With mandatory BNG only a month away, developers will be scrambling for certainty to plan development pipelines, timelines and margins. However, the BNG offset market is opaque; unit pricing and availability vary considerably by Local Planning Authority (LPA) and habitat type. As a result, we see many developers pressured into securing BNG offset units earlier in the process than required – suboptimal for project cash flow.
The BNG secondary legislation directs LPAs to secure biodiversity under a pre-commencement condition. This helps developers and LPAs secure permissions without consideration for the details of any biodiversity offsetting that does not affect the principle of the development.
The result is that developers have two choices;
- Secure offsets pre-permission – Developers gain offset certainty (availability and price) at the application stage, a redline boundary, and reduced pre-commencement conditions. However, this requires early capital outlay (usually a non-refundable 10%+ reservation fee) with the potential loss of the fee if the planning application is unsuccessful.
- Secure offsets post-permission – Developers will have consent, control of the construction timeline, additional financing options, and will be closer to commencement when the offset is needed. However, the future price and availability of biodiversity units are uncertain, leaving holes in viability assessments and increasing risk.
Prices and Availability
BNG trading rules strongly incentivise offsets within the same LPA or National Character Area (NCA) as the development. However, there are significant gaps in availability (by LPA or NCA), and prices vary significantly due to supply, demand, and delivery cost (land, establishment, and management) swings.
Result = offset price and availability are uncertain.
Statutory Credits are certain, and available as a last resort. However, they are prohibitively expensive, and as the mitigation is assumed to be non-local, developers must purchase two statutory credits for each local offset unit.
If the principle of the development is affected by an impact on high-value habitats, securing biodiversity offsets upfront may be required. However, for most developments, a solution exists to manage the risks of securing the offset post-permission.
Empowering Developers with BNG Options
Our Option contracts offer developers the ability to secure the terms of BNG offset supply today at a competitive price with the flexibility to call offsets at a future date. By assuming financial and delivery risks, we provide a product that can align with the unique timelines of each development and financing structure, and requires limited commitment pre-consent.
Options also enable promoters to sell consented developments with offsets secured, giving the acquirer greater cost certainty.
Our BNG Option is for developers when they require:
- assurance of offset availability and price without significant financial commitment or when exact timelines are unknown.
- high-value habitat mitigation that habitat banks cannot provide.
Explore the Benefits of BNG Option Contracts
We have the financial capacity to underwrite contracts, to take an educated future price view, and to assume risk.
Just under a month since our soft launch, we’re pricing Options agreements for developers across logistics, house building, build-to-rent (BTR), and major mixed schemes. Collectively representing over 1500 BNG units, showcasing the immediate resonance in the market.
Whether you have an extensive development pipeline, are engaged in a complex project undergoing planning, or face challenges accessing offsets, we invite you to connect with us. We’re confident that we could offer you better terms than you get elsewhere.