The latest report by the Home Builders Federation last month shows a continuing fall in the grant of planning permissions across England. Recent developments in Government policy, including scrapping the mandatory house building target of 300,000 houses per year, may share part of the blame for the recent lack of planning consents. However, the effect of nutrient neutrality rules just over 4 years after their implementation has no doubt also had an impact.
The rules and concerns
Nutrient neutrality rules were first imposed by Natural England in 2019 in response to concerns over pollution by excess levels of nitrates and phosphates in the water system, particularly in Special Areas of Conservation. Run-off of fertiliser from farming operations, and spillages from sewage treatment works or sewers, are major contributors to this pollution. Natural England has also focused on the relative impact that new housing development has on this type of pollution. Since 2019, nutrient neutrality rules have been extended and now cover 74 planning authorities wholly or in part.
Housebuilders concerns arise from a moratorium on development imposed by rules, prohibiting development unless it can be demonstrated that the increase in wastewater produced by the additional home owners will not cause additional pollution, or that this pollution can be offset. Offsetting, often by creating new wetlands to absorb excess nutrients, can create significant development cost. With contributions from homes and other commercial dwelling estimated to contribute less than 5% towards excess nitrates and phosphates in rivers, neutrality rules have proven controversial.
A Nutrient Mitigation Scheme launched by the Government in 2022 has been designed to address some of the developers concerns and allow development to proceed in affected areas, such as the Solent. Government funding of up to £30m was promised to invest in the creation of new wetlands and woodlands to allow offsetting of any additional nutrients through development. However, such funding is being paid for by developers purchasing nutrient credits to remove personal obligations to offset nutrients on their developments. Many local authorities have accordingly created their own nitrate and phosphate credit schemes, leading to substantial cost increases which can vary widely between local authorities. For example, Hertfordshire Council propose to charge £14,000 for a single kilogram of phosphate credit whereas Eastleigh Borough Council are charging £50,000 for the same credit. Clearly the unequal charges will affect developers confidence to proceed with new developments in different parts of the country, penalising house buyers who will no doubt see local house prices increase as a result.
The Home Builders Federation previously hit the headlines earlier this year with its claims that the Government scheme had prevented planning permissions covering more than 145,000 new build homes from being granted, with 41,000 fewer homes being built each year the current situation continues. The 2023 Spring Budget acknowledge developers concerns, pledging greater support for nutrient neutrality – described as a major barrier to the Government’s house building ambitions. No concrete measures have been proposed, the government announcing a call for evidence to look into local nutrient neutrality schemes and funding to assist developers to deliver nutrient neutral sites.
Despite moves by the Government to address developers concerns, the effect of the Natural England guidance remains a serious issue. A recent High Court decision confirmed that nutrient neutrality rules apply to discharge of pre-commencement planning conditions, meaning even after planning permission is granted, developers must take care that they have set aside adequate funding to fulfil their environmental obligations.
The level of Government support and guidelines governing nutrient neutrality is an area which may well see further changes as the Government seek to increase house building across the country, while addressing concerns to mitigate the potential pollution caused as a result.
Our Commercial Real Estate Team here at Clarke & Son have expertise in helping developers from the grant of option agreements and conditional contracts through to planning obligations and subsequent plot sales. If you have any concerns about the effect of nutrient neutrality on your development proposals, or are looking for more general guidance, contact us by email at firstname.lastname@example.org or by phone on 01256 320555 and ask how we can assist you.