The Building Safety Levy: new guidance and draft regulations

The government has published detailed guidance and draft regulations for the Building Safety Levy, a new charge on certain residential developments in England that is designed to contribute to the remediation of building safety defects. This Law-Now summarises the structure of the levy, when and to whom it applies, how it is calculated and administered, and the practical implications for project planning, structuring and delivery. It is aimed at developers, funders and in‑house counsel, as well as external advisers who will need to factor the levy into viability, transaction and programme strategies.

Purpose and policy context

The Building Safety Levy is intended to raise approximately £3.4 billion over ten years to fund the remediation of life‑critical building safety defects, shifting the cost burden away from leaseholders and onto developers of new residential buildings. The levy operates as a charge per square metre of chargeable residential floorspace and is administered locally. An equivalent scheme is anticipated in Scotland, though final details may vary from the English scheme.

Scope and commencement

The levy will apply to building control applications and initial notices submitted on or after 1 October 2026. The implementation date was deferred from October 2025 to allow local authorities time to prepare, and to enable developers to plan for the cost. Applications submitted before 1 October 2026 remain outside of its scope, even if later varied, subject to limited exceptions.

A levy liability arises only where all of the following conditions are met:

• The works form part of a “major residential development,” defined as either the creation of 10 or more dwellings or 30 or more purpose‑built student accommodation bedspaces;
   
• The works create new chargeable residential floorspace. This includes new dwellings and purpose‑built student accommodation, together with communal areas serving them. For reconfigurations and change‑of‑use schemes, the levy is assessed on the net additional residential floorspace; and
   
• The client identified on the building control application is not an exempt person.

The levy applies across all building control pathways, including local authority full plans, Registered Building Control Approver (RBCA) initial notices, and the Building Safety Regulator route for higher‑risk buildings. In scope schemes include new‑build housing and purpose‑built student accommodation meeting the thresholds, office‑to‑residential conversions, and vertical extensions that add new dwellings.

Exemptions and reliefs

Developments that have commenced the building control process before 1 October 2026—by submitting a full plans application, an initial notice, or a Gateway 2 application—do not attract the levy.

Exemptions can also apply based on use and the status of the client: non‑profit registered providers of social housing and their wholly owned subsidiaries are exempt persons. However, joint ventures benefit only if every JV member is exempt.

Certain uses are outside scope, including social and supported housing and a defined list of specialist or non‑residential accommodation such as hospitals, student accommodation for schools (rather than universities), care homes and hospices, hotels, prisons, and temporary homelessness accommodation. In addition, developments on previously developed (i.e. brownfield) land benefit from a 50% reduction, reflecting viability considerations.

Calculation of the levy

The levy is calculated by reference to the gross internal area of chargeable residential floorspace. Communal areas are included where they serve chargeable units. The regulations include published rates for developed and non-developed land for each local authority in England. The range can be substantial, for example, non‑developed land rates vary from approximately £100 per square metre in high‑value authorities such as Kensington and Chelsea to around £13 per square metre in lower‑value areas. These published rates permit early cost modelling and should be integrated into project‑level viability assessments and business plans.

Administration, process and timing

Local authorities act as the collecting authorities for the levy, regardless of the building control route selected. The process has two key stages.

At the application stage, applicants must provide high‑level levy information alongside full plans, initial notices or BSR applications. Incomplete levy information can result in rejection of the building control submission. At the first commencement notice stage, applicants must provide detailed levy information and supporting evidence, which triggers assessment and calculation by the authority.

Authorities have approximately five to eight weeks to issue either a levy liability notice or a notice of no charge. Payment may be made any time after the liability notice is issued, but it must be paid in full before any completion or final certificate is issued. Authorities may withhold completion or final certificates if the levy remains unpaid. If a scheme changes materially, the authority may recalculate the levy and issue revised notices. Spot checks are expected, and authorities can request further evidence, which may affect programmes as completion certificates will be dependent on payment.

Practical implications for developers and funders

The levy introduces an additional up‑front cost that will need to be carefully managed through feasibility, structuring and delivery. Schemes with substantial communal areas—particularly build‑to‑rent and purpose‑built student accommodation—are likely to experience proportionally greater impacts given their scale and internal layouts. There is no sector‑specific exemption for these uses.

Operationally, cashflow management is critical: the levy must be settled before completion or final certificates are issued, creating potential pinch points at practical completion and handover. Programme risk arises from the information requirements at both application and commencement stages, the potential for spot checks, and the possibility of recalculation following design development post‑commencement. Robust, accurate and timely levy submissions should be integrated into project controls and any mid-project design changes handled with care.

Further, project structuring should be aligned with the exemption rules. If the client entity identified on the building control application is ineligible, an exemption may be lost. Joint ventures require particular care: unless each JV member is an exempt person, the exemption will not apply.

Developers should note that attempts to “package” schemes into multiple building control submissions will not avoid the levy where the planning permission demonstrates that the overall development is a major residential development, as authorities will look to the number of new dwellings permitted by the planning permission rather than under each building control submission.

Takeaways

For projects expected to submit building control applications on or after 1 October 2026, the levy should be priced into land bids, viability appraisals, heads of terms, and funding models now, using the published authority‑level rates. Transaction documents—including development agreements, forward funding and forward purchase arrangements—may need express allocation of levy risk and mechanics for updates if the levy is recalculated due to design change.

We anticipate that the levy may influence site selection, market shares of types of developments and design efficiency, particularly for large schemes and those with substantial communal or amenity space. The brownfield reduction offers a meaningful counterweight, but the benefit should be assessed against other recognized risks to those schemes. As the regime beds in, market practice on risk allocation is likely to standardize. Until then, early planning and disciplined compliance will be the best mitigants to programme delay and certification risk.