On 10 January 2018, the Government published its plan to improve the environment over a 25 year period. It discusses a wide range of ideas, including planting one million urban trees, regulating farms and fisheries after the UK leaves the EU, and establishing a new national forest. Details are thin on the ground, but here we consider what the plan could mean for the real estate sector and those investing into it.
SUSTAINABLE LAND USE
The plan opens with a recognition of the government’s commitment (as formulated in its 2017 Housing White Paper) to the construction of 300,000 extra homes a year by the middle of the 2020s, but states that the protection of the environment must be at the heart of planning and development in order to create better places for people to live in. Key proposals relating to development are:
- an "environmental net gain principle" which will involve measurable improvements to the environment while also ensuring economic growth and reducing costs, complexity and delays for developers;
- measures to manage flood risk by updating national flood risk strategies and strengthening the Environment Agency's role as a statutory consultee via changes to the National Planning Policy Framework and relevant planning guidance to encourage sustainable drainage systems ('SuDS') in new developments. The Government will support an industry-owned voluntary code of practice to promote consumer and business confidence in measures to reduce the impact of flooding on buildings, such as flood barriers, non-return valves on wastewater pipes, airbrick covers, and flood-resistant coatings on walls;
- water abstraction reform, review of supplies and encouragement of more efficient water use;
- pollution reduction, particularly improving air quality and reducing combustible energy production, eliminating the use of disposable plastics and other waste; and
- the enhancement of green spaces and woodland for health and well-being; and the protection of soils, nature and natural beauty.
THE VIEW FROM THE PLANNING SYSTEM
The plan is rather vague and aspirational, but there is a clear expectation that many of the elements listed above are likely to be delivered, managed and monitored through the planning system, with the following possible impacts:
- Biodiversity offsetting is already embedded in the planning system, but the plan proposes to make this mandatory (subject to some exemptions) and to allow local authorities to develop their own strategies to achieve this. This would allow flexibility and a degree of localism, buy may well create log-jams in development similar to those already occurring (and discussed here) where Sustainable Alternative Natural Greenspace ('SANG') is required to mitigate impacts on specially protected areas and the land to deliver the SANG is not readily available or only at a significant premium.
"Biodiversity offsets are conservation activities that are designed to give biodiversity benefits to compensate for losses - ensuring that when a development damages nature (and this damage cannot be avoided or mitigated) new nature sites will be created. Where appropriate, biodiversity offsetting is an option available to developers to fulfil their obligations under the planning system’s mitigation hierarchy." DEFRA
- With regard to flooding, the Environment Agency has, like many planning authorities, suffered cuts to budgets and reductions in staff. The hidden additional cost of this is often the loss of experience and knowledge, so this would be an added burden on these public bodies to perform their duties promptly and efficiently. SuDS is already on developers' radars, but is likely to become mandatory, probably through design codes or conditions attached to consents.
- More efficient use of water can be achieved through grey water recycling and delivered by tightening building regulations and design codes for developments. Abstraction is controlled via licencing. There may be cost and time implications attached to this, but also the potential for increased monitoring costs of local authorities, normally payable by the developer in the form of a commuted sum in a s.106 agreement.
- Enhancing and protecting natural capital is likely to be implemented through requirements to mitigate the impacts of development and/or improve such resources through planning conditions and obligations, as well as through design codes whereby the ratio of green or open space to developed footprint might be adjusted. An example of this is the recently published guidelines for delivering new nature-friendly homes from the Wildlife Trust. These initiatives could have financial viability implications for developers.
It is also interesting to note that developers will also be under increasing pressure to provide higher levels of affordable housing, which will tend to result in denser developments and less green space. These two requirements may well fall into direct conflict with each other in some developments.
- Reduction in the use of fossil fuels requires investment in renewables, a sector which has already experienced fluctuating 'carrot-and-stick' policies. Some simple changes could, however, be made on a planning level, such as reclassifying the use class of battery storage units as storage (not generating) plant, as discussed here. This would allow renewable generation of up to 50MW to be paired up with substantial battery storage units to even out the fluctuations in generation of solar and wind power.
- Matters such as reducing the use of disposable plastics and litter and waste generally and, to some extent, air pollution produced by private cars, are largely behavioural issues but can be influenced by design (car free developments), promotion of alternatives (public transport, developing the electric charging point network) and commercial pressures (e.g. the 5p levy on all carrier bags).
PAYING FOR IT ALL - HIGHER DEVELOPMENT COSTS?
Developers have responded to the plan with a measure of concern. There are insufficient details in the plan to clarify what is intended. As a general rule, a higher level of duty of care normally means a higher cost. The plan, however, suggests that these environmental net gains are to be achieved at no greater cost to developers. If the plan's proposals are indeed to be delivered through the planning system, as being the most efficient and effective way of securing prescribed standards for a variety of developments, and the means of monitoring and enforcing these going forward, it is difficult to see how they can be delivered at no additional cost to the developer.
The plan states that the Government intends to explore, through the work being done by the Ministry of Housing, Communities and Local Government to reform developer contributions, how tariffs could be used to steer development towards the least environmentally damaging areas and to secure investment in natural capital. This may, like affordable housing, not sit easily in the Community Infrastructure Levy and would need to be applied in a robust manner to avoid being lost through viability reassessments. The current proposals to limit this effect on affordable housing may apply here too.
There is still a lacuna – where developments arise under permitted development rights, such as conversion of offices and warehouses, prior approval is only needed for noise, highways, contamination and flooding, so the ability to impose requirements for greening development by the local planning authority are more limited.
REPORTING AND ACCOUNTING FOR ENVIRONMENTAL CHANGE
The Natural Capital Committee (an independent advisory committee which advises the government on the sustainable use of natural capital) recommends that as the plan cannot be delivered without sustained effort from both public authorities and private and institutional landowners, there will need to be a new "natural capital accounting requirement" in the national accounts, and also for landowners in both the public and private sectors as part of their accounting and reporting obligations. The Office for National Statistics is already developing environmental accounts with the intention of incorporating natural capital into the national accounts by 2020.
What will this mean for landowners? The plan suggests that this approach will be introduced gently: "we will use natural capital approaches to help guide us and as part of this encourage better uptake of natural capital reporting, standards and accounting across government and businesses, in conjunction with key initiatives such as the Taskforce on Climate-related Financial Disclosures and the Natural Capital Coalition Protocol." It is not clear whether this will be on a voluntary or mandatory basis and whether it will apply to all landholdings or only those over a certain size. If introduced into law, it could sit alongside other corporate reporting regimes such as corporate transparency and modern slavery reporting rules.
NATURAL CAPITAL REPORTING
The Taskforce on Climate-related Financial Disclosures develops "voluntary, consistent climaterelated financial risk disclosures for use by companies in providing information to investors, lenders, insurers, and other stakeholders."
The Natural Capital Coalition Protocol "is a framework designed to help generate trusted, credible, and actionable information for business managers to inform decisions … by including how we interact with nature, or more specifically natural capital."
A key part of the plan is the drive to protect nature and prevent biodiversity loss. To this end, the plan proposes to:
● develop a strategy for nature to tackle biodiversity loss;
● develop a Nature Recovery Network providing 500,000 hectares of additional wildlife habitat, more effectively linking existing protected sites and landscapes, urban green and blue infrastructure; and
● working with landowners, conservation groups and others, review and take forward the Law Commission’s proposals for a statutory scheme of conservation covenants in England. A conservation covenant is an agreement made between a landowner and a "responsible body" (a relevant public body, charity or local authority) which ensures the conservation of natural or heritage features on the land. It would be a private and voluntary arrangement made in the public interest, which continues to be effective even after the land changes hands. This could be useful in a number of scenarios:
- on the sale of land to a third party, the owner who has grown and nurtured a woodland area on the land might want to ensure that future owners do not cut it down;
- where a charity wants to sell its Georgian headquarters building but does not want future owners to demolish the property or alter it in ways which undermine the restoration and conservation work that the owner has undertaken; or
- where a biodiversity offsetting site is offered by developers in connection with a planning application on green land, if the offset site is protected by a conservation covenant then the local planning authority could take this arrangement into account as a material consideration when determining the application for planning permission. It could conclude that the offset site, secured by a conservation covenant, would compensate for the harm that would be caused to the proposal site by the development and that planning permission could be granted as there would be no net loss in biodiversity.
Much will depend on how willing or able landowners are to engage with this idea, as agricultural policy is separated from current European initiatives. We will report on the implementation of the scheme as it is brought forward.
It seems inevitable that, however attractive the principles in the plan are, their implementation would come at the cost of the developer and/or tax payer. On the other hand, the aspirations in the new plan do give an indication of positive and thoughtful environmental intent in a post-Brexit world.