The Building Safety Act's Legacy - A Long-Term Outlook for the Construction Industry
Beyond the Building Safety Levy, the Building Safety Act introduces a series of new financial and operational challenges. The government estimates that the legislative changes will cost the building industry £731 million in the first two years, with annual costs of £283.7 million thereafter. These costs manifest in a variety of ways:
Direct Penalties: Failure to comply can result in significant financial penalties, including unlimited fines. The Act also imposes a financial penalty of either £10,000 or 10% of the sale value per home for developers who fail to provide a 15-year new home warranty.
Operational Costs: The mandate for the Golden Thread necessitates investment in digital systems and staff training. Similarly, the new competence requirements will require companies to invest in formal training and professional certifications for their staff.
Increased Liability and Insurance: The Act expands the potential for liability for both developers and individuals through new mechanisms like Building Liability Orders (BLOs), which can hold associated companies liable for defects. The retrospective application of liability, which can stretch back 15 years, makes it crucial for companies to review their professional indemnity (PI) and Directors & Officers (D&O) insurance to ensure adequate coverage.
Given these new costs, developers are considering a range of strategic responses to mitigate the financial impact and ensure project viability. These include:
Design Alterations: Developers may reconsider the size and scale of their proposals to reduce chargeable floorspace, particularly for communal areas.
Strategic Use of Exemptions: The BSL’s exemptions for affordable housing and small sites may lead some developers to consider providing entirely affordable schemes or reducing the total number of units on small-to-medium-sized projects to avoid the levy.
Refurbishment Over New Builds: As the levy applies to new residential buildings, some developers may be prompted to consider refurbishing existing housing stock to avoid the charge entirely.
Negotiating Planning Obligations: To offset the cumulative effect of the BSL alongside other costs, developers may more aggressively negotiate lower Section 106 and CIL contributions. This could, however, lead to a reduction in funding for infrastructure and affordable housing.
The cumulative effect of these charges, levies, and increased costs could push some projects, especially those with a tight profit margin, to the brink of the viability threshold. This presents a complex challenge for the industry, as a push for greater safety could have the unintended consequence of slowing down housebuilding.
Financial Impacts & Strategic Responses
Building Safety Levy
A new charge on all new residential developments, calculated on a per-square-metre basis.
Increased Liability
Expanded liability for corporate directors and associated entities through mechanisms like BLOs, with a 15-year retrospective period.
Financial Penalties
Potential for unlimited fines and imprisonment for non-compliance with building regulations. Fines for failing to provide a new home warranty.
Operational Costs
Costs associated with implementing digital Golden Thread systems, ongoing maintenance of records, and formalising competence through training and certifications.
Project Viability Risk
The cumulative effect of the levy, increased insurance, and other costs can push projects close to the viability threshold, potentially leading to delays or abandonment.
The Building Safety Act is not a static piece of legislation; it is a dynamic, evolving framework that will continue to shape the industry for decades. The changes set for 2025 and 2026 are crucial steps in this long-term transformation. The courts have already played a significant role in reinforcing the Act's purpose, with rulings in cases like Triathlon and Hippersley Point affirming the retrospective effect of the legislation and the principle that developers should bear the primary financial responsibility for remediation, even when public funding is available. The government's successful legal action against a developer in the Vista Tower case further demonstrates that the BSR will use its new powers to compel action and that avoidance is not an option.
Proactive industry players are already leveraging these new requirements to build a more resilient and trustworthy business model. Case studies and resources from organisations like the Chartered Institute of Housing (CIH) demonstrate how some companies are successfully navigating the new regime by preparing building safety cases and using digital solutions to maintain the Golden Thread.
These examples illustrate that while the BSA introduces significant challenges, it also provides an opportunity to drive a new level of professionalism, accountability, and safety.
The Act's legacy will be defined by its ability to fundamentally transform the culture of the UK construction industry, rebuilding public and resident trust by ensuring that safety is not an afterthought but a foundational principle from a project's inception.
