What is Habitat Banking?

With Biodiversity Net Gain (BNG) requirements coming into force from January 2024, this post explains a core component of BNG: habitat banking. The purpose of BNG is to halt and reverse biodiversity loss caused by building development, and habitat banking is a key mechanism used to achieve this. Habitat banking offers financial incentives to those looking to conserve land, whilst simultaneously enabling development to occur more sustainably. 

 

How habitat banks link landowners and developers

From January 2024, developments submitted for planning permission will be required by law to deliver at least 10% net gain in biodiversity (measured in ‘biodiversity units'). The BNG mitigation hierarchy states that gains delivered onsite are preferred, but where this cannot be achieved there is the option to purchase compensatory biodiversity units offsite. Habitat banks are the land where these offsite units come from. They are typically parcels of degraded or low-quality land where a significant uplift in biodiversity can be achieved. Landowners manage this land to create habitat and enhance biodiversity, with the aim of selling off the resulting biodiversity units to developers. Overall, habitat banking describes the creation of habitat banks, and the process of selling on the biodiversity units created from doing so to developers, who can then meet BNG requirements. 

 

Creating a habitat bank 

To create a habitat bank, landowners must first identify an area of degraded land; this can consist of a single site, or several smaller parcels of land combined. A farmer might pick an area of low yielding arable land requiring high inputs for example. This land is then restored by converting it to species–rich grassland, woodland, wetland, or other types of biodiverse habitat. The statutory ‘biodiversity metric' is used to calculate the uplift in biodiversity units achieved by converting this land. The units created can then be sold onto developers looking to meet their BNG requirements. When creating habitat banks, landowners must register with Natural England, and once biodiversity units are sold on, they are linked to their development. 

 

There is no one-size-fits-all approach to converting land into a habitat bank. Factors including the current state of the land, surrounding habitat, and the needs of local developers will all influence what can be achieved. For example, if the land parcel borders a body of water, or includes an area that is frequently flooded, it could be suitable for developing wetland habitat. Creating a habitat bank requires considerable planning, in order to give the habitat, the best chance of establishing, whilst maximising the number of biodiversity units that can be created.  

 

What responsibilities will you have? 

BNG requires that any habitat created to replace lost habitat due to a development must be maintained for at least 30 years. To ensure the proper establishment and continued maintenance of this habitat, landowners seeking to create a habitat bank must sign a Section 106 agreement with their Local Planning Authority or enter into a conservation covenant with a responsible body. This agreement will create a legal obligation for the habitat bank to be monitored throughout its lifetime, to ensure it really is delivering biodiversity gains.  

 

For landowners considering habitat banking, there are multiple ways to do so. The option offering the highest profitability is to manage the conversion and maintenance of the land yourself, and then seek out developers to sell to. Tomson Consulting offers BNG baseline appraisals for sites with potential to become habitat banks. This process involves a desk study and field survey, which determine the baseline biodiversity measurement for the site, and model a range of habitat enhancement scenarios with the potential to create significant uplifts in biodiversity. Tomson Consulting then make recommendations on the most appropriate path forwards, as well as outlining further actions the landowner should take. Landowners can also pass on responsibility for habitat banking to a delivery body, but at a cost of up to 75% of the project's total expected sale proceeds. An intermediate option is to manage the conversion and maintenance of the land yourself, but use a broker to find and make arrangements with developers. 

  

Local Planning Authorities have numerous responsibilities when it comes to habitat banking. They will be responsible for approving developers' plans to buy offsite biodiversity units if BNG cannot be achieved onsite. In some cases, they will also be the body responsible for monitoring habitat banks and enforcing Section 106 obligations if the habitat is not being properly managed (although there will be scope for other land management bodies to take up these duties). Local Authorities also have the option of creating their own habitat banks, which can help them to deliver their Local Nature Recovery Strategies. However, they are not permitted to steer developers towards buying biodiversity units from their own habitat banks, unless there is a transparent ecological reason for doing so. 

 

Is habitat banking worth it? 

The first question for many landowners considering habitat banking will be is it worth it? BNG offers further incentives for those primarily interested in conservation, and options for landowners with marginal sites in their portfolio unsuitable for development or other uses. But for a farmer considering taking agricultural land out of use to create a habitat bank, the decision may be trickier.  

 

DEFRA can step in as a seller of last resort for developers unable to acquire suitable biodiversity units on the private market; they will sell statutory BNG credits starting at £42,000 and rising to £650,000, depending on habitat type. These prices have given a guide for what biodiversity units will be worth on the private market, and currently ‘medium distinctiveness' units are trading for ~£30,000. If low quality grassland can be converted to ‘medium distinctiveness' habitat, this could create 4-6 biodiversity units per hectare, offering a potential income of ~£150,000 per hectare for the 30–year agreement. Precise figures will depend highly on individual circumstances of course, and there are many other things to consider, such as the tax status of the land, or the method of payment (e.g., big lump sum upfront or annual payment from a delivery body). The government will release the final BNG details and guidance by the end of November, prior to it going live in January 2024. 

 

Look out for a future blog post discussing this announcement, which should hopefully clear up remaining unanswered questions we have about BNG. In the meantime, feel free to contact tommy@tomsonconsulting.co.uk for more information.