Building Safety Levy

The Building Safety Act 2022 ('BSA') gives the Government the power to impose a building safety levy on all new residential buildings in England (the 'Levy').

Since the BSA came into force in 2022, only very few details about the Levy have surfaced. Many hoped the Government had intentionally let the idea drift down its priority list, trumped by an overriding manifesto promise to build 1.5 million homes by 2029 - a commitment requiring the delivery of over 1,000 new homes every single working day.

On 24 March 2025, the Government confirmed in its consultation response that the Levy is still very much part of its plans but that it will not come into force until autumn 2026 (a year later than previously planned).

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Why is the Levy being enforced?

The aim is to extract £3.4bn from residential developers over the next 10 years to fund the remediation of safety defects.

Which developments will the Levy apply to?

The Levy will apply to all new residential developments (including mixed-use buildings) in England that require building control approval, regardless of height. This will include developments for:

privately-owned houses and flats
build to rent schemes
purpose-built student accommodation
conversions or change of use to residential
retirement housing

Exclusions to the Levy are limited to:

internal refurbishments
developments of 10 units or less or PBSA with fewer than 30 bedspaces
affordable rented and intermediate housing provided to eligible households whose needs are not met by the market
community facilities such as NHS hospitals, care homes, supported housing, children's homes, domestic abuse shelters, accommodation for armed services personnel and criminal justice accommodation

When will the Levy come into force?

The Levy will apply to all new residential developments from autumn 2026. This will allow developers around 18 months to factor the Levy's cost implications into their financial planning. It is anticipated that developments that have already begun the building control process before the launch date will not be subject to the Levy.

How will the Levy be calculated?

The Levy will be calculated using the gross internal area of floorspace, which shall include communal spaces. The rates per square meter will be set by each local authority to capture the geographical variation in house prices – the highest rates shall apply in areas with the highest house prices and the lowest rates in areas with the lowest house prices. For example, developers in Kensington and Chelsea will be subject to the highest rate (£100.35 per square metre) with County Durham adopting the lowest rate (£12.70 per square metre). The full list of rates can be found here.

A 50% discount on the Levy will apply to 'brownfield' land (where the development is on previously developed land). This discount will only apply where 75% or more of the land within the planning permission redline is brownfield land.

Developers will be required to submit information for the Levy, including floorspace, upon commencement of works. The local authority will calculate the Levy due within five weeks. No part of a development will receive a building control completion certificate or a final certificate (for buildings over 18m in height) until the entire levy liability has been paid. This means occupation will not be allowed until the Levy has been paid in full.

How will it impact development?

The Levy applies irrespective of whether the developers that will now be paying it were responsible for historic building safety failures. In doing so, the Levy upholds the Government's firm commitment that neither the taxpayer nor tenants should pay for the cost of historic safety defects.

The Home Builders Federation ('HBF') has already made its views on the Levy clear. In an open letter to Rachel Reeves this January, the HBF pleaded with the Government to reconsider imposing the Levy - describing it as a 'nakedly anti-development new tax' that 'will represent another brake on growth in housing supply'.

The Levy comes on top of the 2023 Developer's Pledge – where the Government forced 52 major developers to commit to self-remediating 'life critical' fire safety works in buildings over 11 metres that they played a role in developing or refurbishing over the last 30 years. Further, the Levy will be charged in addition to the Government's UK-wide residential property developer tax ('RPDT') – a 4% tax on profits exceeding £25 million arising from residential property development.

Residential developers are caught in a whirlwind of additional taxes, stringent administrative requirements imposed on development and 'higher risk buildings', a tedious Gateway approval process, the lack of a skilled construction workforce, ongoing planning reform as well as the prospect of tenure reform. Only time will tell the true impact of the Levy on the future of residential development - no doubt this will be assessed by how close the Government gets to its 1.5 million new homes by 2029 target.

Read Edward Colclough Profile