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Construction industry must act ahead of new building safety levy

Leon Neal/Getty Images

The levy will apply to new residential developments. Leon Neal/Getty Images


The construction industry is being urged take action ahead of the implementation of a new building safety levy, which will introduce new costs for residential developments across England from October 2026.

The new levy will apply to all new residential developments that require building control approval, regardless of height, as part of the government’s continued response to the Grenfell Tower tragedy.

The levy, for which developers will be liable, is intended to help fund remediation works to existing residential buildings where safety defects have been identified. The government says the charges will also encourage developers to prioritise safety from the outset of the building process before construction begins. Local authorities will be tasked with collecting the levy on behalf of central government.

The tax was originally due to come into force this autumn, but the government says the targeted implementation date of October 2026 will give the industry and local authorities more time to adjust to the new charges and related requirements.

After a consultation on detailed proposals for the calculation and collection of the levy, in March this year the government confirmed the levy will be charged at the point at which an application is submitted for building regulations approval. It will be charged on a per square metre basis, calculated against a formula using data on average house prices.

The government also clarified that different geographic levy rates would be applied based on local authority boundaries. A 50% levy rate will be applied to developments built on brownfield sites – areas of previously developed land.

There are currently some exemptions to the levy charge, including social and supported housing; hospitals; hotels; care homes; school accommodation; temporary accommodation for homeless people; domestic abuse refuges; and sites of fewer than 10 dwellings.

For developers, payment of the levy ultimately hinges on whether the development can be classified as a "major residential development" in planning terms. If the application for building control approval contains fewer than 10 dwellings or 30 bedspaces, but the planning permission or planning application is for a major residential development, then the application or notice will still incur a levy charge.

The government published detailed guidance and a list of different rates and exemptions earlier this month together with the draft regulations.

The levy will be reviewed every three years and will require local authorities to return both revenue and management information to central government on a quarterly basis.

The new proposed charges have attracted considerable criticism over concerns the levy could hamper new development, particularly new housing. In March, the Home Builders Federation (HBF) highlighted its concerns over the potential impact the levy would have on housing delivery in England. Although the government expects the new tax to raise £3.4 billion, the HBF said the levy would “severely hamper” the industry’s capacity to meet the government’s target of delivering 1.5 million new homes and would prove both costly and burdensome for small and medium-sized homebuilders.

However, it is worth noting that the levy does not apply to existing applications for dwellings or purpose-built student accommodation submitted before 1 October 2026. This includes developments that have either submitted a full plans application, an initial notice or a Gateway 2 application, which is imposed when a developer applies for building control approval to start construction on a higher-risk building (HRB).

Dr Sue Chadwick, a built environment specialist at Pinsent Masons, said developers should be mindful of the implementation date and act now. “The timing of the charge is particularly problematic due to the delays currently being experienced by the industry at Gateway 2,” she said. “Developers will need to pay the levy as well as funding significant upfront design costs but then face a lengthy delay before construction can start. This will only increase financial pressure on developers.”

There are plans to introduce a similar building safety levy in Scotland. Under the current proposals, the levy would apply to all new residential development in Scotland, including build to rent and purpose-built student accommodation, but will exclude affordable housing. It is expected be operational in 2027.

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