The Building Safety Levy
Following the 2017 Grenfell Tower tragedy, the Building Safety Act 2022 (the “Act”) was introduced to improve the design, construction and management of higher-risk buildings. The Act included powers to impose a new levy, the Building Safety Levy (the “Levy”), which will enable the Government to raise revenue to be spent on building safety. Crucially, the Levy is aimed at residential developers which means that the taxpayer will not pick up the financial burden of financing building safety. It is anticipated that the Levy will raise around £3 billion over the next decade but this will be subject to the Levy rates, which are yet to be announced. The Levy is due to be published in Spring 2025 and will be enacted by Autumn 2025.
What buildings will the Levy apply to?
The Levy will affect all new residential developments in England that require building control approval, regardless of height. The Levy is expected to apply to all residential developments with 10 or more plots/bed units and all purpose-built student accommodation with 30 or more bed units.
To protect the viability of smaller sites, developments of fewer than 10 plots or, in relation to student accommodation, 30 bed units, will be exempt. Furthermore, to avoid hindering the development of essential community facilities, other developments such as affordable housing, NHS facilities, military accommodation, children’s homes and care homes will also be exempt from the Levy.
What are the charges and how will they be calculated?
An important element of the Levy is that it will be based on the number of units on the planning application. This will prevent developers from submitting multiple small applications which individually would not be subject to the Levy.
The rates that will be charged by the Levy are yet to be announced; however, it is expected that the Levy will be charged on a per square metre basis and the rates will vary depending on the local authority. This will allow the rates to reflect local land values and house prices. It is also expected that there will be a 50% rate reduction for developments on brownfield sites. The Government hopes that this will encourage the redevelopment of brownfield sites whilst also acknowledging that the development of these sites carries with it a higher viability risk.
The Process
It is anticipated that as part of an application for building control approval, the developer will provide information about the development to the local authority who will act as a collection agent for the Government. The local authority will then calculate the levy amount due, based on the information provided, and within 5 weeks issue the developer with a notice of levy liability for the Levy amount. There is likely to be some flexibility in when the developer will have to pay the Levy, but it must be paid before the completion certificate is issued or the final certificate is accepted for the development. The money that is collected by the local authorities will be passed to the Government on a quarterly basis. The exact process will be set out in secondary legislation.
If the developer does not provide sufficient information, building control approval will be withheld which will prevent projects from advancing. If, having received notice of levy liability, the developer does not pay the Levy amount, the relevant authority will reject the final completion certificate.
Impact of the Levy
The Labour government has set out ambitious house-building plans to address the housing shortfall within England, but the introduction of the Levy may act as a barrier in reaching this target. For developers the Levy will create further administrative requirements and may slow down developments, but it is hoped that through following enhanced safety regulations, developers will benefit from increased consumer confidence in the industry.
