The Building Safety Levy

The Building Safety Levy (the "Levy") came into force in England on 1 October 2026.  Levy income is intended to contribute to the remediation of unsafe residential buildings and the improvement of building safety standards.  

The Levy's introduction led to a surge of applications for Gateway 2 before the 1 October deadline, as developers sought to push through schemes ahead of the Levy becoming payable.  Those developers that did so should verify that they satisfied the relevant criteria before the cut-off date, rather than assuming that their schemes are exempt.  Developers should also review both live schemes and future pipeline, to determine whether, and to what extent, the Levy will apply.  This assessment will be important in evaluating scheme viability and cost exposure, as the Levy adds an additional burden sitting alongside other charges such as CIL and planning application fees.  As Levy rates vary significantly between local authorities, developers should also consider if the timing and structure of future applications can be configured accordingly. 

The Levy introduces a number of commercial considerations that developers should evaluate:

• Chargeable floorspace should be assessed from the outset - using rates published for the relevant local authority, developers can include location assumptions in financial models, land bids and viability assessments;
• Phasing - the full Levy must generally be paid on or before completion of the first phase where there is phased development.  This means developers should carefully consider whether upfront funding or cash reserves may be needed; 
• Brownfield land – these developments may benefit from a 50% discount where at least 75% of the site satisfies the statutory brownfield criteria. While this may improve the attractiveness of some sites, contamination risk and other site constraints will remain important considerations;
• Mixed-use schemes – it is possible these may become more attractive by including a greater proportion of non-residential floorspace. Particular care may also be required when considering communal areas. Depending on the circumstances, communal space may be chargeable, non-chargeable or subject to proportionate treatment where shared. Any Levy savings should, however, be balanced against the role that such facilities play in the overall quality, attractiveness and marketability of a scheme;
• Refurbishment – as the Levy applies to newly created residential floorspace, developers may also revisit refurbishment-led strategies, where these present a commercially viable alternative to redevelopment.

In addition to the Levy itself, developers should consider the administrative burden associated with assessing liability, preparing calculations, providing information and making payments. Responsibility for these activities, and for the associated costs, should be clearly allocated.  Developers will want to establish a shared understanding of these issues with commercial partners including contractors, development partners, landowners and funders, to help minimise the risk of disputes. Development agreements, building contracts and other project documents should be reviewed to ensure that Levy-related responsibilities, costs and risks are properly addressed.  Where there are fixed-price construction arrangements, these may be particularly challenging to adjust once procurement has commenced.

The introduction of the Levy adds a further layer of cost and regulation to residential development. Understanding these implications now will help developers better manage its impact.  While opportunities may exist to mitigate Levy costs, these should be reviewed in the context of the wider development and site strategy, rather than in isolation.