How to deal with the problem of Open Mosaic Habitats (OMH)

What does this mean? By way of context:

• “Brownfield” land is previously developed land.
• “Grey Belt” land is a new term which the Government has proposed to describe Green Belt land which makes a “limited contribution” to the Green Belt’s purposes.
• “Green Belt” land is land which is protected to check the unrestricted sprawl of large built-up areas; to prevent neighbouring towns merging into one another; to assist in safeguarding the countryside from encroachment; to preserve the setting and special character of historic towns; and to assist in urban regeneration, by encouraging the recycling of derelict and other urban land.

The proposed new NPPF objectives do not contain any new measures to avoid ecological harm from development and this is because it is assumed that this is already adequately provided for under the mandatory BNG regime, which has been in force since 12 February 2024. Mandatory BNG requires (most) new development to deliver a net gain in biodiversity of 10% calculated according to the BNG statutory (official) biodiversity metric tool.

So far so good. The problem, however, is how the BNG statutory metric deals with brownfield land.

‘Brownfield’ land under the BNG statutory metric

Under the BNG statutory metric, a lot of brownfield sites will be classified as ‘Open Mosaic Habitat’ (‘OMH’). This is a term which describes areas on previously developed land that feature a mix of bare ground and various habitat types, such as flower-rich meadows, grasslands, scrub, and wet areas typical on many churned up brownfield sites. Importantly, around 12% to 15% of all nationally rare or scarce insects are recorded on these sites and so they carry a vitally important biodiversity value for those species. Indeed, some of these sites are so important for insects that they have been designated as protected sites in their own right.

Because of this, OMH is classified as a ‘high distinctiveness’ habitat in the BNG statutory metric.

Unfortunately, this causes an unexpected problem in practice.

Because of the “trading rules” under the BNG statutory metric, habitats must be compensated on a “like for like” or “like for better” basis up to the point of “no net loss” on the site. This means that if a habitat of high distinctiveness is lost, it must be replaced with the same type of habitat or with something better. For this reason, a developer cannot, for example, use low distinctiveness grassland units in place of the loss of high distinctiveness OMH.

In practice this means that to re-use despoiled previously developed land and meet the Government’s desire for efficient land use, developers will either need to create areas of high distinctiveness OMH on-site, within the redline boundaries of their developments, or, if this is not possible, purchase high distinctiveness OMH units from third party landowners. The problem with this is that it is inherently difficult and expensive for landowners to create high distinctiveness biodiversity units and, it appears, there is currently an under supply within the emerging market of off-site biodiversity units to meet the growing demand for high distinctiveness OMH units.

In order to protect developers against under supply problems whilst the market in off-site biodiversity units takes-off, the Government can sell developers “statutory biodiversity credits”. The problem with this is that these credits have been made deliberately expensive to prevent the Government undercutting prices in the emerging off-site biodiversity unit market. Furthermore, because of the “spatial risk multiplier” rule built into the statutory metric for BNG, developers must also buy two statutory biodiversity credits for every one biodiversity unit that they need to compensate for. With high distinctiveness OMH units currently priced at £48k (plus VAT) each this means for a developer needing, say, 10 high distinctiveness OMH units, they would need to pay £960k (plus VAT). These costs may make many brownfield sites highly unattractive to build on, piling pressure on the Government’s ambitious target of building 1.5 million new homes over this Parliament.

What is the solution?

In our view, there are several possible solutions to this emerging issue. First, the Government could take a strategic approach and revise the BNG statutory metric to allow OMH and other brownfield land habitats to be replaced with alternative habitat mosaics with a good diversity of ‘standard’ habitat that emulates the variety most brownfield sites support. A degree of fungibility over this type of unit could give developers and landowners more choices in terms of how to address a short-term issue of undersupply. Of course, before this happened Natural England would need to closely consider the ecological merits of this approach (including any unintended negative consequences for biodiversity) and the BNG statutory metric would need to be updated accordingly.

A further solution is for developers requiring high-distinctiveness OMH units to trade up and buy other, better, types of biodiversity units – something which is allowed under the BNG statutory metric rules as discussed above. The problem with this approach, of course, is that whilst it offers a way forward it does not necessarily offer a cheaper way forward for developers.

That simply leaves the “wait and see” option. In this case it means to simply wait for the off-site biodiversity unit market to respond to the price signals currently being sent out from the apparent under supply of OMH units by bringing these types of units to market. Indeed, this may be the correct solution rather than succumb to the urge to tinker with market mechanisms before they have had the opportunity to function properly. The risk with tinkering is that it may distort the nascent market, eliminating the theoretical efficiencies associated with reliance on market mechanisms. There is a strong economic argument, therefore, just to leave things be and let the market sort itself out. The problem, of course, will be the time it takes for this to happen because in the short to medium term the costs associated with building on brownfield sites will be ratcheted up.  Supporting local authorities (and the newly designated responsible bodies with whom landowners can enter into conservation covenants) have greater bandwidth to work with landowners looking to create and legally secure off-site biodiversity units would be one way the Government could help speed things up.

Top tips

In the meantime, Freeths’ top tips for developers are:

• Consider whether planning application redline boundaries can be drawn in such a way so as to cut out areas of high distinctiveness OMH (and other areas with high biodiversity value) as much as possible.
• Consider whether it is possible to enhance existing areas within the redline boundary of the development to ensure that the units you need can be created on-site.
• Instruct experienced and trained ecological consultants to check whether the habitat type of the proposed brownfield development is indeed high-distinctiveness OMH and not some other habitat type or even land consisting of sealed surfaces and buildings with zero biodiversity value.
• Seek legal advice on the correct application of the biodiversity metric (We can assist with this).

If you have any further questions on this issue then please feel free to contact the Freeths Natural Capital team.

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