Pitched as a good thing for SME developers, why the removal of BNG requirements for small sites could have a chilling effect on housebuilding

Proposals to remove small sites BNG are both short-sighted and could have major long-term impacts on the Government’s housing ambitions, private markets and nature according to leading UK ecology consultancy Arbtech.

Robert Oates is CEO of leading UK ecology consultancy, Arbtech

When the BNG policy was introduced last year it was considered to be world-leading and our analysis shows that BNG could protect 19,466ha of land annually, meaning that over a five year period more than 97,000ha has been restored or protected.

The Government’s proposals, launched via consultations in May, to ease BNG requirements for small sites and introduce simplified rules for medium sites could threaten almost 100,000 ha of natural beauty habitats by 2029. To put this into context, that’s an area more than eight times the size of Manchester.

In addition to its impact on nature, to exempt small sites from the policy could lead to the collapse of the entire BNG market given that habitat banks, providing BNG credit, rely on steady demand which comes largely from frequent, smaller purchases. When you consider that large developments can take around six years to obtain planning consent, the removal of small sites removes the majority of market activity, having a massive impact on demand for BNG units. This would expose habitat banks to severe credit risk in addition to undermining investor confidence and drying up private finance.

The impact of the Government’s proposals has already been felt with investors axing further capital commitments to habitat banks due to the steep decline in purchases of small and fractional units as SME developers stall development to see if they will be exempt from BNG.

This has an adverse effect on the Government’s ambition to expedite housebuilding and risks undermining the efficacy of BNG in the long term.

Over time, this would have a chilling effect on housebuilding as bigger developers face competing demand and higher costs for a dwindling supply of BNG units, or being forced to buy statutory credits, which are deliberately expensive.

Our research shows that SME developers aren’t opposed to BNG they just need consistency and this unravelling of the BNG policy isn’t the right approach. Instead some very minor changes to the existing policy would maintain investor confidence in private nature markets while eliminating some of the friction points for developers of small sites.

Firstly, by enabling small site developers to use off-site BNG as a first response and discouraging local planning authorities from insisting on maximising on-site gain would mean developers can maximise gross development value. This would support the Government’s housebuilding ambitions while still delivering for nature.

Secondly, disapplying the Spatial Risk Multiplier (SRM) for small sites would make offsite units more affordable and provide greater flexibility.

Finally, allowing the interchanging of BNG unit types for off-site gain on small sites so that different habitats can be traded like-for-like. This would introduce greater flexibility into the BNG framework and ensure genuine biodiversity gains while reducing dependency on a costly supply chain for a single habitat. Also this would stimulate growth in the offsite market by bringing more units online, meaning better results for nature while reducing costs for developers.

We hope that our campaign will enable these sensible changes to be made and avoid the catastrophic damage that the proposed policy changes could result in.