Developers Granted (Temporary) Reprieve: Building Safety Levy Postponed To Autumn 2026

In the wake of the Grenfell Tower Tragedy of June 2017, the Government introduced powers by way of the Building Safety Act 2022 to impose a building safety levy. The levy aims to ensure the burden of fixing building safety issues is shouldered by the industry responsible rather than leaseholders and tenants. The levy will also help relieve the substantial costs that have been incurred by the Government to date, principally in the form of the Building Safety Fund. For developers, the levy will become a necessary hurdle, as non-payment will result in a failure to obtain a building control completion certificate or rejection of a final certificate. 

Fortunately for developers, the date of imposition has been postponed by a year to Autumn 2026. The Government has also released the levy rates applicable to each local authority, providing housing developers an opportune window to factor levy costs into their financial planning, equipped with the specific region rates.  Not to mention there is a longer window to get developments through building control without incurring the levy.  

How are the rates to be calculated?

The levy amount will be calculated by a Gross Internal Area (GIA) measurement of the floorspace. While Government felt this method reduced the administrative burden on the local authorities who were already familiar with the GIA calculation as it is used in the Community Infrastructure Levy and would reduce the burden on local authorities and developers to gather two separate measurements, the majority of developers who engaged in the levy consultation did not seem to agree with GIA method.  

There appears to be a feeling amongst some developers who feel that it disproportionally impacts buildings where communal space is a key function of the building (e.g. integrated retirement communities, flats or build to rent properties) yet the developer is not making a profit from these areas and therefore not recovering directly from that space to reimburse the levy.

Levy calculations will be based on house prices in local authority areas. By way of example:

• Developments in Northumberland are to be subject to a rate of £16.77, with Burnley, Middlesbrough, North East Lincolnshire and Pendle getting down as low as £13.11 in the latter case.
• The mid-range ranging significantly, with Leeds at £24.57, Cornwall at £29.58, Cambridge at £50.87, Wandsworth at £68.50, Hackney coming in at £71.51.  
• Meanwhile, developments in Kensington and Chelsea are to be subject to a rate of £100.35; Westminster at £98.01 and Hammersmith and Fulham at £91.87.

What discounts or exclusions will apply to the levy?  

The further technical consultation has confirmed the following aspects of the levy:

• A discounted levy rate of 50% applies to developments on previously developed land (PDL), or ‘brownfield’ land, if 75% or more of the land falls within the definition of PDL.
• Certain developments are excluded, including affordable housing, non-social homes by not-for profit organisations, NHS Hospitals, care homes, supported housing, children’s homes, domestic abuse shelters, accommodation for armed services personnel, criminal justice accommodation, and developments of fewer than 10 units.
• Hotels are excluded as they serve a primarily commercial rather than residential function.
• The Government maintains its position that Purpose Built Student Accommodation over 30 bedspaces and Build to Rent development will be included within the scope of the levy as they are profit-making and would otherwise obtain a competitive advantage over build for sale developments.
• Purpose Built Student Accommodation with less than 30 bedspaces will be excluded from the levy to permit smaller developments to be financially viable.  

The rates can be found below.

How long before the levy will be lifted?

The Government has a revenue target of £3.4bn after exchequer funding, industry pledges and contractual obligations have been considered. This target will stay under review and may change as deemed necessary. The Government has alluded to the fact that the levy will be around for at least the next ten years after implementation. However, it says that it will only be a fraction (4%) of the figure raised by the Community Infrastructure Levy over the same period.

What information does a developer need to be prepared to provide?  

A developer will be required to provide information during the early stages of the project to allow for calculation of the levy. Failure to do so, will result in a rejection of the application for building control approval or initial notice.

Developers must supply information at two key stages:

• Application / Initial Notice: Information regarding planning permission / planning application under which the development is to be carried out, and the number of dwellings to be created (or bedspaces in the case of Purpose Built Student Accommodation).
• Commencement: Information on whether levy exemptions apply, whether the development is on previously developed land, and the Gross Internal Area (GIA).

Regulations will be amended to reflect the above requirements, and the supporting evidence required will be outlined in due course.  

Local Authorities plan to conduct spot check for accuracy on approximately 10% of applications for building control authority and 10% of initial notices per quarter, or one application for building control approval and 1 initial notice per quarter, whichever is greater.

What happens next?

Upon submission of the required information, the local authority will calculate the levy within 5 weeks and issue a notice of levy liability.

Developers must pay the levy before applying for the first completion or final certificate for the works. The local authority will confirm payment within two weeks of receipt.

If a further building control approval or a change control application is submitted during construction, developers must provide updated levy information. Failure to do so may result in rejection of amendment applications.

Developers must pay the levy before any completion or final certificate will be issued for any part of the works included in the application, including partial or interim certificates. Regulations will be amended to require the developer to declare the levy status when notifying completed work.

What happens if the developer disagrees with a decision regarding your levy?

Developers will have 28 days to request a review of levy-related decisions.  This may involve submitting additional information to support a claim.

For disputes involving calculations, application of exemptions, refunds or the outcome of a spot-check a senior staff member not involved in the original decision will review the decision and communicate the result within 28 days. For disputes regarding withholding or rejecting a completion certificate, this review should be completed within 14 days.  A review of calculations may result in an increased levy amount.  

If disagreement persists, developers have 21 days to submit an appeal to the property chamber of the First Tier Tribunal.

All references to days refer to calendar days.

What is the impact of the Levy?

While the completion certificate is not legally required for buildings not classified as higher risk, mortgage lenders typically demand such certificates before agreeing to lend – so a lack of a certificate potentially hinders a developer’s ability to sell that property.

The Government acknowledges that the levy may have a “small impact” on the housing supply; poor timing when the Government is ambitiously targeting 1.5m new homes to be built within the next five years. With reports of the fastest downturn in the construction industry since May 2020, the delayed introduction of the levy will offer some temporary relief to many who are already still grappling with the impact of the Building Safety Act, and the increased costs and regulations.  

Levy rates will be reviewed every 3 years unless more frequent review is deemed necessary.

Next Steps

The levy still requires secondary legislation to give it effect, and this will be subject to parliamentary debate in the coming months. We will provide updates in due course.