for the acquisition of BNG sites and units, the others strongly pushed back on the principle that BNG sites should be secured for longer at all.
Persimmon said: “We would firstly note that 30 years is already a very long time and significant commitment for most landowners. It ‘locks’ down assets and essentially sterilises the land from other land use opportunities”.
Taylor Wimpey agreed, saying that it believes that “30 years is a sufficient period to guarantee the maintenance of net gains over at least one generation in most circumstances”.
‘Just get on with it’
In light of ENDS’ reporting, Joan Edwards, director of policy and public affairs at The Wildlife Trusts, said that she hoped the government would not be swayed.
“I would hope that the government would continue to stick with its course of implementing the 25 Year Environment Plan and the Environment Act.
“It’s not something new, we’ve been talking about it for many many years. The metric has been designed with nature conservation organisations and the building sector. They’ve known about this for a long long time, if they’d just get on with it that would speed up the process.”
Benwell echoed this, adding that while getting BNG right was not a simple task, it would be “daft in the extreme” for DEFRA to weaken or delay the policy.
Oxford University’s Zu Ermagesson added that it was prudent to “bear in mind that incumbents will always try and fight off change”, but that the housebuilding industry, with its notable profit margins, does have the potential to adapt.
“In every industry you'll have first movers who get advantages from being good at stuff. This is how a competitive economy is supposed to work, the people who don't perform are supposed to be out-competed by those who do perform”.
He continued: “When what society demands changes, industries are supposed to adapt and deliver for us what we want. If we want to stop damaging nature, then the firms that don't damage nature should outcompete those that do.”
A spokesperson for Bellway Homes said that the concerns it had raised in its response “relate to the lack of any detailed secondary legislation or guidance from DEFRA, and the lack of resource within many local authorities that will likely lead to considerable delays in the planning process”.
“Although BNG has been around as a concept for a long time, we are still lacking the critical guidance and infrastructure needed to integrate it into the planning system.”
The spokesperson added that the delivery of BNG requires land, and that this would be in “addition to land required for much needed homes, the provision of on/off site community facilities, onsite open space, play areas, landscaping and sustainable drainage systems etc.”
They continued: “In addition to this, and issued at a similar time, is another legislative requirement that needs land for mitigation, nutrient neutrality. There needs to be some flexibility in the deployment of BNG and other such requirements in order to be able to come up with a solution that works practically but still means we are able to provide much needed homes for local needs.”
A Persimmon spokesperson said: “As we make clear in our submission, we support BNG and a number of our sites are already delivering to – or even above – the intended standard.
“Our consultation response sought to inform the debate around how the government establishes a new regulatory framework that meets its different objectives while guarding against inappropriate or unintended consequences. Any misrepresentation of contributions made in that spirit would be disappointing.”
Taylor Wimpey said that it “fully supports the principle of BNG to ensure sites have more habitats at the point of completion than they had before building commenced”.
“We recognise that on-site mitigation can help build sustainable communities, create a better place to live and add value to developments - which is why we embedded BNG into our Environment Strategy, have issued internal guidance and implemented processes well in advance of the statutory deadline.”
“We remain closely engaged with DEFRA to develop a workable solution focused on maintaining biodiversity for the long term.”
DEFRA has said that its consultation response, secondary legislation, an updated biodiversity metric, and new guidance will all be issued “in due course”.