What is happening?

• The Building Safety Act 2022 (BSA), which came into force in April 2022, introduced the concept of a developer levy, more frequently referred to as a building safety levy (Levy).  This empowered the government to impose an additional charge for the development of new residential buildings in England. It will effectively be a tax charged on future
  development.
• Proposals for the Levy have been the subject of several consultations (both public and technical) since 2021 and in December 2024 it was announced that the scheme would come
  into effect during Autumn 2025 as part of the government's Remediation Acceleration Plan.
• The government has now confirmed that the implementation of the Levy will now be delayed until Autumn 2026 and has indicated that it will publish draft regulations later in 2025. Before then, what we know about the Levy and how it is
  likely to operate is based upon the outcomes of the various consultations.
• Although the draft regulations have yet to be published, we do know the Levy rates for each local authority area.  The Levy charge will depend on the floorspace of the relevant development which will include communal areas.  It is expected that the Levy will be forward-looking and only apply to developments where construction is yet to commence.

Developers should ensure that they factor the Levy cost into their financial planning for future developments.  The Levy will be linked to the building control application process and not the planning process.

What is the aim of the Levy?

The government has targeted raising £3.4bn from the Levy to fund remediation of safety defects and protect taxpayers and leaseholders from such financial burden. By requiring that developer contribution, the government also sees the Levy as a scheme that will promote greater accountability within the construction industry.

Which developments will be caught by the Levy?

Save for some limited exemptions, the Levy will apply to all new residential developments that require building control approval (including mixed use developments) regardless of their height. This means that developments caught by the Levy would include:

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

There will be some exemptions from the Levy, but they are limited.  The exemptions are:

• internal refurbishments
• residential sites where there are fewer than 10 plots or units
• purpose-built student accommodation 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 government has now stated that the Levy will apply from Autumn 2026, having been postponed from the original launch date of Autumn 2025.   The delay is intended to allow developers additional time to factor the Levy cost into their financial planning.

How will the Levy be calculated and how much will it cost?

• The Levy will be calculated by each relevant local authority based on the gross internal area of floorspace using the RICS Code of Measuring Practice 6th Edition.
• For the purposes of the calculation, communal areas will be included even if they do not directly generate income.  The theory behind this is that these areas contribute to the overall value of the development.  Where, however, a development contains a mix of exempt and non-exempt units, the Levy will only be charged on the communal spaces on pro-rata basis equivalent to that part of the development which is not exempt.  
• The Levy rate itself varies by local authority to reflect the geographical variation in house prices.  Put simply, those areas with the highest house prices will attract the highest rates and the lowest house prices the lowest rates. There is an average Levy rate of
  roughly £34 per square metre, but unsurprisingly the rates vary significantly - for example the highest rate is set in Kensington and Chelsea at £100.35 per square metre, compared with County Durham where it is £12.70 per square metre. The government has published the full list of rates, which you can access here. The rates will be reviewed
  every three years and may be adjusted to reflect changes in property prices.
• A 50% discount on the Levy will apply where the development is on 'previously developed land'.  However, this discount will only apply where 75% or more of the land within the planning permission redline is 'previously developed land'.  The draft regulations (when published) will determine the scope of the term 'previously developed land' for the purposes of calculating the Levy. 

How will it work? 

• Whilst the detailed procedure will be set out in the regulations, it is understood that developers will be required to submit the necessary information for the Levy prior to or at the commencement of works.  The relevant local authority will then calculate the Levy, which must be paid before a building control completion certificate or a final certificate (where 18 metre plus buildings are concerned) is issued.  
• It is expected that entire Levy liability will be payable before building control completion certificates are issued, regardless of whether there is staged completion. 

How is the Levy paid and what are the consequences of non-payment?

• It is not expected that upfront payment of the Levy will be required at the start of a development, rather that there will some flexibility for payment in instalments during the development period. However, the entire Levy liability for a chargeable development will be payable before building control completion certificates are issued, regardless of whether the development is subject to staged completion.
• In practice, this will mean that no part of a development can be occupied until the entire Levy liability for that development has been satisfied. This is particularly burdensome for staged developments because completion certificates will not be issued for a stage until the Levy liability has paid for the whole development.