Building Safety Levy update: levy rates published but launch delayed by a year

Posted: 28/03/2025

Just when residential developers were anticipating the publication of the new Building Safety Levy Regulations ahead of the planned launch of the levy this autumn, the government has announced a one-year delay, pushing the launch date back to 1 October 2026.

This is a welcome reprieve for developers already contending with increased construction costs and the regulatory demands of the new building safety regime.  Additionally, it provides over-burdened local authorities and the new Building Safety Regulator more time to prepare for the administration of the levy.   

Background

The Building Safety Act 2022 included powers for a new residential developer levy – the Building Safety Levy – to be charged on most new residential buildings in England which require building control approval.  Developers will have to pay the levy to the relevant local authority for a completion certificate to be issued. The levy is payable in addition to any community infrastructure levy (CIL), section106 payments and (for large property developers) the Residential Property Developer Tax. 

The levy will be introduced by new Building Safety Levy Regulations. The government's latest update (contained in the Building Safety Levy Technical Consultation Response (24 March 2025)) confirms the Regulations will be laid in Parliament later this year. The levy will come into effect on 1 October 2026.   The update also contains much-needed details of the levy rates.

The levy is intended to raise approximately £3.4 billion over ten years to be used to fund the cost of remediating unsafe residential buildings.  While no-one doubts the importance of remediating these buildings or that the current pace at which this is happening is far too slow, the levy comes as another financial burden on residential developers.

When will the levy apply?

Subject to limited exceptions, the levy will apply to all new residential buildings, regardless of height.  Its reach is wide-ranging and includes:

• Development schemes with 10+ residential units (including mixed use buildings)
• Build-to-Rent (BTR)
• Purpose-Built Student Accommodation (PBSA)
• Private retirement housing
• Conversions/change of use of buildings to residential
• Market-rate housing built by local authorities

It is important for developers to note that, once the Regulations come into effect, there will be no transitional arrangements.  However, developments that have started the building control process before that date will not be subject to the levy.  

Are there any exceptions?

Yes, the levy will not be charged on the following:

• Social and affordable housing (as defined in the government consultation response)
• Developments of fewer than 10 dwellings (or 30 bedspaces for PBSA)
• Housing built by a not-for-profit registered provider
• NHS hospitals
• Care homes, hospices, army accommodation and prisons
• Supported housing, children’s homes, refuges.

How will the levy be calculated?

The levy will be calculated by the relevant local authority, based upon the information provided by the developer during the building control process.  The calculation will be made on the chargeable floorspace area of the development (based upon its gross internal area (GIA) under the RICS Measuring Code 6th Edition), using a levy rate set by central government.

Importantly, communal areas will be included in the floorspace area even if they are not directly income- generating on the basis that communal areas contribute towards the overall value of the development.  However, if a communal area serves a residential building - caught by the levy - which includes affordable housing  - exempt from the levy - then the levy will only be chargeable on a proportionate part of the communal space equivalent to the proportion of the non-exempt residential accommodation.

What is the levy rate?

The levy rate varies by local authority area to reflect land values and property prices in the relevant region. This means that areas with the highest prices will have the highest rates. The average levy rate is around £34 per square metre but ranges from £100.35 (Kensington and Chelsea) to £12.70 (County Durham).  The rates will not be subject to indexation but the government's levy target of £3.4 billion will be reviewed every three years and rates may be adjusted to reflect changes in property prices.

For details of the published rates for each local authority and a worked example as to how the levy will be calculated, see here. 

There will be a discounted rate of 50% for developments built on 'previously developed land' (PDL), to be defined by the Building Safety Levy Regulations.  To qualify for the discounted rate, at least 75% of the land within the planning permission redline boundary must be PDL.

How and when is the levy payable?

It is proposed that the levy be paid to the local authority prior to the developer applying for a building control completion certificate or approval of a final certificate. Once paid, the local authority has two weeks to issue a confirmation of payment receipt.

Local authorities will not accommodate partial levy payments for staged development works. This means that developers will not receive their completion certificate (even if the certificate is for part of the development site only) unless the local authority has received the whole of the levy payment.  As completion certificates are a legal requirement for buildings over 18 metres and are a standard requirement of any residential lender, failure to pay the levy could significantly affect a developer's ability to sell and realise their profits.

Full details of the levy collection process will be set out in the Regulations. 

Next steps

Well-advised developers should familiarise themselves with the levy proposals.  Now that the levy rates have been published, these can be factored into development costs. Development timelines should be adjusted to take the new levy processes into account.

Remember that the levy is not chargeable if the building control process begins before the levy comes into force on 1 October 2026.  Note that it is the date of submission of the building control application not the planning application which counts.

The impending levy may motivate developers to prepare their initial building control application sooner -in the hope of submitting it before the levy is launched - or to seek out ‘previously developed land’ over ‘non-previously developed land’ and landowners should take stock.

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