The new Building Safety Levy - what you need to know

What is the Building Safety Levy and why has it been introduced?

The Building Safety Levy was introduced by the Building Safety Levy (England) Regulations 2025 (the 'Regulations'). It is essentially a tax on new residential developments, payable by developers to local authorities.

The income generated by the levy will be used to contribute to the cost of remediation of historic building safety and fire defects in residential buildings across England. The aim is to prevent individual leaseholders or the taxpayer from footing the remediation bill, by shifting responsibility to developers of new residential developments. With thousands of residential occupiers trapped in flats they are unable to sell or mortgage, the government hope the levy will raise £3.4bn across the next decade.

When the levy is payable?

The levy is payable in England when making a building control application for 'major residential development'. The Regulations define major residential development as development that creates:

• 10 or more new dwellings; or

• 30 or more new bedspaces in purpose-built student accommodation.*

It includes redevelopment where there is a change of use to residential purposes. For redevelopment of existing residential accommodation, the previous number of dwellings will be deducted from the post development number, and the net increase must be at least 10.

* “A bedspace is defined as a sleeping area for one person (which may be in the same room as a bedspace for another person)" (Regulation 6(1)(4)).

When must the levy be paid?

Payment of the levy must be made to the local authority before the earlier of the following:

• The date building work is completed; and

• The date of occupation of the property.

Local authorities will collect the levy and transfer the revenue, net of administrative costs, to central government for use in building safety. The levy applies in England only.

How much will the levy cost?

The levy is a charge per square metre based upon gross internal area of the development. The exact rate will depend upon the local authority and whether the site is classed as 'brownfield' (i.e. previously developed land) which will benefit from a 50% discount.

The levy rates per square metre vary wildly, from £16.60 in Barnsley (£8.30 for brownfield land) to £87.04 in the City of London (£43.52 for brownfield land).

When does the levy not apply?

• Exempt persons: These are defined in Regulation 13 and are restricted to non-profit social housing providers and their wholly-owned subsidiaries.

• Excluded residential developments: Certain types of development are excluded from the levy. They include school accommodation, hospitals, temporary accommodation for the homeless and nunneries. A full list is set out in Schedule 1 of the Regulations.

• Pre 1 October 2026: The levy does not apply to existing building control applications submitted before 1 October 2026. However, if a pre 1 October 2026 application is rejected and later resubmitted, it will then be subject to the levy.

Potential effects of the levy

Increase in cost: The introduction of the levy will significantly increase the cost of new residential developments. By way of illustration, a 15,000 square metre residential development in Bristol which is subject to a levy rate of £42.97psm for non-previously developed land, would attract a levy of £644,550.

Design implications: Due to the levy is based upon floor area of the development, developers may seek to reduce the size of both residential units and communal spaces, to minimise levy liability.

Cash flow: The levy is an up-front cost and becomes due before developers realise a return on their investment, holding the potential to cause cash-flow issues.

Reduction in supply: The levy may render some schemes commercially unviable, leading to a reduction in the supply of new residential accommodation.

Key points

• If you are planning, funding, or delivering residential development in England, you should factor the Building Safety Levy into your early viability assessments, design strategy, and building control programme.

• The levy can materially affect cost, timing, and compliance.

• Exemptions or discounted rates may be available depending on the development type and site.

• The levy applies to England only.

How can VWV we help you?

VWV is experienced in representing large residential developers and dealing with complex purpose-built student accommodation projects. Please get in touch with Ruth Glinister in our Real Estate team if you wish to discuss how we can assist.