Preparing for the Building Safety Levy: Key Considerations

On 1 October 2026 the Building Safety Levy (the Levy) will take effect in England. The Levy is a new charge on residential buildings that will be collected by local authorities. For residential developers, investors, lenders, promoters, forward funders and build-to-rent operators, the focus is now on understanding which projects are affected, how liability will arise and whether the Levy can be mitigated.

What is the Building Safety Levy?

The Levy will be payable on major residential developments. It forms part of the Government's wider building safety programme and is intended to ensure that the development sector contributes towards the cost of remediating historic building safety defects. The Levy rate varies by location, with the highest initial Levy rate being £100.35/m² in Kensington and Chelsea and the average being around £34/m². The Government hopes it will raise around £3.4 billion during the next 10 years.

Unlike section 106 obligations or the Community Infrastructure Levy (CIL), the Levy sits within the building control regime rather than the planning system and is triggered by the submission of an initial notice or other relevant building control application. This means the person or entity liable to pay the Levy is the ‘client’ specified in the relevant building control application or initial notice. Payment is not triggered by the grant or implementation of planning permission, and this distinction is likely to have significant practical consequences for developers.

Scope of the Building Safety Levy

The Levy will apply to ‘major residential developments’ which, generally, means developments of:

• 10 or more dwellings; or
• 30 or more bedspaces in purpose-built student accommodation (PBSA),

or a change of use relating to the same, creating new residential floorspace.

The regime therefore has potential application across a broad range of residential asset classes, including private residential development, apartment schemes, build-to-rent projects, mixed-use developments containing residential elements, residential conversion schemes, change-of-use developments creating dwellings and larger PBSA developments.

Importantly, developers should not assume that a phased approach to a wider residential scheme will necessarily avoid the Levy. The Government’s guidance states that the levy cannot be avoided by submitting multiple applications for building control approval for fewer than 10 dwellings or PBSA 30 bedspaces if the planning permission to which those applications or notices relate is for more than 10 dwellings or 30 bedspaces. If the site for which there is planning permission is a major residential development and is to be built out by multiple clients, applications for building control approval submitted by those clients will be chargeable (subject to any other exemptions).

The Government recently considered extending the small-site exclusion to medium-sized developments of 10 to 49 dwellings, but decided not to do so at this stage. Those developments therefore remain within scope where the other charging conditions are met.

A critical point: planning permission is not the trigger

One of the most important practical messages is that planning permission does not determine Levy liability. Many developers may have secured planning permission months or even years ago. However, if the relevant building control application is submitted on or after 1 October 2026, or an existing application is rejected and re-submitted, then the Levy may still apply to that development.

This creates an unusual position where projects with planning permission, agreed section 106 obligations and established viability assumptions may nevertheless face a significant additional cost at a later stage in the development process if the relevant building control notices have not yet been served. Government guidance states variations to existing building control applications will not trigger the Levy.

As the Levy is integrated into the building control process, non-compliance may have consequences for project delivery. The regulations require the whole Levy for a development to have been paid before a building control completion certificate or final certificate can be issued and occupation will be prohibited until this has been done.

As part of standard due diligence, parties such as development funders, joint venture partners and acquisition vehicles, will increasingly want to assess:

•  whether Levy liability applies;
•  whether exemptions have been properly analysed;
•  whether a brownfield discount is available;
• who bears the economic risk; and
• whether compliance obligations have been satisfied.

Exemptions

Not all residential development will be caught. There are a range of exemptions, including non-profit registered providers of social housing and supported housing. Certain types of buildings, including hotels, hospitals, children’s homes, school and military accommodation and certain accommodation provided for vulnerable groups, are also exempt from the Levy.

Smaller residential schemes remain outside the regime. Developments creating fewer than 10 dwellings, or fewer than 30 PBSA bedspaces, are generally exempt.

For developers, investors and funders, understanding the availability of an exemption could have a material effect on project viability and should be considered early in due diligence and project structuring exercises.

The brownfield discount

The Building Safety Levy (Amendment) (England) Regulations 2026 were issued to clarify how a 50% discount to the Levy charged on ‘previously developed land’ would operate in practice and to outline which types of land will qualify for the discount.

To constitute ‘previously developed land’, at least 75% of the land within the boundary of the development (as specified in the relevant planning permission) must be ‘previously developed land’. The recent amendments broaden the definition of existing relevant buildings and structures and expressly address matters such as paved areas, load-bearing surfaces, plant, machinery and other permanent man-made structures. They also clarify that unlawful operations cannot be relied upon when determining whether land qualifies as previously developed. Detailed guidance has been published by the Government on how to calculate the percentage of ‘previously developed land’ within a site but this is a complex area: Building Safety Levy: Guidance - Section 2: Levy rates and calculations

For residential developers acquiring brownfield sites, these changes may create opportunities to access the reduced Levy rate, potentially resulting in a 50% discount. Equally, they mean that site history and supporting evidence are likely to become increasingly important components of development due diligence.

What should developers do now?

Many developers have been preparing for the Levy for several years and will already have reviewed affected schemes. With commencement now only weeks away, developers should:

• confirm which schemes in their portfolios and pipelines may be affected;
• determine whether relevant building control applications are likely to be submitted on or after 1 October 2026 and whether any existing applications are likely to be varied or rejected;
• assess any exemption opportunities;
• revisit viability assumptions, budgets and funding models to reflect potential Levy liability;
• review transaction documents to consider how the Levy cost and compliance risk are allocated in development agreements, promotion agreements, options, funding documents and acquisition structures; and
• collate and retain evidence supporting any brownfield discount claims.

Moving Forward

The introduction of the Levy marks a significant milestone in England’s post-Grenfell building safety reforms. Five years on from our original article (Proposed Building Safety Levy – consultation deadline looms) which examined the consultation proposals, the Levy is now finally moving from policy to implementation.

From 1 October 2026, the Levy will become another critical consideration for residential developers already facing increasing regulatory hurdles and market pressures. While debate about the Levy’s impact on viability is likely to continue, the immediate challenge for the sector is practical rather than policy-driven: understanding which projects are affected, quantifying the financial impact and ensuring compliance with the new regime.