Housing associations told to cash in on habitat banks to lower service charges

Housing associations should cash in on new biodiversity rules by creating habitat banks and using the profits to lower residents’ service charges, experts have told Inside Housing.

by James Riding 29.07.24

Under English planning rules which came into force in February, developers must increase biodiversity on their sites by 10% or purchase Biodiversity Net Gain (BNG) units.

The government wants landowners to set up habitat banks to sell these BNG units to developers. Any biodiversity increases over 10% achieved on sites can also be turned into units and sold on.

“There is no reason, as large landowners, which many registered providers are, not to take advantage of the BNG market,” said Neil Toner, senior consultant at Devonshires, the law firm.

Most large housing associations “clock the importance of biodiversity”, he said, but they do not acknowledge that it could become “an income stream” that could be used to benefit residents.

“Everyone’s complaining about service charges… here would be a way of reducing people’s service charge by offsetting some of the cost that would otherwise be passed on to them for maintaining their estates,” he said.

This is because selling BNG units would “as a minimum” cover the landlords’ costs of greening their estates, which they would have spent anyway as part of improvement and maintenance works in many cases.

Across the sector, there are “definitely millions” of pounds to be made from habitat banks, he added.

Landowners that have already begun to sell BNG units include large family estates such as Belmont in North Somerset. Local authorities such as Plymouth City Council have set up subsidiaries to green their land and create habitat banks.

Hannah Langford, a partner at Devonshires, noted that “you’ve got to commit to” a habitat bank, as landowners are required to set aside their land for 30 years under a Section 106 agreement. However, she said, BNG “is in law now, so it’s not going away”.

Gresham House, the asset manager, has invested in habitat banks since 2021 through Environment Bank, one of its portfolio companies that helps landowners market BNG units.

“We are really supportive of biodiversity creation as a new business line for many people,” Ruth Murray, investment director of sustainable infrastructure at Gresham House, told Inside Housing.

However, faced with a choice between using part of their sites for additional biodiversity or more housing, housing associations should always maximise development land, she said. To sacrifice land for housing would be a “complete false economy”.

While creating a habitat bank “isn’t necessarily hard”, selling the credits was “actually quite complicated”, she said.

“Getting into that whole commercial sales cycle and having a sales team is another layer,” she added.

Profits to be made from BNG credits depend on the starting condition of the land, Ms Murray explained. “If they’ve got land that’s been sitting, just becoming biodiverse for many years because it’s really hard to develop, then you’ll probably get very little uplift.”

Landowners must also make sure they are delivering the right type of biodiversity for an area, she added, “to make sure you’re not building a white elephant”.

A spokesperson for Peabody said: “The housing sector has an important role to play in protecting and improving biodiversity in local areas.

“We’re keen to explore innovative ways to enhance habitats, including habitat banks, across a spectrum of shared open spaces in our neighbourhoods – from pocket parks in smaller developments, through to the 240 hectares of green space we own and manage in Thamesmead.

“While the potential of habitat banks to raise income is interesting, their real measure of success will arguably be the ecological value they bring.”