You will remember that the Building Safety Act 2022 introduced powers to impose a levy on new residential buildings requiring certain building control approvals in England, to raise revenue to be spent on building safety. The levy is now planned to come into effect in Autumn 2026 and we will see the necessary regulations laid before Parliament later this year. The levy is targeted to raise £3.4 billion.
On 24 March 2025 the Government published an updated version of a response to the technical consultation that had been carried out by the previous government from 22 November 2022 to 7 February 2023 and initially responded to by the previous government and further informed by a further technical consultation that was carried out from 23 January 2024 to 20 February 2024. This has all been a long time coming.
The 2022 Act empowers the Secretary of State to make regulations which will apply to a “relevant building”, payable to the Secretary of State or their nominee and applied in relation to applications or notices filed for building control approval. The Act defines “relevant building” as one, in England, consisting of or containing one or more dwellings or other accommodation (“including temporary accommodation, for example in a hotel or hospital”, although the Government now intends to exclude hotels and hospitals from the levy, as well as, for instance care homes and all types of affordable housing as defined in the NPPF).
To quote from the 24 March 2025 version of the government’s technical response to consultation:
“The levy charge will depend on the floorspace of the development. Rates per square metre will be set per local authority area to capture the geographical variation in house prices, so that levy rates will be highest in those areas with the highest house prices, and lowest in low-house-price areas. This measure is designed to protect the viability of house building across England. There will be a discounted levy rate of 50% for developments built on previously developed land (PDL), also known as ‘brownfield’ land.”
Certain residential buildings which provide important community facilities and certain types of communal accommodation will be exempt from the levy charge, so as not to deter their development. These include affordable housing, non-social homes built by not-for-profit registered providers, NHS hospitals, care homes, supported housing, children’s homes, domestic abuse shelters, accommodation for armed services personnel, criminal justice accommodation, and developments of fewer than 10 units (as a protection for small and medium-sized sites and enterprises).
The sanction for non-payment of the levy will be the withholding of a building control completion certificate, or rejection of a final certificate. As completion certificates are a legal requirement for buildings over 18m in height, and are required by many mortgage lenders, this means that the developer will struggle to sell and occupy that building upon completion if the levy is not paid.”
Annex A to the document sets out the relevant levy rate per square metre of chargeable development for each local authority area, with separate columns for the previously developed land rate and the non-previously developed land rate. The highest I could see was £50.17 and £100.35 respectively for the Royal Borough of Kensington and Chelsea; the lowest that I could see was for County Durham: £6.35 and £12.70 respectively. Annex A starts with this worked example:
“For example, a building control application is submitted for 20 identical houses in Dover. Each house has a gross internal area of 100m2, so the total chargeable floorspace for the building control application is 2000m2. The houses are being constructed on previously developed land. The levy rate for works on previously developed land in Dover is £15.19. To calculate the total levy liability for the building control application, the total chargeable floorspace (2000m2) is multiplied by the levy rate for works on previously developed land (£15.19). The total levy liability for the building control application is £30, 380.“
There will be no indexation although the rates will be subject to review by the Secretary of State on a three-yearly basis (but it can be more frequent than that).
What about any transitional provisions, you may ask? The November 2022 consultation document indicated that the previous Government was minded to make transitional provisions which apply to the first year of operation of the Levy and will be dependent on the stage within the building regulations processed that the development has reached at the time that the Levy comes into effect. The Government response to that consultation provided that a development which had begun the building control process as at the launch date of the levy would be exempt. Developments which enter the building control process after the levy is launched will be subject to it. There is no mention of any transitional provisions in the more recent consultation, or in the Government’s latest response.
How do you work out whether a site amounts to previously developed land? The NPPF definition of previously developed land is to be used. “Where 75% or more of the land within the planning permission redline boundary falls within the definition of PDL all levy-chargeable development on the site will qualify for the discount rate. We propose a 75% threshold as this will mean that sites which have a clear majority of land that constitutes PDL qualify for the discount. The developer will apply for the discount rate as part of the levy information provided as part of the first commencement notice and will submit supporting evidence to illustrate the site falls within the levy definition of PDL.“
The levy is to be payable to the local authority and passed onto the government. Local authorities’ role as tax collector continues to expand.
The developer will need to file information with their building control application or notice. At the initial notice stage, the developer will need to include reference to the planning permission pursuant to which the development is being carried out and the number of dwellings which will be created as a result of the development. At the stage of filing a commencement notice, the developer will need to confirm:
(a) whether in its view any exemptions from payment apply;
(b) whether the development is on previously developed land; and
(c) the gross internal area of the chargeable floorspace.
Supporting evidence will need to be filed at both stages, but exactly what is required is not yet known. The Government has indicated that it will prepare guidance to assist on this point. If insufficient evidence is provided, the local authority will be empowered to reject the application or notice. The local authority will not verify all information provided to it but will carry out spot checks.
Having received the information from the developer (and subject to a spot check) the local authority will issue a levy liability notice to confirm the amount payable. The amount will then need to be paid before a completion certificate is issued or final certificate is approved. The Government does not intend to provide for phasing of payments.
In the event that an amendment notice is filed, or a further application is made for building control approval, the developer must provide information which reflects any change of consequence for the levy liability calculation – i.e. an increase or decrease in chargeable floorspace. The developer may also file updated information if they believe that the development has become eligible for an exemption from the Levy. Where the levy liability changes:
- if the original liability sum has been paid, the payment already made will be credited against the new total; and
- where the levy liability decreases as a result of a change, the developer will be entitled to a refund within 2 weeks of the issue of the updated Levy liability notice.
The regulations will provide for a review procedure and subsequent appeal where there is a dispute between the developer and the local authority as to the levy liability amount.
Many thanks to my Town Legal colleague Aline Hyde for much of the above detail. There is a lot here for us all to start to take in, both in terms of the additional regulatory requirements but also, for clients (whilst we should not forget the human tragedies that led to the need for this levy in the first place) the potentially significant financial implications of the levy for current and future development projects.
Simon Ricketts, 5 April 2025
Personal views et cetera
SIMONICITY 