The Building Safety Levy, introduced under the Building Safety Act 2022 as part of the government’s response to building safety failings identified following the Grenfell Tower tragedy, represents an additional cost for many residential developments in England.
This article provides an overview of how the levy will apply when it comes into force on 1 October 2026.
The levy is a charge on certain residential development and is administered through the building control regime. Local authorities act as collecting authorities for the levy.
The levy regime is set out principally in the Building Safety Levy (England) Regulations 2025 as amended by the Building Safety Levy (Amendment) (England) Regulations 2026 (together the regulations). The regulations establish the scope of the levy, the method of calculation, exemptions, procedural requirements and the mechanism for collection through the building control regime.
Income raised from the levy will be used to contribute towards remediation of historic building safety defects across England. The government aims to raise over £3 billion from the levy over the next decade.
Development will be chargeable if all three of the following conditions are met:
Major residential development is a development of 10 dwellings or more or, in the case of purpose built student accommodation, 30 bedspaces or more.
It is important to note that whether or not works form part of a major residential development will depend on the planning permission. For example, if the building control application relates to fewer than 10 dwellings or 30 bedspaces but forms part of a planning permission permitting major residential development, the levy will nevertheless apply.
This includes new dwellings, new purpose-built student accommodation and new communal areas intended to be used by chargeable dwellings or purpose-built student accommodation.
‘Creation’ captures both the construction of new buildings and the change of use of existing buildings where residential floorspace is created for the first time or where additional residential floorspace is created.
Exempt persons are non-profit registered providers or social housing and certain wholly-owned subsidiary companies. Joint venture entities may also qualify for exemption where all members of the joint venture are themselves exempt persons.
As well as exempt persons, certain types of accommodation are exempt from payment of the levy:
Affordable, social and intermediate rent dwellings provided by a local authority or registered provider, shared ownership dwellings and dwellings subject to planning obligations requiring first and subsequent sales to be for no more than 70% of their market value, commonly referred to as ‘first homes’, are exempt.
The exemption applies to qualifying social housing accommodation rather than the entire development. Where a scheme contains both exempt and chargeable accommodation, only the chargeable element will be subject to the levy.
Social housing is exempt regardless of the identity of the developer constructing it. Developers can apply for the exemption by providing evidence that the relevant accommodation will be used as social housing following completion.
Where available, evidence may be submitted at commencement notice stage. Alternatively, evidence may be submitted later through a Levy Update Notice at any point before completion, in which case the levy liability will be recalculated.
Accommodation provided by a local authority, housing association, registered charity or voluntary organisation where care, support or supervision is also provided.
Certain categories of accommodation are exempt, including schools, care homes, hospices, children’s homes, hotels and similar forms of accommodation. A full list of exempt accommodation is included at schedule one of the regulations.
The levy is collected through the building control system, rather than the planning system.
It applies to building control applications relating to chargeable development submitted on or after 1 October 2026 and will be triggered by the first of the following to be submitted:
A full plans application to a local authority or the Building Safety Regulator;
An initial notice registered with a Registered Building Control Approver, such as the National House Building Council; or
A building notice.
The levy does not apply to existing building control applications submitted before 1 October 2026, provided works are commenced within three years. This is the case even if the application is subsequently varied. However, where an application submitted before 1 October 2026 is rejected and resubmitted on or after that date, the levy will apply.
The ‘client’ named in the relevant building control application is responsible for payment of the levy.
Payment is due on the levy due date, which will generally arise on the earlier of occupation of the relevant building or completion of the works for building control purposes.
The levy is payable to the relevant local authority acting as collecting authority, regardless of the building control route used. Once payment has been made, the collecting authority will issue a Levy Payment Certificate.
Until the Levy Payment Certificate has been issued, the relevant completion certificate or final certificate under the building control regime cannot be issued.
The levy is charged per square metre of chargeable floorspace using levy rates that vary depending on the local authority area in which the development is situated.
A reduced levy rate applies to qualifying previously developed land, also referred to as brownfield land.
Chargeable floorspace is the new residential floorspace that will be created by the works including:
New dwellings;
New purpose-built student accommodation; or
New chargeable communal areas.
Chargeable communal areas are communal spaces used, in whole or part, for the benefit of the occupants of chargeable dwellings or purpose-built student accommodation.
Chargeable floorspace excludes social housing, supported housing, exempt accommodation and communal areas used exclusively for the benefit of those exempt elements.
Where communal floorspace is shared between chargeable and non-chargeable development, the floorspace is apportioned on a pro-rata basis.
The levy applies only to chargeable residential floorspace. In mixed-use schemes, commercial floorspace is not subject to the levy, although shared communal areas may need to be apportioned.
Developers of build-to-rent schemes should also be aware that accommodation is not exempt simply because it will be retained and rented rather than sold.
The Building Safety Levy adds a further development cost alongside planning obligations, section 106 contributions, the Community Infrastructure Levy and rising construction costs.
Developers should ensure levy liabilities are considered at an early stage when assessing development viability, preparing appraisals and negotiating land acquisitions. For sites acquired close to the commencement date of the levy, particular attention should be paid to the timing of building control submissions and the transitional arrangements.
The levy is also likely to place downward pressure on land values in certain sectors where viability is already constrained.
In addition to considering the commercial impact of the levy, developers should be aware of the consequences of non-compliance. Without a Levy Payment Certificate, the relevant completion or final building control certificate cannot be issued. This may delay practical completion processes, prevent statutory sign-off and potentially impact plot sale completions, funding arrangements and development exits.
For further information on how the Building Safety Levy may affect your development proposals, please contact our real estate team.
