SME developers and the Impact of BNG
In April 2024, mandatory Biodiversity Net Gain (BNG) legislation was extended to include almost all development sites in England. In force for major developments since January 2024, BNG is a landmark legislation. Its purpose is to balance housing need with the ecological imperative to stop the decline in native habitats and wildlife.
Nine months on, BNG has played a major role in pushing an industry sector to crisis point.
While that may sound dramatic, studies and reports from industry bodies representing SME developers all tell the same story. Now, even environmental professional bodies (designers of and firm advocates for BNG legislation) are calling for urgent review of the system. More on that later.
Undermining the role of the SME in housing delivery
In 2024 BNG became the latest in a long line of planning reforms that dangerously affect the viability of SME developers’ business model. I discussed the general (and gloomy) situation facing SMEs previously in another blog https://www.sfplanning.co.uk/sme-developers-and-the-planning-system/.
Specifically, BNG is undermining one major strength of the SME; the ability to deliver housing on smaller, more complex sites, and to do that swiftly. These sites, often overlooked by major housebuilders, are the heartland of SME developers and, combined, make an essential contribution to housing supply in England.
The 2024/2025 Home Builders Federation State of Play Report cites ‘A lack for resources in Local Planning Authorities’ (LPAs) as one of the top three barriers preventing the growth of SME home builders. This is further qualified by 78% of respondents who answered that ‘the local authorities that they work with do not have sufficient resources or capacity to support the delivery of BNG requirements.’
As planning consultants who represent many SMEs, we’ve encountered the impact of BNG on multiple sites, and throughout our network of clients.
Navigating a complex and costly system
Net gain can be a real challenge to deliver on-site for smaller developments. Instead, developers must navigate the process of purchasing off-site credits (the mechanism for delivering BNG elsewhere, often by a third party, and facilitated by a broker). The cost implications to a housebuilder, both in the cost of the credits and the administrative process involved, are often eye-watering. Consequently, we see this making development increasingly financially unviable. Developers are simply ‘walking away’ from small sites with practical and sustainable development potential. Simultaneously lost are the enhancements (visual and townscape for example) often associated with this type of development and the valuable housing supply they deliver.
For example; an application submitted for a single new home on a brownfield site (a former car park). The landscaping associated with the scheme could easily offer biodiversity enhancements. However, with the legislation specifically ruling out private gardens as a source of BNG, this was not possible. The offsite BNG credits would cost the developer in excess of £20,000, and they subsequently decided not to build out the site. The potential result in this case is the site remains a disused car park with little to no biodiversity.
This type of ‘catch-all’ legislation brings with it a raft of contradictions that compound the frustration felt by SME developers and those working on their behalf. It calls for a far more forensic look into solutions to support biodiversity.
So, returning to the experiences of environmental professional bodies and lobbyists. Our anecdotal experience is reinforced in a survey from the Chartered Institute of Ecology and Environmental Management (CIEEM). In their paper ‘BMG for Small Sites – Delivering on its Potential’ they examine the experiences of the ecologists involved in ensuring the successful implementation of BNG.
Calls for reform
84% of the ecologists surveyed cite BNG as having ‘major problems’ for small sites with a further 14.9% citing ‘minor problems’. Specifically, ‘difficulty in on site delivery’ is a major issue for 86.4% of respondents.
This is excellent news, bear with me…For the first time, a major supporter of the legislation (in theory) is calling for reform, in order to support SMEs. We support the set of proposed measures created by the CIEEM to adapt BNG to address the shared concerns of SME developers and make the legislation fit for purpose:
Proposed changes to BNG legislation
- Review of the de minimis threshold to avoid disproportionate burdens on very small scale developments.
- Introduction of a simple biodiversity tariff system as an optional alternative to an offsite credit. This should be on the basis that appropriate on-site gain has been considered and, where possible, delivered at least in part. Funds provided through the tariff system could be distributed by Local Nature Partnerships in support of Local Nature Recovery Strategies.
- Review of the metric to provide more flexibility in condition assessment for the baseline habitats. More recognition of the contribution wildlife-friendly gardens and ecological features can make to delivering onsite gains, especially in urban areas. Condition assessment should be removed altogether for low distinctiveness areas.
- Introduction of a simpler version of the metric for use on sites where only low distinctiveness habitats are present. This would remove the challenge of satisfying the trading rules for the provision of on site and off site units.
- Clarification of what is meant by a competent person in relation to use of the Small Sites Metric (SSM).
- Better use of pre-occupation planning conditions and post-development auditing by competent persons to confirm delivery of the required biodiversity and landscape enhancements.
- Development of local habitat banks offering small-sized biodiversity units, and fractions of units, at an affordable cost. (NB: This may become less important if a tariff system is introduced).
- More targeted training in the requirements of the small sites approach and accurate use of the metric.
There is currently no response from the Government to the CIEEM report, published earlier this month. In the meantime, we’ll continue to support our SME clients as they navigate BNG, alongside the myriad of other planning related challenges and the impact on their schemes.
Sources:
CIEEM – Net Gain for Small Sites: https://cieem.net/resource/biodiversity-net-gain-for-small-sites/
Home Builders Federation – Challenges and opportunities facing SME home builders: https://www.hbf.co.uk/documents/14137/2024-25_SME_State_of_Play_report.pdf
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