Are you ready for the implications of the Building Safety Levy?
31/03/2025
As part of the Government’s response to issues raised following the Grenfell Tower disaster, it has recently reconfirmed its commitment under the Building Safety Act 2022 to introduce the Building Safety Levy on most new residential buildings in England. First announced in 2021, the Building Safety Levy’s implementation has now been delayed a further 12 months until Autumn 2026. In adopting this approach, the Government has said it will give all parties an additional 18 months to factor in the levy cost to their financial planning and to prepare for the process.
Are you, or those you advise, ready to use this small respite to plan for its effect on development plans?
What is the Building Safety Levy?
The Building Safety Levy is a charge on new residential buildings in England that require certain building control applications (i.e. new dwellings and purpose-built student accommodation, with certain exemptions).
The amount of the levy varies according to which local authority the development falls under, and how the site is classified (e.g. there will be a 50% discount for developments built on a brownfield site (referred to as “previously developed land”). The rates for each local authority area have recently been published, and are stated to be different in each area to allow for variations in house prices across the country. The rates will not be subject to indexation, however, so there is at least some clarity on what the rates will be for the foreseeable future.
The levy will be calculated at a rate per square metre of the gross internal area of the floorspace of the development. This is contrary to the industry requests via the related consultation to base the calculation per unit instead. The Government also rejected industry calls to allow for staged payments on phased developments.
Why is the Building Safety Levy being introduced?
This is one of the measures the Government will use to generate funds to pay towards the remediation of residual unsafe cladding on existing buildings, as well as on building safety generally.
Despite forcing certain developers to address the cost of fixing unsafe cladding on their previous projects, and the Government so far making money available via various schemes (such as the Building Safety Fund and the Cladding Safety Scheme), vast sums of money will still be required to fix the remaining buildings constructed with unsafe cladding in the UK.
The numbers are frightening, but this new charge is aimed at raising around £3.4 billion to put towards sorting out these issues, including where a developer cannot now be identified or be held accountable (e.g. in an insolvency situation).
Who pays the Building Safety Levy?
The duty to pay the levy to the local authority will be responsibility of the client, namely the company or person for whom a construction project is carried out. It may also be the principal designer and/or principal contractor.
If the client changes over the course of the development, the new client will bear the responsibility for paying the levy.
What happens if you do not pay the Building Safety Levy?
The Building Control Authority will be able to withhold a building control completion certificate, or reject a final certificate if the levy has not been paid. Although such certificates are currently only a legal requirement for buildings over 18 metres, the expectation is mortgage lenders will also require them, which will in practice restrict their sale and occupation if they levy is not paid.
What are the exemptions to the Building Safety Levy?
To still encourage the development of residential community facilities and some types of communal accommodation, the Government has so far stated the levy will not be charged on “affordable housing, non-social homes built by not-for-profit registered providers, NHS hospitals, care homes, supported housing, children’s homes, domestic abuse shelters, accommodation for armed services personnel, criminal justice accommodation, and developments of fewer than 10 units”. The latter is specifically noted as a carve out for small and medium-sized sites and enterprises.
What should you be thinking about now?
Now that the rates for local authority areas across England have been published, you can re-evaluate development plans. Any concerns that this additional development cost might lead to a further reduction in the supply of affordable housing should also be considered carefully by the Government. Local authorities and the Building Safety Regulator will need to use their time wisely to be ready to implement the new regime efficiently in Autumn 2026.
As with most aspects of the Building Safety Act, secondary legislation will be required for these principles to take effect. With the now extended implementation period of 18 months, we will have to watch to see if the debates in the Houses of Parliament lead to further changes in the secondary legislation when the new law is approved and takes effect.
This article is not legal advice, which it may be sensible to obtain before you take any decisions or actions in the areas covered. Please do contact me if you would like an initial discussion of your situation.
