"For those developers constructing apartment schemes above 18 metres, there is the triple challenge of not only the payment of the levy, but the requirement for the second staircase, which reduces the building’s efficiency and net sales/lettable area, and the need for sign-off by the Building Safety Regulator and the costs and delays this inevitably causes"
- Chris Hemmings - Carter Jonas
The Building Safety Levy (BSL), due to come into effect on 1 October 2026, is yet another cost that developers are having to bear in delivering new housing stock across England.
Following the Grenfell Tower tragedy in June 2017, 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 Act also introduced a Building Safety Regulator to oversee building work and enforce safety standards, particularly for higher-risk buildings.
As a result of the Act, the Government published new guidelines in March 2024 on the requirement for a second staircase in all new residential buildings over 18 metres, which is mandatory from 30 September 2026, following changes to Approved Document B of the Building Regulations 2010.
The raft of changes has already seen developers amend schemes at the planning stage to incorporate the second staircase, and it has been well documented that the volume of applications requiring Building Safety Regulator sign-off has created a backlog, which has further delayed planning permissions from being granted (Gateway 1) and starting on site (Gateway 2).
The BSL is formulated and administered in a very similar way to the Community Infrastructure Levy (CIL), being applicable to the gross internal area of major residential schemes with relief for affordable housing. Major schemes are defined as those of 10 or more new residential units and 30 or more new bedspaces in relation to student accommodation. Other uses, such as care homes, hotels and other forms of accommodation, are exempt from the levy. The levy will be collected on behalf of the Government by local authorities, and the income raised will contribute to fixing building defects across England, such as cladding materials on apartment buildings.
Rates for the new levy were published in March 2025 by local authority area, with two rates set according to whether the site is brownfield or greenfield. The rates vary across the country and are set according to weighted average house prices, with brownfield sites receiving a 50% discount compared to greenfield sites.
So, for example, the brownfield rate in Preston is £7.19 per sq m, which is in stark contrast to the greenfield rate in Guildford, of £46.15 per sq m. The cost for a typical private three-bedroom house (93m2) on a greenfield site in Guildford is typically £4,300 per unit, which is roughly 3-4% of the base build cost for that unit - so a small, but not insignificant number when applied to, say, 200 units.
Some brownfield rates in London are even higher. For example, in Westminster the rate is £49.01 per sq m and in Kensington & Chelsea the rate is £50.17 per sq m. We understand that the levy will not be subject to indexation, but it will be reviewed every three years and could be adjusted at these intervals.
The timing of the introduction of BLS has been delayed by the Government to 2026, but there is little acknowledgement of the rising cost burden from other legislative changes in recent years, such as Biodiversity Net Gain and other changes to the building regulations (Part L and F), coupled with rampant build cost inflation and higher CIL and Section 106 contributions due to this inflationary indexation.
Building defects can occur on all types of housing sites, be it low-rise greenfield developments with a high proportion of houses, or large brownfield developments with apartment towers. In this respect, it seems fair to apply the BSL to all types of housing schemes, with the exception of minor developments, which in part provides some protection for local small-scale developers. However, SME developers would frequently face the cost because the threshold for major developments is just 10 homes.
This impacts SME developers disproportionately because they do not benefit from the economies of scale that PLC housebuilders can apply to construction costs. I believe the Government could seek a discount on the levy for SME developers to reflect this, or as an alternative, it could raise the threshold for paying, for example, to 50 units.
One of the key challenges is that partial or staged payments are not allowed, and therefore, the full amount for the scheme needs to be paid within the first phase of development, placing additional financial burdens on the project’s cash flow.
For those developers constructing apartment schemes above 18 metres, there is the triple challenge of not only the payment of the levy, but the requirement for the second staircase, which reduces the building’s efficiency and net sales/lettable area, and the need for sign-off by the Building Safety Regulator and the costs and delays this inevitably causes.
Depending on the scheme, the location, the site’s landownership history and the transactional terms, it may not be possible to simply deduct the BSL from land acquisition costs.
Moreover, while the BSL on its own is not necessarily a significant drag on the viability of schemes, when added to the ever-growing list of planning obligations, such as BNG and the requirement for second staircases, it provides more incentive for developers to challenge planning obligations at application.
The introduction of the levy is already being factored into scheme viability, especially at the planning application stage, with developers including it within their financial viability assessments for schemes that are timed to be commenced and not completed by Autumn 2026. This has the impact of reducing the level of affordable housing further still, as S106 contributions are usually fixed amounts set by formula, and CIL is non-negotiable.
With the Government’s 1.5 million housing target already under significant pressure, there needs to be some assistance to take the hand brake off and accelerate build-rates, which could include incentives for both buyers and developers, and one potential incentive could be a delay to the introduction of the BSL.
