Real Estate Visions 2022: What’s on the horizon for real estate in the year ahead?
UK & Europe
UK Real Estate Insights
The Environment Act 2021 brings into law - theoretically at least - a number of the UK Government’s environmental aspirations. It remains to be seen, however, whether in responding to the pressures of the so-called ‘green lobby’, the government has effectively placed some rather difficult hurdles/solid brick walls in front of a development sector which, at the same time, the government is ostensibly claiming to support.
The Environment Act 2021 (the Act) introduces a number of environmental measures including Nature Recovery Strategies, conservation covenants and the concept of ‘biodiversity net gain’. It also creates a new independent environmental watchdog, the Office for Environmental Protection. Whilst on one level the Act will certainly assist in protecting the natural environment – the question, unanswered at present, is whether in so doing, it will create obstacles (in some cases possibly unjustifiable obstacles) to that very regeneration that the UK economy so clearly needs.
The Environment Bill became law in November 2021, setting clear targets for the improvement of air-quality, biodiversity, water and waste in the UK. Headlines at the time focused on these targets and the establishment of the Office for Environmental Protection (which will amongst other things “review and report on government’s progress in meeting environmental goals and targets”), championing the Act as a world leading and ambitious example of environmental legislation which coincided with the COP26 Climate Summit.
Now that the dust of its enactment has settled, however, the property sector must start to consider the impacts of the Act on its future schemes. A great deal of the Act has yet to come into force – dependent on the making of secondary legislation by regulation to provide much needed detail to the somewhat unhelpfully generalised wording employed in the Act itself.
So how does this ‘ground-breaking’ act aim to affect an industry looking to do exactly that?
The Act amends the Town and Country Planning Act 1990 so that, when the provision is brought into force, an applicant seeking permission for a given development will have to demonstrate to the satisfaction of the local planning authority that the development will achieve a 10% BNG. If it is not possible to achieve the net gain on the application site itself, it will be open for the applicant to propose the improvement of the biodiversity of an alternative area of land and if that is not possible, provided the relevant system has been put in place, purchase what will be known as ‘bio-diversity credits’. A register of these ‘net gain sites’ will be created, whilst the local authority or designated body will ensure that the gain itself is in place for 30 years.
The somewhat nebulous (but very important) credit scheme, like many of the provisions of the Act, is awaiting enactment via yet-to-be published regulations. Until then, details of how the BNG requirement will work in practice are equally nebulous. What is certain, however, is that when the provisions are brought into effect, they are bound to impact on scheme viability in terms of cost and raise questions as to timing (should the BNG be delivered on completion of the development – on first occupation – or in time, when it matures?) bearing in mind at all times the 30 year maintenance requirement. It should be noted that whilst these provisions are not scheduled to be brought into force before 2023, a number of planning authorities are already requiring developers to provide 10% BNG - which if nothing else, complicates and potentially delays the application negotiating process.
It should also be noted that the concept of BNG will apply equally to Nationally Significant Infrastructure Projects.
Any measures to reduce the biodiversity value of a site prior to measuring the baseline from which the gain is to be measured will be disregarded, but it is currently unclear how local authorities will bear the additional workload of both reviewing biodiversity submissions and monitoring implementation. The government has not set out any additional funding for this yet, but it is possible that planning authorities will be able to charge developers for using council owned land as off-site gain locations.
A further burden for local authorities will be the creation of the new Nature Recovery Strategies. These spatial strategies will map the most valuable wildlife areas within an authority’s administrative boundary, highlighting and prioritising opportunities for improving habitats. The aim is for the entire country to be included in order to facilitate coordinated action and investment in priority areas.
This again is set to impact the planning and development sectors, as these maps will inform the local plan making process. The intention is that the Strategies will offer opportunities for developers to bring meaningful improvements to the local environment and encourage schemes which include the specific recovery strategies outlined by the authorities.
The Act also introduces the concept of ‘conservation covenants’, effectively voluntary legal agreements which will bind and run with the land. These covenants might include positive obligations such as maintaining habitats on site or negative obligations preventing certain actions and will restrict owners’ use of their land potentially indefinitely, with the threat of injunction or a claim in damages if breached.
Whilst these new covenants are voluntary, local authorities and developers will be interested in their potential as an alternative to planning obligations. They will allow the achievement of conservation aims (such as ensuring that biodiversity net gains are secured for the long term) and provide an alternative to owners transferring land to other legal bodies in order to secure these aims.
It is important to note that the Act contains transitional provisions which mean that many of its requirements, as noted above, are still to be brought into effect by regulation.
That said, with increasing public awareness and with the National Planning Policy Framework (and an increasing number of local plans) already requiring an element of biodiversity net gain, developers cannot afford to ignore nature conservation issues. In sum, the Act when fully in effect, will create a radical shift in the approach to development – both urban and rural.
Contact the Clyde & Co planning and environmental law team for further information.