The Building Safety Levy

The long-anticipated Building Safety Levy (Levy) will come into force in England on 1 October 2026, introducing a significant new cost for residential developers and adding another layer of compliance to the development process. Introduced under the Building Safety Act 2022, the Levy forms part of the Government’s wider programme of building safety reforms following the Grenfell Tower tragedy. Its purpose is to ensure that the cost of remediating historic building safety defects is borne by the development sector, rather than leaseholders or taxpayers.

For developers, landowners, investors and lenders, the introduction of the Levy will have important financial and practical implications. Early consideration of levy liabilities will be essential when assessing project viability and development strategies.

What Is the Building Safety Levy

The Building Safety Levy is a charge payable on certain new residential developments in England. Revenue generated through the Levy will be used to fund the remediation of historical building safety defects, including unsafe cladding and related fire safety issues where responsible parties cannot be identified or held liable. The Government expects the levy to raise approximately £3.4 billion over the next decade.

The Levy will be administered and collected by local authorities through the building control process. It sits alongside existing development costs such as planning obligations under Section 106 agreements and the Community Infrastructure Levy (CIL).

When does the Levy Apply?

The levy will apply to relevant building control applications submitted on or after 1 October 2026. Importantly, liability is linked to the building control process, rather than the date planning permission was granted. This means developments with planning consent may still become liable if the relevant building control application is made after the commencement date.

Developers should also be aware that where an application submitted before 1 October 2026 is rejected or invalidated and subsequently resubmitted after that date, the resubmission may be treated as a new application and fall within the Levy regime.

Which Developments are Caught?

The levy generally applies to major residential developments in England, including:

• New housing developments.
• Apartment schemes.
• Build-to-rent projects.
• Mixed-use developments containing residential units.
• Residential conversions and change-of-use schemes creating dwellings.
• Purpose-built student accommodation.

A development will typically be within scope where it provides at least 10 dwellings, or at least 30 student accommodation bed spaces. Notably, unlike some other building safety measures introduced in recent years, the Levy applies regardless of building height.

There are, however, a number of developments that are exempt in addition to those which will contain less than 10 dwellings or 30 student accommodation bedspaces, such as affordable housing, care homes and nursing homes, hospitals, children’s homes and domestic abuse refuges among others.

Developers should review projects carefully to determine whether any exemptions may apply.

How is the Levy Calculated?

The levy is calculated on a per square metre basis, using the gross internal floor area of the residential development. Rates vary depending on the local authority area in which the development is located.

An important feature of the regime is the distinction between brownfield land, which benefits from a reduced rate and greenfield land, where higher rates apply.

The Government has stated that the reduced brownfield rate is intended to recognise the higher costs often associated with redeveloping previously developed sites and to support regeneration projects.

When is Payment Due?

Local authorities will issue a Levy Liability Notice during the building control process. The Levy must generally be paid before the final building control certificate is issued, meaning developers will need to factor payments into project cashflow and delivery programmes.

Local authorities will also have enforcement powers, including the ability to pursue unpaid amounts and impose penalties for non-compliance.

What Does This Mean for Developers?

The introduction of the Building Safety Levy represents a significant additional cost for many residential development projects. Developers should be reviewing:

• Land acquisition appraisals.
• Development viability assessments.
• Funding and finance arrangements.
• Construction contracts.
• Development timelines and building control strategies.
• Projects that may previously have been commercially viable could see profit margins reduced once levy liabilities are taken into account. Careful due diligence at the earliest stages of a project will therefore be increasingly important.

The Levy applies to all relevant developments irrespective of whether the developer was responsible for historic building safety issues or whether they have already paid to remedy defects on their previous developments. The Home Builders Federation has spoken out clearly in opposition to the Levy stating it is an unfair, anti-development tax and has pointed out that to date UK home builders have already made building safety commitments worth around £6 billion through various schemes recently and the home building industry does not consider that the Levy is necessary to deal with the required remediation.

What does the Building Safety Levy Mean for Buyers and Investors?

Although the Building Safety Levy will be paid by developers, it is anticipated that they will want to pass on at least some of the additional costs and this may ultimately be reflected in the price of new homes and residential developments. As developers are assessing the impact of the Levy on their developments, buyers are likely to see changes to pricing structures, incentives and the availability of certain developments.

In terms of liability for individual property purchasers, the intention is that the Levy is solely enforceable against the developers and this is why the Levy must be paid in full before a building control completion certificate can be issued for any of the works on the site. The downside of this is this may cause changes to build schedules and could cause delays to intended legal completion dates for buyers even where properties have been fully built.