Guide
Building Safety Levy for developers
How the Building Safety Levy affects residential developers in England. Covers exemptions for small sites, rates, timing, and planning for levy costs. Essential reading for SME housebuilders and developers of new residential buildings.
The Building Safety Levy is a new charge on residential development in England, designed to fund the remediation of unsafe cladding on existing high-rise buildings. If you develop new residential buildings, you need to understand how this levy will affect your projects and finances.
The levy comes into force in Autumn 2026. From that date, developers building new residential properties that require building control approval will need to pay the levy as part of the development process.
What the levy funds
The Building Safety Levy funds the removal and replacement of dangerous cladding from residential buildings constructed by other developers. Following the Grenfell Tower tragedy in 2017, the government committed to making buildings safe. The levy ensures that the residential development industry contributes to the cost of remediation rather than the burden falling entirely on leaseholders or taxpayers.
The government estimates that remediation could cost between 5 billion and 10 billion GBP. The levy forms part of a broader funding package that includes direct grants and the Responsible Actors Scheme.
Who pays the levy
The Building Safety Levy is charged to developers of new residential buildings in England. It applies to:
- New-build residential developments requiring building control approval
- Conversions creating new dwellings
- Purpose-built student accommodation (PBSA) above certain thresholds
The levy is collected through the building control process. You will need to pay it before receiving building control approval for your development.
Exemptions from the levy
Not all residential development is subject to the Building Safety Levy. The government has designed exemptions to protect small developers and certain types of housing.
Small sites exemption
Sites with fewer than 10 dwellings are fully exempt from the Building Safety Levy. This exemption is designed to protect small and medium-sized enterprises (SMEs) and maintain the viability of smaller development projects.
If your development creates 9 dwellings or fewer, you will not pay the levy regardless of the building height or value.
Purpose-built student accommodation (PBSA)
PBSA developments with fewer than 30 bedspaces are exempt from the levy. Larger student accommodation developments will be subject to the levy.
Other exemptions
The following types of development are also exempt:
- Social and supported housing developed by non-profit registered providers
- NHS hospitals
- Care homes
- Supported housing
- Children's homes
- Domestic abuse shelters
- Armed services accommodation
- Criminal justice accommodation
Possible medium site exemption under consideration
The government is exploring whether to extend the exemption to medium sites (10-49 dwellings). This is part of the SME housebuilder support package announced in May 2025.
If you are planning a development of 10-49 units, monitor government announcements closely. The exemption threshold could be raised before the levy commences in Autumn 2026.
This decision has not yet been confirmed. Do not rely on a medium site exemption when planning your finances.
Levy rates
The Building Safety Levy uses differential rates based on local house prices. Areas with higher property values will have higher levy rates, reflecting the greater value uplift developers receive in those markets.
The levy is charged per square metre of residential floor space. The government has also confirmed a 50% reduction for developments on previously developed (brownfield) land, incentivising the use of brownfield sites over greenfield development.
Specific rates for each local authority area will be published before the levy commences. Factor potential levy costs into your development appraisals now, using government consultation documents as a guide to likely rates in your target areas.
Impact on SME housebuilders
The Building Safety Levy represents a significant concern for smaller developers. According to government research, 40% of SME housebuilders cite the levy as a barrier to housing delivery.
The challenges for SMEs include:
- Cash flow impact: The levy adds to upfront development costs before any sales revenue
- Land viability: Marginal sites may become unviable when levy costs are factored in
- Competitive disadvantage: Large developers can absorb costs more easily across their portfolios
- Planning uncertainty: Projects in planning now may face unexpected costs when the levy commences
The government has acknowledged these concerns and is considering additional support measures for SME developers, including the possible medium site exemption discussed above.
How the levy interacts with other obligations
The Building Safety Levy is separate from, and additional to, other developer contributions and charges:
- Section 106 obligations: Planning agreements for affordable housing, infrastructure contributions, and other local requirements remain in place
- Community Infrastructure Levy (CIL): Where applicable, CIL charges continue alongside the Building Safety Levy
- Building Safety Regulator charges: If your development is a higher-risk building (18m+ or 7+ storeys with 2+ residential units), you will also pay gateway approval fees to the Building Safety Regulator
- CITB/ECITB levy: Construction industry training levies continue to apply to construction businesses
When appraising development viability, ensure you account for all applicable charges, not just the Building Safety Levy.
Planning ahead for levy costs
To prepare for the Building Safety Levy, take these steps:
-
Review your development pipeline
Identify which projects will complete after Autumn 2026 and therefore be subject to the levy. Projects completing before the commencement date will not be charged.
-
Model levy costs in development appraisals
Use the government consultation response to estimate likely levy rates for your target local authority areas. Include these costs in your financial models for all projects completing after Autumn 2026.
-
Consider site selection implications
The 50% brownfield reduction and small site exemption may affect which sites are viable. Prioritise brownfield land and smaller sites where appropriate.
-
Monitor medium site exemption developments
If you develop medium-sized sites (10-49 units), watch for government announcements on the possible exemption extension. Do not rely on it until confirmed.
-
Factor levy timing into project finance
The levy is payable before building control approval. Ensure your project financing accounts for this upfront cost, particularly if you rely on staged funding.
-
Review land acquisition terms
For sites you are acquiring or negotiating, consider whether levy costs should be reflected in the land price. Site vendors may need to adjust expectations for sites completing after Autumn 2026.
When the levy takes effect
The Building Safety Levy commences in Autumn 2026. The precise date will be confirmed when the regulations are laid before Parliament.
Key timing considerations:
- Projects already under construction: If you obtain building control approval before the levy commences, you will not pay the levy on that project
- Projects in planning: Planning permission does not trigger the levy. The levy applies at the building control stage
- Phased developments: Each phase requiring separate building control approval may be assessed separately. Phases approved after commencement will be subject to the levy
What happens next
The government will:
- Publish detailed regulations and rate tables before Autumn 2026
- Confirm the final exemption thresholds, including any medium site exemption
- Establish the collection mechanism through building control bodies
Keep informed through official government channels and industry bodies. The Home Builders Federation and Federation of Master Builders provide updates relevant to residential developers.