New research shows that farms and estates are yet to realise the full potential of the opportunity presented by the biodiversity net gain (BNG) obligation placed on developers last year. 
 

From February 2024, an England-wide, regulated marketplace for biodiversity offsetting was created, designed to ensure habitats are left in a better state than they were pre-development.
 
Developers need to offset whatever damage they cause, plus 10% extra. If they cannot provide this extra 10% on site, they will need to purchase BNG 'units' off site, which is where the opportunity exists for landowners.
 
National property consultancy Carter Jonas has now published research exploring the impact of the change on landowners.
 
It finds that the ignition of the market last year generated a lot of excitement, but a relatively quiet 12 months followed as landowners prepared biodiversity units for sale and developers began to work out how many units they would need and how best to buy them. 
 
"It is only now, one year on, that we are we seeing deals completing after initial requests a year ago," says Carter Jonas Partner Mark Russell.
 
"In a way this isn't a surprise; planning applications submitted in March 2024 are doing well to have been through the local planning authority process and, in some cases, a planning appeal by now.
 
"For landowners this pause has created a useful period for them to continue considering their response to the market and either bring forward a habitat bank or complete a deal with a habitat banker such as the Environment Bank or BioFarm."
 
'Biodiversity Net Gain: Navigating the Evolving Market' explores the impact of the change on landowners, plus  land managers, developers, local authorities and environmental organisations.
 
This research indicates that more land may be required for BNG in the long term than initially envisioned.
 
"Our advice to farmers and landowners continues to be to consider the opportunities in the Natural Capital Market alongside competing land uses," adds Mark. "If they want to make sure they can benefit from the market either now or in the future, they should get their baseline recorded and review their Natural Capital Market opportunities."
 
Carter Jonas' analysis of over 3,300 hectares of development sites across England finds the average habitat baseline value is 3.45 units per hectare. To achieve a 10% net gain on a typical 10-hectare site, developers must therefore enhance or create habitats to achieve at least 37.95 biodiversity units (BU). 
 
The research also reveals that 54.7% of developments deliver BNG entirely on-site. Off-site solutions are either the developer's own land bank, the purchase of biodiversity units from local or national landowners or third parties, or through the national statutory credit scheme as a last resort.
 
In this respect, the analysis shows considerable disparity across the country: the East and South East have established habitat banks, while other regions currently face shortages. 
 
Variation exists not only between regional sites but also between different habitat types. However, the variation between greenfield and brownfield land is less than many anticipated. Greenfield sites have an average baseline of 3.60 BU/ha and brownfield sites 3.17 BU/ha.
 
Although the availability of biodiversity habitat banks is limited in some regions, the development industry's response to the requirement for BNG has been demonstrably positive, with 69.4% of proposed schemes identifying BNG solutions at the point of submitting a planning application, despite BNG being a pre-commencement condition under the Environment Act. 
 
Naturally, some challenges and potential for refinement have been identified during the first year.  From a natural capital markets perspective, David Albrough, Joint National Lead of Carter Jonas' Natural Capital Services Team based in Cambridge, said: "The industry has been slowly getting to grips with mandatory BNG over the past year and there are a couple of key issues coming through. Firstly, the invisibility of demand to potential suppliers. Developers of all types are having real difficulty in predicting their likely demand. This means that it is not clear to the likely providers if there will be a market for the units they want to produce. Thus, in some cases, they are not committing to schemes. 
 
"Secondly, this bias in the regulations towards on site mitigation is already causing problems, especially for smaller developers and developments. With the additional costs and risks being passed on to the owners of the houses which in turn will make them harder to sell, this risks making some developments unviable. 
 
"To solve these problems, firstly developers can use the research we have carried out to give them an estimate of their likely demand. They can then take this information to the market and let the market work out how to deal with any fluctuations. Secondly, government needs to review the bias towards on-site BNG for small developments because in reality impacts are far better mitigated off-site. If we can get this right, we will be on the way towards a properly functioning market which is in all our interests."
 
The government is currently consulting on a national land use strategy, and resulting policy changes may impact BNG. Lucy George, a Senior Natural Capital Advisor in Carter Jonas' Natural Capital Services Team in York said: "We live on an island and as such, there always has been and will continue to be conflicting, and complementary, demands on land.  Land is ultimately in finite supply. Any land use policy needs to make sure the markets for nature-based solutions, including BNG, sit alongside economic growth and food security. Engaging in these evolving markets must be a strategic decision for landowners and habitat banking particularly should be viewed as a semi-permanent, if not permanent, land use change. It will be the right move for some but not all, and not only is the ecological capacity of land important, but property due diligence is critical as part of site selection."