Will measures in the Budget and the government’s efforts to foster private local nutrient neutrality credit schemes be enough to unlock the estimated 120,000 homes held up by nutrient neutrality requirements? Nicola Gooch, Irwin Mitchell takes a look
The Home Builders Federation (HBF) estimates that up to 120,000 homes have been delayed or cancelled because of the requirement for nutrient neutrality in various parts of the country. Given that 74 local planning authorities are currently subject to Natural England’s nutrient neutrality guidance, this is a number that is only likely to grow.
The reason for the problem is simple. Nutrient pollution is damaging protected habitats in parts of the country. Increased levels of nitrogen and phosphorus can speed up the growth of certain plants and algae, leading to eutrophication, which in turn causes the loss of valuable ecosystems and wildlife.
Why is nutrient neutrality important?
The habitat regulations place local authorities under a legal duty to ensure that new developments will not have a negative impact on a protected habitat. As wastewater from housing developments can contribute to nutrient pollution, Natural England issued guidance requiring all new housing developments in affected areas to achieve “nutrient neutrality” before planning permission can be granted.
This means that the consented development, once completed, cannot cause an increase in nutrient pollution levels at the affected habitat, when compared to pre-development levels.
The need for nutrient neutrality, however, is not limited to the grant of planning permission. It can also attach to post-grant decisions such as reserved matters approvals and even condition discharge decisions. This has led to an effective moratorium on development in large parts of the country.
Housebuilding makes a relatively small contribution to the nutrient pollution issue. By far the largest sources of nutrient pollution in England are wastewater treatment works and agricultural pollution.
While the Levelling Up & Regeneration Bill includes measures to force water companies to upgrade water treatment works, they will not provide a quick solution.
Firstly, the bill is working its way through parliament slowly. It is currently at committee stage in the House of Lords and is facing a very significant number of amendments (at last count, over 700 had been proposed). The measures proposed in the bill are not designed to take effect quickly. They require water companies in England to upgrade wastewater treatment works to the highest technically achievable limits by 2030 in nutrient neutrality areas.
In the meantime, developers looking to bring forward new housing schemes need to rely on mitigation schemes to achieve neutrality. The vast majority of nutrient mitigation schemes involve either taking land out of agricultural production or creating new wetlands to generate credits, which developers can purchase to offset the nutrient loads of their proposed schemes.
Plans are in place to roll out credit schemes across the UK
While there is a reasonable supply of credit schemes available in and around the Solent (as these councils were among the first to be impacted by nutrient neutrality issues), coverage across the rest of the country is decidedly patchy. Natural England has recently set up its own credit scheme, but this is currently only open to developers in the Tees Catchment Area and has its limitations – firstly, there are a limited number of credits available, and these can only be purchased during specific application windows, which take place throughout the year. If an application is granted, developers then only have 36 weeks to obtain planning permission. If permission is not granted within that time, there is a risk that the credits will be reallocated elsewhere.
For any developer unable to access the Natural England credit scheme, the only hope is to acquire credits on the admittedly embryonic private market. The recent announcements in the Budget are aimed at speeding up the development of these private sector schemes to enable more local mitigation schemes to be created more quickly than might otherwise be the case.
By way of a reminder, the Budget announced a “call for evidence from local authorities in England for locally-led nutrient neutrality credit schemes”. Where high-quality proposals are identified through the call for evidence, the government has promised additional funding to support their delivery.
The Call for Evidence opened on 12 April 2023 and includes an invitation for councils to bid for grant funding that can be used to accelerate local mitigation schemes, with priority being given to proposals that could be delivered or expanded within six months. Two further bid rounds are proposed for autumn 2023 and spring 2024. The government’s plans to pump prime local nutrient neutrality credit schemes can only be a positive thing, particularly when combined with the landowner-side tax measures that the Treasury is looking to introduce.
Just after the Budget was released, the Treasury launched a consultation on the Taxation of Environmental Land Management and Ecosystem Service Markets. This consultation, which runs until 9 June, explores ways to change the tax system, particularly around agricultural property relief, to make it easier for ecological mitigation schemes to come forward.
Taking all of these announcements together, the direction of travel seems clear. The government is keen to support the development of new nutrient mitigation schemes and is actively looking for ways to encourage schemes to come forward soon. Indeed, this was the core message of the Nature Markets Framework that DEFRA published just last month. The key question for the development sector, is whether these schemes will come forward quickly enough to unlock those 120,000 homes that are currently waiting on a solution.
Nicola Gooch
Partner
Irwin Mitchell
