The Building Safety Act's Financial Impact - Understanding the New Building Safety Levy

One of the most anticipated and significant changes is the introduction of the Building Safety Levy (BSL), which is scheduled to come into effect in Autumn 2026. The purpose of the levy is to ensure that the residential development industry, which is considered responsible for creating the issues, contributes a fair amount to the remediation of historical building safety defects, particularly for unsafe cladding. This measure is intended to prevent the financial burden from falling on taxpayers and leaseholders.

The levy will apply to all new residential developments in England that require building control approval, regardless of their height. This wide-ranging scope means its impact will be felt far beyond the high-rise sector. The charge will be calculated on a per-square-metre basis of the Gross Internal Area (GIA). To ensure fairness and protect the viability of house building across England, the levy rates will be set per local authority area, with higher rates in regions with higher average house prices. A discounted rate of 50% will apply to developments on previously developed land (brownfield sites), reflecting the higher costs of building in such areas.

Local authorities will act as the collecting authority for the central government, with revenues returned quarterly. A critical sanction for non-payment is the withholding of a building control completion certificate or the rejection of a final certificate. As completion certificates are a legal requirement for buildings over 18m and are required by most mortgage lenders, this creates a hard stop that will prevent the sale or occupation of a property until the levy is paid.

The BSL is not merely a revenue-raising tool; it is a powerful market-shaping mechanism. The discounted rate for brownfield land and the exemption for affordable housing directly incentivise developers to pursue projects that align with key government housing priorities. Conversely, the per-GIA calculation may lead developers to reassess the design of their projects. For instance, developers of Build-to-Rent (BTR) schemes or purpose-built student accommodation (PBSA), which often feature a high proportion of communal space, may reconsider their designs to reduce chargeable floorspace and mitigate their levy liability. This creates a critical trade-off between project viability and the provision of valuable amenities.

The delay of the levy's implementation to Autumn 2026 provides a unique, anticipatory market dynamic. Projects nearing the viability threshold may rush to get to the building control stage before the deadline to avoid the charge. This could lead to a short-term increase in applications, potentially followed by a reassessment of project viability. In the long term, developers may look to mitigate the cumulative effect of the levy alongside other charges like the Community Infrastructure Levy (CIL) and Section 106 contributions, which could impact the pipeline of affordable housing and funding for infrastructure.

Building Safety Levy: Key Details and Exemptions

Purpose

To fund the remediation of historical building safety defects, protecting taxpayers and leaseholders.

Implementation

Regulations to be laid in Parliament in 2025, coming into force in Autumn 2026.

Scope

All new residential developments in England requiring building control approval, regardless of height (with exemptions).

Calculation

Per-square-metre basis, calculated on Gross Internal Area (GIA). Rates are set per local authority area, weighted by average house prices.

Discount

50% discount for developments on previously developed (brownfield) land.

Exemptions