Building Safety Levy for developers

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 on 1 October 2026 under the Building Safety Levy (England) Regulations 2025 (SI 2025/1236). It applies where the building control application for a chargeable residential development is made on or after that date.

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 levy is designed to raise around 3.4 billion GBP over roughly 10 years, alongside 5.1 billion GBP of direct government funding. It 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 charged to the developer or client making the building control application, and is collected by local authorities (including for work supervised by the Building Safety Regulator or a registered building control approver). You do not pay it upfront: it must be paid before the earlier of your completion certificate application (or completion-stage notice) and first occupation. Non-payment blocks the completion or final certificate. Notification and information obligations arise at the application stage.

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

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 chargeable residential floorspace (including residents' communal space). The government has also confirmed a 50% reduction for developments on previously developed (brownfield) land where at least 75% of the site is brownfield, incentivising the use of brownfield sites over greenfield development.

Rates for each local authority area have been published with the regulations. They range from 12.70 GBP per square metre (County Durham) to 100.35 GBP per square metre (Kensington and Chelsea), with an average of around 33 GBP per square metre. Factor the published rate for your target local authority into your development appraisals now.

Impact on SME housebuilders

The Building Safety Levy represents a significant concern for smaller developers.

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; the small sites exemption (under 10 dwellings) is the main protection for SME developers in the final regulations.

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:

When the levy takes effect

The Building Safety Levy commences on 1 October 2026. The date is set by the Building Safety Levy (England) Regulations 2025 (SI 2025/1236), made on 19 November 2025.

Key timing considerations:

• Projects already under way: If your building control application is made before 1 October 2026, 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 a separate building control application may be assessed separately. Phases applied for on or after commencement will be subject to the levy

What happens next

The regulations, exemptions, and per-local-authority rate tables have been published. Local authorities will collect the levy through the building control process from 1 October 2026.

Keep informed through official government channels and industry bodies. The Home Builders Federation and Federation of Master Builders provide updates relevant to residential developers.