The Building Safety Levy

On 24 March 2025, following a consultation period which first began in 2021, the Government published a consultation response to its controversial Building Safety Levy (BSL) proposal. The BSL is part of a series of measures introduced by the Government under the Building Safety Act 2022 to generate revenue in order to remediate unsafe buildings, particularly unsafe cladding in the wake of the Grenfell tragedy. The Government has already pledged £5.1bn towards the cost of remediating “orphan” buildings (i.e. those where there is no responsible developer to shoulder the costs) but is relying on the BSL to raise the further £3bn required. It is unclear if the BSL will stay in place after the target is reached but the Government’s intention is clear; the cost of remediation will fall on the industry rather than on taxpayers or leaseholders of unsafe residential buildings.

Unsurprisingly, it is thought that the proposal will have a major impact on development across England and Wales, so here are the key features and possible effects of the BSL to be aware of.

Which developments will the BSL apply to?

In the Government’s initial proposal, the BSL would only apply to Higher-Risk Buildings (HRB), which are at least 18 metres or seven storeys in height.   However, with the need to raise extra funding for remediation in mind, the Government’s current proposal has expanded the scope of the BSL so that all residential developments which require a building control certificate are caught. There are a small set of exceptions for small-scale developments of less than 10 units and developments that provide social benefit to the local community, including care homes, affordable housing and NHS facilities.

When will the BSL come into force?

The Government has pushed back the timeframe for the BSL to be introduced from this Autumn to Autumn 2026. This will give local authorities, Building Safety Regulators, and developers 18 months to prepare both administratively and financially for the BSL. It is expected that developments which have begun the building control process before the introduction of the BSL will remain unaffected. This may result in developers rushing to begin the building control process before Autumn 2026, although the Government’s exact intentions regarding existing developments are not yet clear.

How will the levy be calculated?

Chargeable rate

The Government has decided to adopt a similar approach to the BSL as they have for the Community Infrastructure Levy (CIL). The BSL charge rate will depend on the location of the development. For example, the highest rate proposed by the Government is £100.35 per square metre for developments in the Kensington and Chelsea area, whereas the lowest rate is £12.70 per square metre for developments in County Durham.

The vast difference in chargeable rates between regions aims to address the geographical variation in house prices within England and Wales, with larger sums being charged on developments that will yield the highest purchase price. Conversely, lower charges apply to areas where the sale price will be lower. The Government believes this is the most equitable approach and will protect the viability of development sites across England and Wales.

However, there have been criticisms of the Government’s approach, suggesting that it lacks nuance in relation to the varying house prices within an area. This may cause a reduced supply of housing in region-specific areas with depressed house prices, as lenders may be unlikely to choose to fund developments with considerably smaller margins.

Chargeable area

The chargeable rate will then be applied to the Gross Internal Area (GIA) of the development which, like CIL, measures the increased floorspace resulting from the development. The Government has confirmed that the GIA will take into account any reduction in floorspace (e.g. as a result of demolition) but will also include any increase in floorspace. This includes GIA attributable to communal areas within a development as they benefit residents and in turn increase the value of the building. As an already established method of measuring floorspace, it is thought that GIA will make it easier for both local authorities and developers to calculate and understand the BSL liability.

Provision of information required to calculate the Levy

Currently, the Government intends that the submission of information necessary to calculate the BSL liability is split between application/initial notice stage and commencement stage of works with:

• information relating to the propped development and associated planning application/ consent to be submitted to the local authority or Building Safety Regulator when a developer applies for building control approval or submits an initial notice to the local authority; and
• further information relating to any exemptions, any pre-developed land (please see below in this respect) and Gross Internal Area, submitted with the first commencement notice which is submitted in respect of the relevant initial notice or building control approval application.

Government has suggested that a failure to provide levy information should be a ground for the rejection of a building control approval or initial notice application, to prevent local authority’s having to chase missing information – developers will therefore need to ensure that all of this information is in order to prevent any delays in this respect.

When is the levy payable?

Developers are afforded some flexibility regarding when payment should then be made, with the only requirement being that payment occurs before the developer applies for an interim or final building works certificate. However, the Government’s adopted approach differs from their previous proposal, in that payments cannot be staggered throughout the development. This is likely to cause considerable difficulty for developers in managing their cash flow, especially in phased developments where early plot sales (and therefore occupation) cannot occur without prior payment of the BSL – see below. The predicted financial strain on developers from making one lump sum payment before any sales can be made may impact the ability of the developer to secure funding (on favourable terms) from lenders who now see the developer’s financial standing as more risky.

What about pre-developed land?

Despite the Government’s clear stance that all residential developments will fall within the scope of the BSL, they recognise that the viability and margin of profitability on brownfield land (i.e. previously developed land) is more precarious. As such, a 50% reduction in the chargeable rates will apply to all brownfield sites where 75% or more of the site consists of brownfield land. Whilst the general consensus is that the discount is welcomed on the whole, it has thrown up questions including what the exact definition of previously developed land is and the criteria by which it is to be assessed. The discounted rate has also not been free from criticism, with many arguing that the level of discount is completely arbitrary and not reflective of the higher costs incurred in developing a brownfield site. If the BSL has the effect of trimming already slim profit margins on previously developed sites, there may be a resulting move away from them as both developers and lenders look elsewhere for more profitable sites.

What happens if the levy is not paid?

Rather than imposing financial sanctions for non-payment of the BSL, building control completion certificates will be withheld and applications for building control approval will be rejected. The onus, therefore, is on the developer to ensure that all the correct information is submitted to the local authority and the levy is paid. Although not legally required for non-HRB developments, building control certificates are an integral part of a development’s sign-off. They are required by lenders and purchasers alike, and so developers are unlikely to secure funding or sell / occupy the finished building without promising to pay the BSL and obtain building control approval.

The BSL is the latest in a package of measures introduced by the Government with the aim of raising funds to address building safety issues. It will operate alongside the Government’s recently introduced Residential Property Developer Tax; a 4% tax on development profits above £25 million. Although the focus is on remediation efforts, the unintended consequences of the combined measures on the viability of future developments and housing supply are yet to be revealed. Branded an “anti-development new tax” by the Home Builders Federation, the effect of the BSL must be considered carefully not only by developers but also by the Government, who made an ambitious manifesto promise to deliver 1.5 million new homes by the  next parliament.

This article first appeared in Property Law UK – online case law library and monthly publication