Biodiversity can offer farmers potential income stream

The rapidly expanding biodiversity market offers potential income opportunities for farmers and landowners, say advisers.

New Biodiversity Net Gain (BNG) rules introduced last year mean developers are now required to replace habitats lost during building projects – plus a net gain of at least 10%.

Developers can do this either by ring-fencing wildlife areas on site, or by paying farmers and landowners to create equivalent off-site BNG units for them nearby, says the latest report from Savills – Biodiversity: risk, reward, resilience.

The report explores the opportunities that the evolving market presents to farmers and land managers as a potential alternative income source, particularly at a time when farm profits are under pressure.

Growing market

Savills associate director Joshua Spink said: “The BNG market is expected to expand significantly over the next decade as more developers seek ways to meet their legal obligations under new planning and environment policies.

“As demand grows there are opportunities for farmers and land managers to create new revenue streams by providing habitat creation or enhancement services – an area that we are already exploring with several clients.

When BNG came into effect Defra predicted biodiversity units would achieve values ranging from £9,000 to 15,000 per unit. But some are well above this figure, varying largely depending on the habitat type, its rarity and potential.

“Units related to watercourses, for example, are achieving the highest prices nationally, at £140,000 per unit, while hedges and neutral grassland-based habitats are closer to £20,000,” said Mr Spink.

Good time

“With traditional income sources for farming businesses diminishing it’s a good time for farmers and land managers to review current land use activities and consider whether there is scope for allocating areas for the creation of biodiversity units.”

Developers unable to use on-site or off-site BNG units can buy statutory credits from the government. These have a mark-up to prevent statutory credit prices undercutting the off-site market, with a starting price of £42,000 per unit.

Since the implementation of the BNG regulations, an estimated 7,500 planning applications with a requirement for BNG have been made, and around 2,000 new applications are being made every month.

BNG units must be legally secured either through a Section 106 agreement or a Conservation Covenant, with the market showing a preference for the latter as they streamline the process and increase certainty for buyers.

More potential

Based on current evidence to inform future projections, Savills says opportunities are set to increase. In 2024 a record low number of planning permissions were granted for new homes in England, with just over 30,000 projects approved.

The land agent suggests that of the amount of land estimated to be developed for housing in England each year, 20% will be required for BNG. In 2021, this was forecast as 1,300ha of off-site land.

Katie Stein, associate director in the Savills rural research team, said: With current house building targets at 130,000 per year it follows that the amount of off-site land required for BNG units will need to increase significantly.”