Developers, do you know your nitrates from your phosphates?
By Guy Murray, Head of Development Finance, West One Loans
Alongside finance and healthcare, the environment is undoubtedly one of the most regulated parts of the UK economy.
That's understandable when you consider how fiercely protective we are of your nation's outstanding coastlines, wildlife and countryside. However, there is no denying that where there is red tape, it usually means added costs, delayed projects and more than the odd headache for developers.
There is one emerging environmental issue that has the potential to catch out developers that are both underprepared and unaware - and that is the matter of nutrient neutrality.
It relates to a process called eutrophication, where nutrient pollution causes excessive plant and algal growth, preventing light from entering and denying the fabric of life to exist beneath the waterline.
Local planning authorities now have to work with Natural England's requirements on nutrient neutrality due to concerns about the impact developments can have on the surrounding environment.
Wastewater infrastructure - along with agriculture - can contribute to eutrophication, and Natural England, which has the power to implement environmental legislation on behalf of the government, is increasingly stepping in to ensure developments are not adding to the nutrient burden.
Their involvement is causing significant delays to housing projects with the Home Builders Federation (HBF) estimating that around 120,000 new homes are currently held up. In these areas, developers are told they cannot start or resume building work until they can prove “nutrient neutrality”.
If this sounds unfamiliar, it’s because Natural England has only intervened so far in 74 out of 333 local authorities in England, according to the HBF.
However, this should be on all developers’ agendas. So, what can they do to ensure they do not become tied up in red tape when it comes to nutrient neutrality?
There is no single answer to that question and I can only talk about the solutions we have been using with our developers.
We work with a property advisory business called Cicero Estates which, in tandem with regulated statutory water undertaker, Albion, use nature-based solutions such as building new constructed wetlands to achieve nutrient neutrality.
This solution supports developers who can purchase credits to offset the impacts of their developments.
Cicero and Albion can look at a range of onsite treatment processes to deliver the outcomes that nutrient neutrality requires.
There will be many other solutions out there and developers should start becoming familiar with them now.
Otherwise, we could very quickly see a situation forming where housebuilding in this country comes to a grinding halt because they don’t have a solution to this particular problem.
As this issue becomes better known, we may also see lenders require developers to provide evidence of their solutions before agreeing to lend them money.
I don’t want to overstate the issue. Developers are used to complying with vast swathes of regulations, so this is not an insurmountable challenge for them.
But it is something they need to start considering today if they want to avoid delays and frustration further down the line.