The building safety levy: Key takeaways

Purpose

The building safety levy aims to raise over £3 billion over the next decade to support the ongoing safety of residential buildings, particularly those at higher risk due to their size and complexity. This goes hand in hand with one of the key components of the Building Safety Act 2022, which is to make sure that taxpayers and leaseholders don’t pay for necessary remediation of building safety defects.

While the government has highlighted that it’s aware of the burden the levy will place on developers, the levy will be going ahead, taking account of the views from various consultations with stakeholders including construction professionals, developers, building owners and safety advocates.

Scope

The levy will apply to most new buildings in England containing 10 or more residential dwellings and so its scope is far-reaching. The levy will apply to buildings regardless of their height and whether they’re mixed use or purely residential. The levy will cover:

• Privately-owned houses and flats
• Build to rent schemes
• Purpose-built student accommodation
• Conversions
• Change of use to residential
• Retirement housing.

Any developments which have already started the building control process (submission of planning application, an initial notice or a Gateway 2 application) before the levy is implemented will not be subject to the levy charge. There won’t be any transitional period for developments submitting applications after implementation.

Exemptions

There will be exemptions from the levy, and there’s scope for the government to add more. The current proposals are:

• Affordable housing (including social rented, affordable rented and intermediate housing) provided to specified eligible households whose needs are not met by the market
• Non-social homes built by not-for profit registered providers
• NHS hospitals, medical homes and GP practices
• Supported housing (except for private tenure supported housing)
• Children’s homes
• Domestic abuse facilities
• Criminal justice accommodation
• Armed forces accommodation
• Care homes and nursing homes
• Purpose-built student housing with fewer than 30 bedspaces

How is the levy calculated?

The government announced levy rates for each local authority area in respect of previously developed land and non-previously developed land.

Levy rates will be set by central government in regulations, and will not be subject to indexation. The government will review the levy every 3 years, but will retain the ability to conduct more frequent reviews should it decide that they’re warranted.

The levy will be calculated using the gross internal area of floorspace, as set out in the RICS Code of Measuring Practice 6^th Edition, including communal spaces. Where communal space is shared between chargeable and exempt areas, a proportion of that communal space which is equivalent to the proportion of exempt areas within the building will also be exempt from the levy charge.

The highest levy rates will apply in areas with the highest house prices. Developments in Kensington and Chelsea will be subject to the highest rate of £100.35 per square metre for non-previously developed land.

To calculate the relevant levy sum, developers will need to submit information for the levy to the relevant local authority at application/initial notice stage and at commencement stage. Information needed at the application/initial notice stage includes:

• Information about the planning permission or planning application under which the development in the application or notice is to be carried out
• The number of dwellings which will be created as a result of the development, or bedspaces in the case of purpose built student accommodation.

Information needed at first commencement notice stage includes:

• Information as to whether exemptions to the levy charge apply
• If the works are chargeable, confirmation as to whether the development is on previously developed land
• If the works are chargeable, the gross internal area of the chargeable floorspace of the development, including communal areas.

The local authority will then calculate the levy due within 5 weeks (or 8 weeks in the event of a spot check).

Enforcement

Developments won’t receive a building control completion certificate or final certificate (where a building is over 18 metres in height) until the levy is paid. This means that a development can’t be occupied until that time. The government has indicated that there’s flexibility as to when the levy can be paid throughout the development process, but it must be paid ahead of a completion certificate being issued or a final certificate being accepted for the development. The local authority collecting the levy will then issue the developer, within 2 weeks of receipt of payment, with a notification confirming that the levy has been paid.

As the implementation phase progresses, the government plans to maintain an open line of communication with industry stakeholders. This will help to address any unforeseen challenges or refinements needed to make sure the levy is both fair and effective.

Building safety levy: Steps to take now and how we can support you

Regulations establishing the necessary legal frameworks for operating the levy will be laid before Parliament later this year. With confirmation that the levy will take effect in autumn 2026, and with the rates having been published, developers now have until then to factor the levy cost and associated requirements into their administrative and financial planning. As the levy moves towards implementation, developers should keep an eye out for any further developments and guidance. Walker Morris will continue to monitor and provide further practical insights as needed.

Our team of experts is on hand to help with any queries you may have about the levy and how it will affect you. Please get in touch with Tom Peel, Lewis Couth or Charlotte Ash.