This article was first published in Housing Today on 27 February 2026 and is reproduced with the permission of that publication and can be accessed here.
The building safety levy is a new tax on the development of residential buildings in England. The levy forms part of the government’s post-Grenfell reforms, designed to require developers to contribute to the cost of remediating historical building safety defects.
The regulations imposing the levy, made under the changes brought in by the Building Safety Act 2022, will come into force on 1 October 2026 and will catch applicable developments where the building control application is submitted on or after that date. The levy will not apply if the original application was made before that date, even if it is subsequently varied after 1 October 2026.
The levy will apply to new residential projects comprising 10 or more homes – or, for purpose-built student accommodation (PBSA), 30 bed spaces – and is based on the gross internal area of affected developments as measured under the RICS Code of Measuring Practice. While rates are set centrally, the levy is administered by each local authority, which sends the collected payments to central government quarterly.
While a large majority of residential developments will be caught by the levy, there are limited exemptions to avoid hindering development of key community facilities or placing undue burdens on developers of smaller projects. Exemptions include schemes falling below the thresholds above, as well as affordable housing, temporary accommodation, care homes, school accommodation, hospitals, children’s homes and hotels or hostels.
Impact on construction
Developers will need to pay the levy to the local authority in whose area the development is located. The local authority retains this collecting responsibility even where the works are carried out under initial notices submitted by a registered building control approver or under applications submitted to the Building Safety Regulator.
The amount charged will be 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 and range from £12.70/m2 (County Durham) to £100.35/m2 (Kensington and Chelsea), to correlate with the average house prices in that area. However, for developments on brownfield sites, the rate may be discounted by 50%.
Notably, PBSA, build-to-rent and retirement schemes did not make it onto the exemptions list, and the cost impact on such developments will be significant.
With large communal areas and shared facilities being an integral part of each of these asset classes, viability is a concern for developers, particularly in areas with higher levy rates. A larger proportion of a building being communal space makes levy costs harder to offset, as such spaces do not directly generate income. However, redesigning buildings to reduce these spaces would diminish the attractiveness of the offering, potentially reducing the rent that prospective tenants are willing to pay.
Effect on financial planning and project timeframes
The cost of the levy is intended to sit with developer (as designated as the client on the building control application). While pre-fixed rates, which are not indexed, provide some level of cost certainty, they are due to be reviewed every three years. Potential increases should be accounted for when considering project timelines and anticipated costs.
Developers may also want to consider the potential benefit of mixed use or mixed tenure schemes, which include non residential elements or exempt tenures, in order to take advantage of a proportionate reduction in the levy payable on shared communal areas. Phased development may be one method of financial modelling – but note that the levy must be paid for the entire project before any phase can be occupied.
The levy becomes payable following issue of the levy liability notice by the collecting authority, shortly after submission of the building control application. The developer must then pay the levy upon or before submitting its application for completion certificate for the works, noting that the relevant building control authority will withhold the completion certificate until payment has been confirmed. This could delay occupation and sales or impact insurance cover or validity.
Developers should start planning now to incorporate the cost of the levy into their financial modelling and viability assessments. Where possible, they may benefit from accelerating design development so as to submit building control applications before 1 October 2026. They should in any case carefully consider both the design and projected value of a development to ensure it remains viable following the introduction of the levy.
