Proposed Building Safety Levy – consultation deadline looms
Legal Development 13 October 2021 13 October 2021
UK & Europe
UK Real Estate Insights
As the 15 October 2021 deadline for the consultation on the design of the proposed new Building Safety Levy approaches, we look at what this new levy will mean for residential developers
The Building Safety Levy – also referred to as the “Gateway 2 Levy” - forms part of the Government’s new Building Safety Bill which is currently being considered by Parliament and which aims to impose a more stringent building safety regime, whilst also raising funds to support the Government’s commitment to remove unsafe cladding from high-rise residential buildings.
Who will need to pay the levy?
The Building Safety Bill proposes a three-stage ‘Gateway’ system to building regulation approval for new high-rise residential buildings, care homes and hospitals that are 18 metres or more in height (or at least 7 storeys). The three stages include:
- a planning application stage – Gateway 1;
- a pre-construction Building Safety Regulator approval stage – Gateway 2; and
- a pre-occupation Building Safety Regulator approval stage – Gateway 3.
It is proposed that the levy will apply to all developments in England caught by the new bill and seeking approval from the Building Safety Regulator unless excluded. The “client” – being the party for whom the development is being carried out – will be responsible for paying the levy. The definition of “client” is part of the consultation. It is unlikely simply to be the land owner and so, depending on how the final legislation is set down, it may be necessary to include an express agreement about responsibility for the levy in development contracts.
What are the proposed exclusions?
The consultation invites views on a range of proposed exclusions from the levy charges (although not from the safety checking regime), including exclusions for:
affordable housing – so as not to disincentivise the supply of affordable homes;
hospitals – so as not to add costs to the health sector;
small and medium-sized enterprises – whilst not completely excluding SMEs from paying, the consultation seeks views on a scheme of delayed or staged payment, to help SMEs that might not otherwise be able to pay up front; and
refurbishment projects – so as not to put hurdles in the way of landlords seeking to maintain or improve the quality and safety of existing buildings.
How will the levy be calculated?
Again, views are being sought, but in essence, the Government is proposing two simple options, being either:
a charge per square metre of the entire internal floor area (with exclusions); or
a fee per residential unit.
The rate of the levy is as-yet unknown and will be informed by the feedback from the consultation and it may be that the rate varies depending upon the geographical location to take account of disparities in property values.
How will the levy be enforced?
In short, non-payment will result in the Building Safety Regulator withholding building control approval at the appropriate stage. That will either prevent commencement of the development or prevent completion. The consultation also invites views on ways to incentivise payment and minimise issues, such as through penalties for miscalculations, fraud, or failure to assume responsibility.
Is the Building Safety Levy the same as the proposed Residential Property Developer Tax and/or the new Infrastructure Levy?
No. The first point to note is that the proposed Building Safety Levy is separate from - and potentially in addition to - the proposed new Residential Property Developer Tax (RPDT) which was the subject of our recent blog and which shares the same 15 October 2021 deadline in respect of its draft legislation consultation.
The Building Safety Levy is also separate from the proposed new ‘Infrastructure Levy’ proposed in the August 2020 Planning for the Future White Paper and which would replace the existing parallel Section 106 planning obligations and Community Infrastructure Levy regimes.
The Government says that both the RPDT and the Infrastructure Levy are designed to “target different points in the development cycles and for different purposes”, although it will consider the cumulative impact on development viability as part of the consultation.
How will the levy impact the housing supply?
The Government acknowledges that the levy, the RPDT and the Infrastructure Levy are all additional costs to developers that “may have an impact on their activities” and so it will “consider the potential cumulative impacts” when it sets the final levy rates. Clearly, there is a risk that housing supply could be impacted – which directly contradicts the Government’s priority to build new homes – and so a balance will need to be found, but it is likely that those developers that do have to pay will seek ways to pass on or off-set costs.
The consultation details can be found here and the deadline for responding ends on Friday 15 October 2021.
Those wishing to contribute to the debate can fill out the digital survey hosted on Citizen Space, or alternatively
email responses directly to: HRB.LevyConsultation@communities.gov.uk
Assuming that the levy comes into effect, it is intended that it would be introduced with “Gateway 2” which is targeted for 2023.