Biodiversity Net Gain Changes: What Small Developers Need to Know

The upcoming biodiversity net gain changes represent the most significant shift in the policy since it became mandatory in February 2024, and for small developers they cannot come soon enough.

From 31st July 2026, development sites with a red-line boundary of 0.2 hectares or less will be exempt from the mandatory 10% biodiversity net gain requirement. For the developer clients who have watched small and infill sites become unviable under the weight of off-site biodiversity payments, this is a material change to the economics of small-scale development.

This article explains what biodiversity net gain is, when it applies and at what stage of a project, what it costs and when that cost falls due, and what the 31st July 2026 changes mean for the small development market. It is written for developers and landowners who need to understand how the new exemption affects the viability of their sites.

What Is Biodiversity Net Gain?

Biodiversity net gain, usually abbreviated to BNG, is a requirement introduced under the Environment Act 2021 and made mandatory for most development in England from February 2024. It requires development to deliver a measurable improvement in biodiversity of at least 10% compared to the pre-development state of the site. The principle behind it is that development should leave nature in a better state than it was found.

Biodiversity is measured using the statutory biodiversity metric, a calculation tool that assigns a value in biodiversity units to the habitats present on a site before development and to the habitats that will exist after it. The post-development biodiversity value must exceed the pre-development value by at least 10%. That uplift can be delivered in three ways, in a strict order of preference known as the biodiversity gain hierarchy: on-site first, then off-site, and only as a last resort through the purchase of statutory biodiversity credits from the government.

The difficulty for small sites lies in the arithmetic. When a development removes existing habitat to make way for new buildings, that lost biodiversity value has to be replaced and then increased by a further 10%. On a small plot where most of the site area is being built on, there is simply not enough remaining land to deliver the required biodiversity units on-site. The developer is then forced down the hierarchy to off-site provision or credit purchase, and that is where the costs escalate.

When Does BNG Apply and at What Stage?

Under the current rules, biodiversity net gain applies to most planning applications for development in England, including residential, commercial and mixed-use schemes. Since April 2024, it has applied to small sites as well as major development, which is the point at which it began to bite hardest for small developers.

BNG is not a consideration that arrives late in a project. It is a planning condition that must be addressed as part of the planning application itself. The developer must submit a biodiversity gain plan setting out the pre-development biodiversity value, the post-development value and how the 10% uplift will be achieved. This requires an ecological survey of the site, carried out by a suitably qualified ecologist, to establish the baseline habitat value before any design work is finalised.

This is why BNG needs to be considered at the feasibility stage of a project, not after planning has been granted. The biodiversity baseline affects what can viably be built on a site, and a scheme designed without regard to the BNG requirement can find its viability undermined at the point of the biodiversity gain plan submission. Our guide to what property developers need from an architect covers why feasibility-stage thinking is where the greatest commercial value is protected or lost on a development scheme.

How Much Does BNG Cost?

The cost of biodiversity net gain varies enormously depending on the site, the habitats affected and the route taken to deliver the required uplift. Where the uplift can be delivered on-site, the cost is largely a matter of design and landscaping. Where it cannot, the developer must either secure off-site biodiversity units or purchase statutory credits, and this is where the cost becomes a serious factor in viability.

On small residential schemes, off-site biodiversity payments have been quoted at around £30,000 per unit, a figure that can render a small site unviable on its own. When a developer removes a modest area of habitat to build two new houses, the requirement to replace that habitat and add a further 10%, delivered off-site because the plot cannot accommodate it, produces a cost that bears no reasonable relationship to the scale of the development. For a scheme of a handful of units, a five-figure BNG cost per dwelling can be the difference between a viable project and one that never leaves the drawing board.

Statutory biodiversity credits, the last resort in the hierarchy, are priced by the government deliberately high to encourage on-site and off-site delivery ahead of credit purchase. They are not a cheap fallback. The cumulative effect of these costs on small sites is precisely why the policy has been widely criticised for stalling the very small-scale housing delivery that the country needs most.

When Does the BNG Payment Need to Be Made?

The biodiversity gain plan must be approved before development can lawfully begin. In practice, this means the BNG obligation is discharged as a pre-commencement matter, and the financial commitment to off-site units or credits is made at the point the developer needs to start on site.

Off-site biodiversity units are typically secured through a legal agreement, and the habitat they represent must be maintained and monitored for a minimum of 30 years. This is a long-term legal and financial commitment, not a one-off fee. It is registered on a public register and secured through a planning obligation or conservation covenant. For a small developer, taking on a 30-year maintenance obligation on an off-site parcel of land, or paying a premium to a habitat bank to take that obligation on, is a significant undertaking relative to the size of the scheme.

The timing matters because it falls at the worst possible point in the development cashflow: before any revenue has been generated, at the same time as the developer is committing to construction costs. A large BNG liability at the pre-commencement stage can be the factor that prevents a small scheme from being financed at all.

The Changes to Biodiversity Net Gain from 31 July 2026

Following a consultation that attracted more than 25,000 responses, the government confirmed in its response of 15th April 2026 that a new area-based exemption would be introduced. From 31st July 2026, any development with a red-line site boundary of 0.2 hectares or less will be exempt from the mandatory biodiversity net gain requirement.

0.2 hectares is 2,000 square metres, roughly a square of 45 metres by 45 metres. In practical terms it covers a single detached house on a standard plot, a pair of semi-detached homes and smaller infill schemes of up to around eight dwellings depending on density. Analysis of Planning Portal data suggests that a substantial majority of BNG-eligible applications since November 2023 would fall below this threshold, which gives a sense of how many small schemes the exemption will remove from the BNG regime entirely.

There is one critical condition that every small developer needs to understand. The 0.2 hectare exemption does not apply where on-site priority habitats would be affected. A site can be well under the 0.2 hectare threshold and still be subject to full BNG if it contains or intersects a priority habitat listed on Natural England’s Priority Habitats Inventory. This means site size alone does not guarantee exemption. A developer with a small site should not assume the exemption applies until a Phase 1 Habitat Survey has confirmed that no priority habitat is present.

The exemption is measured by the planning red line, not the developable area, which makes it straightforward to apply and easy for local planning authorities to enforce. It is also worth noting that the exemption does not remove all environmental obligations. Wildlife legislation, protected species requirements and local planning policies continue to apply, and a planning application can still be refused where significant harm to biodiversity cannot be avoided, mitigated or compensated, even on an exempt site.

How Will This Affect the Market?

For small developers, the effect of the 31st July 2026 changes is straightforward and significant. Schemes that were rendered unviable by five-figure per-unit BNG costs become viable again. The ecological survey, the biodiversity gain plan and the off-site unit purchase, all of which added cost, delay and complexity disproportionate to the scale of a small scheme, fall away for sites under the threshold and clear of priority habitats.

This should unlock a category of small and infill sites that had effectively been frozen. The sites most affected are exactly the ones the policy had hit hardest: small brownfield plots, garden land, infill between existing buildings and the modest schemes of two to eight units that make up a large share of the small-developer pipeline. Removing the BNG burden from these sites changes their development economics at a stroke.

For the wider market, the picture is more nuanced. The off-site biodiversity unit market, which had been developing as a way for landowners to sell biodiversity units to developers, will see reduced demand from the small-site segment. Habitat banks and landowners who had invested in creating biodiversity units may find the market smaller than anticipated. There is also legitimate concern among environmental groups that the exemption will reduce cumulative biodiversity gains, particularly in urban areas where small sites are common and green space is already scarce.

For developers weighing up whether a site qualifies, the interaction between the site boundary, the priority habitat carve-out and the wider planning context is exactly the kind of assessment that belongs at the feasibility stage. Our guide to developing small urban sites covers the broader considerations that apply to exactly this category of scheme, and our overview of planning permission timescales is relevant to how the removal of the BNG step affects the overall programme.

What Small Developers Should Do Now

For developers with small sites in the pipeline, the practical implications of the 31st July 2026 change are worth acting on rather than assuming.

Confirm the site boundary.
The exemption is measured by the red-line planning boundary at 0.2 hectares. Sites close to the threshold need to be measured precisely, as the difference between qualifying and not qualifying can be a matter of a few square metres.

Commission a Phase 1 Habitat Survey.
The priority habitat carve-out means site size alone is not enough. A habitat survey confirms whether any priority habitat is present that would remove the exemption regardless of site size. This is the single most important step for any small site relying on the exemption.

Review stalled schemes.
Sites that were shelved because BNG costs made them unviable should be revisited. A scheme that did not stack up with a five-figure per-unit BNG liability may be viable once that liability is removed.

Consider timing.
For sites that qualify, the timing of the planning application relative to the 31 July 2026 implementation date matters. An architect with current knowledge of the reforms can advise on how to sequence an application to take advantage of the exemption.

Talk to Discover Architecture

At Discover Architecture, we work with small developers and landowners on exactly the kind of sites the 31 July 2026 BNG changes are designed to unlock. We assess viability at the feasibility stage, factor the BNG position into the development appraisal and advise on how the new exemption affects your specific site. If you have a small site that BNG had made unviable, or one you want to bring forward under the new rules, we are ready to have that conversation. Explore our developer client services or get in touch directly.

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