Survey finds SMEs suffering most under BNG regulations
The latest HBF survey reveals that 84% of housebuilders continue to find implementing Biodiversity Net Gain (BNG) a major blockage in development viability and housing delivery, particularly on smaller sites.
The Biodiversity Net Gain Sentiment Survey 2026, which polled HBF members in early 2026, shows that 60% of respondents reported that BNG has influenced their company’s decision not to pursue sites that may previously have been viable.
While the industry supports the principle of BNG, which is valuable both for nature and for demonstrating to communities the benefits of development, a major cause of concern is the uncertainty around agreeing on the cost and type of biodiversity enhancements needed on a site.
Some 80 companies, six in 10 of which are SME homebuilders, took part in the survey. While proposed changes to assist SMEs were welcomed, two-thirds of respondents do not think they go far enough to make a difference.
Significant challenges remain across the system, with respondents highlighting ongoing uncertainty around aspects of BNG policy, inconsistencies in how requirements are applied, and the cumulative burden of increasing regulatory and cost pressures facing the industry.
Local authority capacity remains a significant challenge for the delivery of BNG, says the report, with delays in reviewing biodiversity assessments continuing to affect a large proportion of the companies surveyed. 80% of respondents in 2026 reported planning delays due to BNG. While some progress is being made, 66% cited insufficient resources, expertise and gaps in council capacity are still slowing development. This compares with 79% last year in the 2025 survey.
With the industry facing a huge increase in taxes and policy costs generally, including a further Government levy set to be imposed in the Autumn of £3,000 per new home, alongside the recently announced Future Homes Standard, estimated to cost on average £10,000 per home, the amount of flexibility in a development’s finances has been severely curtailed.
Respondents said that they had reduced the number of homes on a site in response to these pressures, as land must be set aside for habitat creation and enhancement, which raises concerns about overall site viability.
There are emerging signs of progress, particularly in the off-site biodiversity unit market, where availability has improved significantly. Some 47% of respondents now report sufficient supply, up from 31% last year, indicating that the private market is beginning to mature as more habitat banks come forward.
The industry’s response to the government’s proposed reforms to BNG has also been cautious. Last year, the Government proposed introducing a 0.2 hectare (ha) area-based exemption, meaning sites smaller than this threshold would not be required to deliver BNG. Local authorities will also be restricted in setting their own BNG requirements on most sites. However, only a third of SME housebuilders believe the changes will improve the cost and ease of delivering BNG, while 63% do not expect the measures to make a substantial difference.
HBF is urging government to ensure BNG is implemented without restricting housing supply by addressing the recruitment crisis for public sector ecologists, providing clearer guidance, and including baseline biodiversity assessments in local plans. It stresses the need for further consideration of cumulative policy cost pressures and calls for government to scrap incoming cost pressures on development, such as the Building Safety Levy and rising Landfill Tax, rather than reconsidering BNG in its entirety.
The report also calls for stronger support for SMEs through a higher small sites threshold, as the proposed exemption of 0.2 hectares is widely seen as too low, a more accessible off-site biodiversity market, and a Quality Mark for units.
Neil Jefferson, chief executive at the Home Builders Federation, says: “The cumulative impact of Biodiversity Net Gain requirements and wider cost pressures is increasingly affecting the viability of housing developments, with too many sites becoming difficult to bring forward.
“The home building industry supports the goals of BNG and remains committed to delivering new homes alongside meaningful improvements to nature.
“However, we need government to provide greater clarity and ensure a consistent approach across local authorities and to provide support for SME builders so that these requirements do not become a barrier to delivering much-needed housing.”
Source: Showhouse
