What developers need to know about the Building Safety Levy

The Building Safety Levy is set to bring substantial changes to the development landscape in England, marking a critical response to the need for safer building standards following the Grenfell Tower tragedy.

While its implementation has been delayed to autumn 2026, developers cannot afford to postpone their preparations. Here, we explore the key aspects of the Building Safety Levy, its implications for developers, and steps they should take to ensure compliance while minimising impact on their projects.

What is the Building Safety Levy?

The Building Safety Levy is a mandatory charge that developers must pay on most new residential developments in England. Its primary aim is to fund the remediation of unsafe buildings and ensure that leaseholders and taxpayers do not bear the associated financial burden. Integral to the Building Safety Act 2022, the levy is one of the government’s flagship policies to improve building safety and restore public confidence in the construction industry.

The levy applies to residential projects with 10 or more dwellings and includes build-to-rent schemes, purpose-built student accommodation, retirement housing, and conversions. However, exemptions exist for affordable housing, NHS facilities, care homes, supported housing, and small-scale developments with fewer than 10 units. Developments already under the building control process before the levy’s implementation will be exempt.

With a target to raise over £3 billion in the next decade, the levy underscores the government’s commitment to ensuring long-term safety in housing stock across England.

Why is the Levy being introduced?

The Grenfell Tower tragedy in 2017 exposed significant flaws in building safety regulation and initiated a drastic overhaul of industry practices. The devastating loss of life brought to light unsafe cladding and structural issues in countless residential buildings across England.

Historically, the financial responsibility for rectifying such defects has disproportionately fallen on leaseholders and taxpayers. The Building Safety Levy aims to rectify this imbalance, mandating that developers, as the ultimate beneficiaries of property developments, contribute to making the built environment safer.

Critically, the levy seeks to establish consistent funding to address urgent issues where developers cannot be held accountable, such as cases involving defunct or insolvent companies. This move not only allocates financial responsibility more equitably but also seeks to create a culture of greater accountability within the construction sector.

How will the Levy Work?

The levy will be calculated per square metre of gross internal area (GIA), following the RICS Code of Measuring Practice. Rates will vary by local authority, reflecting regional property values. For example, developers in high-demand areas like Kensington and Chelsea may face the highest charge, exceeding £100 per square metre on non-brownfield land.

To reduce the burden on complex sites, projects on brownfield land will benefit from a 50% discount. Developers must submit detailed information, including site classification and projected residential units, at both the application and commencement stages of a project. Local authorities will then assess and confirm the levy due within prescribed time limits.

Importantly, the enforcement mechanism ties the payment of the levy to the issuance of vital building control approvals. Without proof of payment, developers cannot obtain a completion certificate, potentially halting occupancy or sale of the development. This linkage underscores the importance of timely and accurate levy submissions to avoid jeopardising project completions.

Financial and administrative implications for developers

The introduction of the Building Safety Levy brings both immediate and long-term challenges. At the forefront is the financial strain. Developers must now factor in levy charges within their project costs, potentially impacting profitability and viability. For smaller developers operating with tighter margins, these additional costs could prove more significant, potentially reducing activity in the sector.

Coupled with the financial burden are the administrative demands. Navigating the compliance requirements involves preparing and submitting precise metrics on each development. Overlooking or mishandling these responsibilities could result in costly delays or errors. Compliance must therefore be embedded into all phases of project planning, from feasibility assessments to execution, to ensure timely adherence to levy regulations.

Another pressing concern is the possible disruption to financing strategies. Some developers may require additional funding to cover unexpected levy costs. Questions also linger over how lenders might assess projects subject to the levy, especially for those with marginal profit projections.

Enforcement and penalties for non-compliance

The government has outlined strict enforcement mechanisms to ensure that the levy is paid. Building projects cannot be completed or occupied without issuing either a building control completion certificate or a final certificate for structures exceeding 18 metres in height. A failure to pay the levy could result in delays to these critical approvals, effectively stalling key phases of construction, sale, or occupation.

Developers who disagree with their levy assessment may seek an initial review by the local authority. For unresolved disputes, appeals can escalate to the Department for Levelling Up, Housing and Communities (DLUHC), or other relevant adjudicating bodies. However, navigating these legal channels may result in further delays, underscoring the need for meticulous submissions and planning from the outset.

Steps developers should take now

While the implementation date may feel distant, early preparation is key to mitigating the levy’s impact on future developments. Developers should act immediately to:

1. Review development portfolios: Identify which projects will be subject to the levy and reassess their financial viability under the new cost regime.
2. Engage legal and financial advisors: Expert support will help developers accurately calculate levy charges and comply with submission requirements.
3. Adapt project planning process: Integrate levy-related compliance into early-stage planning, ensuring that completion certificates can be obtained without delays.
4. Explore cost optimisation strategies: Consider ways to manage costs, including prioritising developments on brownfield sites, which benefit from reduced levy rates.
5. Update contracts and agreements: If contracts allow developers should revisit contractual arrangements to allocate potential levy costs and compliance responsibilities across stakeholders.

Long-term implications for developers

The Building Safety Levy highlights a fundamental shift in how the construction industry balances profitability and accountability. While the policy has faced criticism for potentially constraining housing supply, its overarching aim of improving building safety is undeniable. Developers who adapt quickly to the levy’s requirements and prioritise compliance can avoid disruptions while positioning themselves as industry leaders committed to public safety.

It is also worth considering that policies like the Building Safety Levy could set a precedent for additional regulatory costs related to sustainability or fire safety in future residential developments. The industry should remain agile, monitoring these broader trends and adapting practices to meet evolving sustainability requirements.

Taking action

Navigating the intricacies of the Building Safety Levy requires a clear understanding of its legal, financial, and operational dimensions. At Newmanor Law, we specialise in providing tailored advice to developers, construction firms, and property managers facing complex regulatory landscapes.

Whether you need assistance optimising your compliance strategy, revising contracts for risk allocation, or understanding potential legal challenges, our team is here to help.