In July 2025, the Ministry of Housing, Communities and Local Government (MHCLG) published draft regulations setting out details of the Building Safety Levy, a proposed tax on new residential buildings.
The Levy is one of the final components of the new regulatory regime introduced by the Building Safety Act 2022, and is anticipated to raise £3.4 billion over 10 years, to contribute to the cost of remediating safety defects across buildings in England.
The Building Safety Levy (England) Regulations 2025 will come into force on 1 October 2026 and apply to new build developments where the building control application is submitted on or after that date. The Levy will not apply if the original application is made before that date, even if subsequently varied.
The Levy applies to new residential projects comprising 10 or more homes, or purpose-built student accommodation (PBSA) of 30 or more beds. Schemes falling below these measurement thresholds will be exempted. Affordable housing projects will be exempted, as will any open market housing developed by Registered Providers or their wholly-owned subsidiaries. Other exemptions include temporary accommodation, care homes, school accommodation, hospitals, children’s homes and hotels/hostels.
The cost of the Levy is calculated by multiplying the total amount of new residential accommodation floorspace and associated communal floorspace (in m2) by the applicable area rate. The Regulations set out the area rates for each local authority, ranging from £12.70/m2 (for County Durham) to £100.35/m2 (for the London Borough of Kensington & Chelsea), to correlate with the average house prices in each area. Developments constructed on previously-developed land ("brownfield" sites) may be discounted by up to 50%. These rates are due to be reviewed every three years, though should not change during the life of individual projects.
Payment of the Levy is the responsibility of the party who submits the building control application for the development, so technically this could be a landlord or a developer.
The Levy becomes payable following the issue of a Levy Liability Notice by the collecting local authority, after the building control approval application has been submitted for the development. The client or developer must pay the Levy on or before submitting its application for a completion certificate for the project. For Higher-Risk Building projects where the Building Safety Regulator is the building control authority, the collecting local authority will be expected to share information with the Regulator about the payment of the Levy.
The Levy will be administered by local authorities, who will be responsible for collecting payments for developments within their catchment area, including any Higher-Risk Building projects. The relevant building control authority must withhold the issue of the completion certificate until payment has been confirmed. Critically, the Levy must be paid for the entire development before any parts of the site can be legally occupied.
The commercial implications of the Levy are difficult to estimate in advance. However, it is anticipated that developments with large communal areas and shared facilities will be especially hard hit by the increased costs, as these areas will not generate direct income from rental or sale. Mixed-use schemes incorporating exempted non-residential elements and tenures are likely to become more popular, as shared communal areas will be charged on a pro-rated basis. Phased completion for large developments, where building control is applied for in stages, may also become popular as a way of spreading the costs of the Levy across a longer time period.
Clients and developers who are caught by the Levy should start strategising now to anticipate the costs of future projects.
As social landlords and their development subsidiaries are exempt from the Levy, they will have a competitive advantage on mixed-tenure schemes, as the open market element will cost less than for private developers. However, developers on mixed-tenure schemes may seek to pass on a proportion of the Levy to their social landlord partners. Social landlords will also want to ensure they have control over the payment of the Levy for the wider development in order to permit occupation of their units.
