A London-based marketplace has listed over 25,000 off-site biodiversity net gain (BNG) units at an average price of almost £30,000 ($38,000) each, though demand has been slow.

Around 155 sellers on Gaia are offering units for £29,947 each on average, out of those with prices, ranging between £22,000 for mixed scrub in Buckinghamshire to £75,000 for ponds in Lincolnshire, Ben Askins, co-founder of Gaia told Carbon Pulse.

Gaia offers an online forum for English landowners to sell their units to local developers to help them fulfil their legal requirements to boost biodiversity by 10% under the BNG scheme, which came into effect in February.

“Location is probably the biggest factor for prices, where there is going to be a lot of development they’ll be worth a lot more,” Askins said.

“Some of the rarer habitats will be probably quite expensive – watercourse units are the most expensive – they are likely to continue to remain so, whereas some might start to drop in price as people start to sell them,” Askins said.

Approximately 90% of the unit types are under ‘area’, while ‘hedgerow’ makes up 8%, and ‘watercourse’ constitutes just 2%, he estimated.

At an average price of £30,000, landowners stand to make 35-40% profit from sales, so they could afford to reduce them, though a price of £20,000-22,000 a unit would be the minimum to keep schemes financially viable, he said.

Around 70% of sellers have listed prices, while the remainder have advertised details of units on Gaia with prices on request.

DEMAND

Potential buyers have been enquiring about units on Gaia at an increasing rate each week over the last three months.

However, prices are tentative as demand has not yet taken off, Askins said. Gaia has sold some units but it was unable to confirm how many.

“Supply and demand hasn’t really kicked in yet because the first wave of planning permission doesn’t come in until this summer – so that will be the first test. I think sellers are getting a bit nervous about sales.”

BNG became obligatory for developers beginning the planning permission process in February, so a “wave of demand” could happen when they start to need to buy off-site units around August, he predicted.

The brokerage platform of property company Savills, its Environmental Exchange, has around 5,000 off-site BNG units available but with limited pricing data, Jon Dearsley, head of natural capital told Carbon Pulse.

Nevertheless, Savills sold one BNG habitat unit recently for £32,500. “We are beginning to see demand for units creep up now that BNG is mandatory. As with any new policy there is a time lag while stakeholders navigate the detail,” Dearsley said.

“The market for BNG units is in its infancy while developers establish where they are going to require units off-site – Defra’s policy and mitigation hierarchy requires on-site delivery or as close to the development site as possible.”

SUPPLY

The 155 sellers on the Gaia platform are made up of different types of landowners such as farms, estates, and non-profits.

“Every month, for the last eight months, we’ve had an increase of new listings added. So it’s definitely picking up,” Askins said.

Each listing of an area ranges widely in the number of units on offer – from two at the lowest to almost 1,600 at the highest, with four sellers making up approximately 30% of items.

Askins could not share the increase in units published on the platform each month. The number of units from each area is calculated using the government’s biodiversity metric, which depends on elements like size, quality, and habitat type.

Credit: Gaia

Furthermore, lots of projects are in draft or pending approval that have not yet been published on Gaia.

BOTTLENECKS

The biggest obstacle to the BNG market gaining traction is around local planning authorities (LPAs) preparing to enable the creation of conservation agreements, Askins said.

“Section 106, which is getting sign-off from your LPA, is the bottleneck of all bottlenecks. There are so many different LPAs, they’re all doing it slightly differently. A lot of them are very willing, some of them are struggling.”

“The simplest fix would just be a nationally recognized Section 106 document that everyone used.”

Last month, law firm BDB Pitmans found only five local authorities in England have Section 106 templates for BNG sites, out of 317 local and 10 national park authorities assessed, with the results likely to cause delays.

Savills’ Dearsley said a recent change to the law should boost demand by allowing responsible bodies other than LPAs, such as public bodies or charities, to process the conservation agreements.

“The other challenge is the national registry. That’s quite a clunky piece of software that the government have built. Not many accounts are being formally registered on the registry yet,” said Askins.

In March, the BNG registry listed its first two areas in Brighton and Exeter. Since then it has only listed two more sites.

In the longer term, Askins thinks the BNG scheme will work well.

“There are a couple of early teething problems, which you would probably expect from such a major production,” he said.

By Thomas Cox – t.cox@carbon-pulse.com

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