Building Safety Levy- the headlines

1 October 2026 – this is the date of implementation for the Building Safety Levy (the “Levy”) which aims to collect c£3.4bn to fund the remediation of historic building safety defects.

What is it though? And how will it apply to new schemes coming forward from 1 October?

How and when does it apply?

There will be three conditions that any new residential schemes have to meet for the Levy to apply, these being:

1. Major Residential Development

For the purpose of the Levy, a ‘major residential development’ is one which consists of:

• 10 or more dwellings; or

• 30 or more bedspaces in purpose-built student accommodation (PBSA)

Please note: that this definition is based on the planning permission for the development – it will not be possible to avoid the Levy by submitting multiple applications for building control approval for fewer than 10 dwellings or 30 bedspaces.

2. New residential floorspace

It must create new residential floorspace, including:

• Residential floorspace within a new building

• Existing buildings undergoing a change of use to create residential floorspace (e.g. office block to flats) and

• Existing buildings with existing residential floorspace having additional floorspace created (e.g. extensions or conversion/change of use)

3. Not an ‘exempt person’

If the “client” (which, for the purposes of the Levy, is the person named on the application for building control approval) is a non-profit registered provider of social housing (or a wholly owned subsidiary company), all of the works are exempt from the levy charge.

Costs and calculations

The Levy will be calculated and charged on gross internal area (GIA) per square meter and, in Build-to-Rent and PBSA schemes, communal spaces can increase GIA and therefore Levy exposure.

The rates vary by local authority – the intention being that this reflects the variation in house prices across geographic regions, with County Durham charging the lowest rate of £12.70 per square metre and Kensington and Chelsea charging the highest, at £100.35 per square metre.

There is, however, a 50% reduction in the chargeable rate where:

• Planning permission for a chargeable development is granted through permitted development rights or

• A chargeable development is constructed on ‘brownfield’ land (i.e. land that has previously been developed). However, to qualify for this reduction, at least 75% of the land within the planning permission redline boundary must meet the ‘brownfield’ criteria

Exclusions

Sitting alongside the Government’s commitment to affordable housing (evidenced by its monumental announcement of £39bn in funding), one of the key exclusions to the Levy are residential developments for “Social Housing”, which includes:

• It is provided by non-profit registered providers under recognised tenancy types and rent is no more than 80% of market value

• The dwelling is occupied under shared ownership where:
  The initial purchase valuation of the dwelling does not exceed 75% of market value, the annual rent is not more than 3% of value of unsold interest and restricted rent increases are in place

• The dwelling is let by a non-registered provider:
  Under recognised tenancy types, rent is no more than 80% of market value and dwelling is let to a person whose needs are not served by the commercial housing market

• The first sale (and future sales) of the dwelling is for no more than 70% of the market value

An important point to note here is that Social Housing is exempt regardless of who is developing it – therefore, any affordable housing to be delivered by a private developer under a s106 agreement will be exempt, even where the open market units are not.

What does it all mean, really?

In short – the Levy is a new cost that, for private developers and housebuilders, will need to be factored into viability appraisals and could have a knock-on effect in terms of the speed at which new developments are coming forward in certain areas (particularly where the Levy rate is higher). It is also likely to have an impact on legal negotiations, and we are seeing more and more acquisitions contracts for land treating the Levy as an abnormal cost deductible from the agreed land price.

Further, if the Levy is not paid by the time a person carrying out works notifies the local authority building control of completion of works, then building control must not issue a completion certificate. Therefore, developers must ensure that the timings of this is also factored into their project programmes, to ensure there is no delay in sale and occupation of the plots built.

From an affordable housing perspective and specifically on s106 schemes, registered providers will need to ensure that the plots they are purchasing from the developer are “Social Housing” under the Levy requirements.