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What is the building safety levy?
The Building Safety Levy (the “levy”) is no doubt one of the most significant financial and regulatory changes facing the residential development sector in recent years. As part of the government’s ongoing response to the Grenfell Tower tragedy, the purpose of this legislation is simple: to ensure that leaseholders and taxpayers do not have to fund the remediation of unsafe buildings.
The regulations come into force on 1 October 2026. The key date for the application of the levy to particular sites is not the date of planning permission, but the date on which the relevant building control application is submitted. Projects with planning permission already in place may therefore still be caught if their building control application, higher-risk building application or initial notice is made on or after 1 October 2026.
No levy: no completion certificate
The levy will apply to new major residential developments in England, including mixed-use buildings. It covers schemes creating or increasing residential floorspace, including privately-owned houses and flats, Build-to-Rent schemes, purpose-built student accommodation, retirement accommodation and conversions to residential use. The levy is not limited to higher-risk buildings or tall buildings.
The amount charged is calculated by multiplying the chargeable floorspace by the applicable local authority rate set out in Schedule 3 of the Building Safety Levy (England) Regulations 2025. The rates apply per square metre of chargeable residential floorspace and vary by local authority area, meaning that the levy may represent a materially greater cost in higher-value locations.
The person liable to pay the levy will be the client named in the relevant building control application. In most cases that will be the developer, but in some transaction structures it could be the landowner. Responsibility for the levy should therefore be dealt with expressly in development agreements, sale contracts, options, promotion agreements and funding documentation.
Counting the costs
Brownfield schemes may qualify for a 50% discount where at least 75% of the relevant site consists of previously developed land. The Building Safety Levy (Amendment) (England) Regulations 2026 update the test for previously developed land by clarifying how paved areas, hardstanding, permanent man-made structures, plant and machinery and underground structures are treated. The amendments are intended to make it clearer that features such as car parks and other load-bearing surfaces may be relevant to the assessment, depending on the statutory test and evidence available.
Whilst the rates won’t be automatically indexed to inflation, they will be reviewed every three years, with the Government providing flexibility for earlier adjustment if required.
The levy becomes payable when a levy liability notice, or a revised levy liability notice, is given to the payee. If the levy is not paid before the first building control completion certificate is issued for a dwelling to your development, the final certificate will be delayed, meaning that occupation and practical completion strategies will inevitably be affected. Developers should therefore treat the levy as a project delivery risk as well as a development cost.
Exemptions, reliefs and timing traps
The levy will not apply to developments that fall outside the major residential development threshold, or to exempt buildings and accommodation. Key exclusions and exemptions include:
- Affordable housing and other qualifying exempt accommodation, subject to the detailed statutory definitions and evidence requirements
- Community facilities and specialist accommodation such as hospitals, care homes, hospices, schools, hotels, supported housing, refuges, children’s homes, armed forces accommodation and criminal justice accommodation
- Small developments of 10 units or fewer, and Purpose Built Student Accommodation (PBSA) with fewer than 30 bedspaces
- Conventional internal refurbishments that do not create chargeable new residential floorspace
Developers should not assume that phasing or submitting smaller building control applications will avoid the levy. A major residential development is assessed by reference to the wider development context, including the relevant planning permission, so dividing a larger scheme into smaller applications is unlikely to prevent the levy applying.
There may be a timing trap where significant time has passed from application to commencement of works. Delays in commencement should be avoided to mitigate challenges around reapplication.
Developers should also keep clear evidence of the original application date and the relationship between any later notices or variations and that application.
The operation of the levy comes at a sensitive time in the housing market, with the country already failing to meet the government’s target number of new homes per year.
This instability could exacerbate an already strained economy, heightening affordability pressures, particularly in areas where the levy rates will be the highest. Whilst the levy has been designed to address safety concerns, it risks unintentionally worsening the housing supply crisis if delivery patterns are distorted.
What developers should do now
Developers should review their portfolios to identify schemes where building control applications will be made on or after 1 October 2026. For schemes within the scope, they should confirm who is liable, update appraisals and funding assumptions, gather evidence for any exemption or brownfield discount claim, and reassess those claims once the amendment regulations are in force.
More caution is also likely to be taken when securing funding, as the levy will operate as a gating cost before building regulation completion certification. As the certification could be delayed until the levy has been paid, lenders may scrutinise whether the levy has been properly calculated, budgeted and funded as part of the development appraisal.
Conclusion
The Building Safety Levy is now an immediate diligence and drafting issue. Developers and landowners should now:
- Identify schemes in scope,;
- Understand the relevant local authority rate;
- Preserve evidence for any exemption or brownfield discount;
- Ensure contracts allocate responsibility for payment; and
- Build the levy into cost plans before it becomes a live completion risk.
