Movin’ On Down The Line
Most of John Healey's first Budget was what accountants politely call "many small measures", but buried in the housing package were two changes that do something rarer than a headline: they alter the numbers on a small developer's appraisal. The first is an exemption from biodiversity net gain (BNG) for residential brownfield sites of up to 1.5 hectares in England. The second is a commitment to make no major changes to building regulations for the rest of this parliament, other than on building safety.
Neither will make the evening news; they barely made the cutoff criteria for this blog, and we are setting a low bar with engaging content here, but to anyone borrowing millions of pounds, try to make a 20-unit scheme stack up in 2027, it’s exciting, trust me, so stick with us.
The 1.5-hectare line means nothing to most, but BNG has been mandatory for most new development in England since February 2024. Every scheme must show a 10% uplift in biodiversity value against its pre-development baseline, measured using Defra's metric. In principle, few would argue with that. In practice, on a tight urban site, it has become one of the more frustrating lines in an appraisal. The problem isn't the ambition, but the mechanics. A brownfield site of under 1.5 hectares (roughly two football pitches) rarely has room for meaningful on-site habitat. So the developer pays for an ecologist's baseline survey, runs the metrics, finds the gain can't be delivered on site, and goes shopping for off-site units. If those are scarce locally, the developer can end up buying statutory credits, the expensive option of last resort. Where gains are delivered, they come with a 30-year management and monitoring commitment that sits awkwardly with a build-to-sell exit.
The government already moved once; a 0.2-hectare exemption for the smallest sites took effect on 6 August 2026. Healey's announcement goes much further. Burges Salmon's planning team summarised the point neatly: sites previously written off may now work. For an appraisal, the effect is straightforward. Take out the baseline survey, the metric work, the off-site units or credits, the legal agreement to secure them and the long-tail monitoring cost. Just as importantly, take out the programme risk of waiting for a biodiversity gain plan to be approved before you can start on site. One caution for anyone rushing to re-run their numbers: detailed eligibility, commencement and transitional rules have not yet been published. Until they are, treat the saving as an upside rather than something to lend against.
The building regulations freeze is less dramatic but arguably more valuable; its benefit is not a lower cost; it's a known one. Anyone who has funded development over the last decade will recognise the pattern: a scheme is appraised under one set of standards, consented under another, and built under a third. Every revision to energy performance, ventilation, or overheating rules lands mid-pipeline, and each carries a cost nobody priced in at day one. A commitment to hold the line for the rest of the parliament, with building safety the only exception, removes that moving target. For a scheme with an 18- to 24-month build programme, that means the cost plan signed off at a credit committee is far more likely to be the cost plan on completion.
For lenders, this matters in a specific way. Contingency exists to cover the unknown. When fewer unknowns come from Westminster, the contingency that remains can do its proper job: covering ground conditions, contractor performance and price inflation in materials.
As we all know, costs are only half of an appraisal. The other half is the exit, and here the Budget has also done something useful. The £4.7bn Your First Home scheme will offer 20% equity loans to first-time buyers. Deposits will range from 2.5% to 15%, with income caps, and borrowers get a five-year interest-free period. The first loans are expected by April 2027. Anyone who remembers Help to Buy will see the family resemblance and remember what it did to new-build sales rates. There is a catch: developers will be expected to contribute to the scheme's costs, and details of how much are still to come. It's a trade most will accept if it shortens sales periods. Faster sales mean shorter loan terms, lower rolled-up interest and less exposure to a shifting market at the point of exit. None of this happens in a vacuum; a week after the Budget, the Bank of England raised Bank Rate to 4%. It was the first increase since August 2023, driven by concern over the inflationary effects of the Middle East conflict, which has cut across the good news. Some of what the Budget takes out of the cost side, the MPC is putting back into the finance line. The banks, already cautious about development lending, are unlikely to grow more generous in a rising-rate environment. And the planning pipeline is still thin: the Home Builders Federation has recorded eleven consecutive quarters of decline in the number of sites granted permission. Our honest conclusion is that the Budget has made marginal schemes viable, not made viable schemes easy.
The developers who gain most from this Budget are exactly the ones the big banks have been least interested in funding. These are SMEs building out small urban and edge-of-town brownfield sites: the infill plots, former garage blocks and redundant commercial units under 1.5 hectares. For them, the first step is to revisit shelved sites. A brownfield plot that failed on BNG costs in 2025 may pass in 2027, so it's worth re-running the appraisal now, with and without the exemption, so it's ready when the detail lands. The second is to price certainty into the build. With regulations frozen, there is less reason to carry an inflated contingency for regulatory change, although lenders will still expect a robust contingency for everything else. It also pays to model the exit both ways. Your First Home may lift sales rates on first-time-buyer stock, but the developer contribution needs to be factored in once it's confirmed. And the funding conversation is worth having early, with lenders who work at this scale. Specialist development lending platforms like ours exist precisely for schemes of this scale. A Budget that makes more of them viable is good news for developers, and for the housing supply the country is still waiting for.
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