Building Safety Levy: key considerations for developers

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Elayna Rattenbury: Welcome to today's discussion on the Building Safety Levy. As we approach our building safety conference, we are taking a closer look at some of the key developments affecting the construction industry and the practical implications for those delivering new homes.

I am Elayna Rattenbury, a partner in our Real Estate Team, specialising in residential development. I am joined today by Emma Knight, a Knowledge Lawyer in our Risk and Disputes Group and a key member of our multi-disciplinary Building Safety Team.

Emma Knight: Today we will be discussing the Building Safety Levy, what it is, a few potential pitfalls and some practical next steps.

So the Building Safety Levy comes into force next week, 1 October 2026. Let us talk about what this actually means for our developer clients. In simple terms, what is the levy?

Elayna: In a nutshell, it has been described by the government as a new tax on new residential buildings in England. However, it is not just an additional tax. It actually forms part of the wider building control process. It is important to get it right, as failure to properly manage and discharge the obligations could impact completion and sales deadlines.

It is due to be collected by local authorities as part of the building control process and the money goes towards funding the remediation of buildings with safety defects. The important thing to understand is that it is not just about high rise towers. It catches all new dwellings above a certain threshold.

Emma: And what is that threshold?

Elayna: The levy applies where the development is a major residential development, which means it results in at least ten dwellings or 30 bed spaces for purpose built student accommodation. It is key to note that developers cannot get around it by splitting sites into smaller building control applications. If the planning permission is for more than ten dwellings, the levy applies regardless.

Emma: So who actually has to pay the charge?

Elayna: The named client on the building control application. Broadly that is the person or entity named on the application, whether that is full plans application, an initial notice or a gateway 2 application for higher-risk buildings. That is a really important point for developers to think about, particularly on joint venture projects.

Emma: Let's talk about the rates. How much are we looking at here?

Elayna: The rates are set per square metre of chargeable floor space and they vary depending on which local authority the development sits on. The former itself is pretty straightforward. Chargeable accommodation floor space plus chargeable communal floorspace multiplied by the applicable right, but the key message for developers is that these rates are not fixed permanently. The Secretary of State must review them within three years, so before October 2029 and that review will look at actual revenue, remediation costs and the broader housing market. The rate you model today might not be the rate you pay at commencement. Developers need to build that uncertainty into their appraisals and commercial agreements.

Emma: There is a discount for brownfield sites isn't there? How does that work?

Elayna: Yes, there is a 50% discount where at least 75% of the land to which the planning permission relates is previously developed, but here's the catch. The definition of "previously developed land" is narrower than most would expect. Under the regulations land is previously developed if a building was situated on it on or after 1 July 1948 and the key word is "building", which in the initial set of regulations did not include curtilage, hard standing or associated infrastructure. This led to many questions and concerns being raised by developers. For example, if you have an industrial estate or a supermarket with a large car park. That hard standing would not have counted as a building and you could fall below the 75% threshold and miss out on the discount entirely.

Emma: That could make brownfield redevelopment significantly more expensive, but you mentioned this was the initial definition. Has this since been changed?

Elayna: The government have laid draft amending regulations which are expected to come in to force on 1 October alongside the original regulations. These new draft regulations make a number of important changes to the definition, one of which addresses the concern about hard standing making it clear that sites featuring substantial hard standing, such as former car parks, industrial yards or storage areas as well as roads, loading bays, airport runways and drainage may count as previously developed land for the purpose of the discount, provided the other qualifying criteria are met.

Emma: And what about social housing, is that exempt?

Elayna: Social housing and supported housing are both exempt from the levy. They fall outside the definition of "ordinary residential dwelling". There is also a broader exemption for exempt persons. If the named client on the building control application is a non-profit registered provider of social housing or a wholly owned subsidiary of one, then all of the works are exempt, even if some of the homes are for market sale.

Emma: That sounds straightforward enough.

Elayna: On the face of it, yes, but there are two areas where developers need to take particular care.

First, the definitions of social housing in the regulations all rely on a status that can only really be demonstrated after the homes have been built. For example, that the dwellings have been let by a registered provider. At the point the developer needs to calculate its levy liability, it may not yet be able to prove the exemption. The government guidance says you can apply for the exemption at commencement notice stage by submitting evidence, things like section 106 agreement, planning conditions or an exchanged contract with an RP. The developers need to make sure that evidence is in place early. We are heavily reliant on the guidance in this area to fill in the gaps in the regulations and these appear to push everything firmly onto the local authorities. How this works will come down to how it plays out in practice and how local authorities interpret the requirements.

Secondly on joint ventures, the government guidance is clear that a JV is not exempt unless every party in the JV is exempt. So if a developer in RP are directly named as a client, the exemption will not apply. That makes the structuring of JVs and specifically who is named as the client on the building control application a really critical decision.

Emma: So with the levy going live on 1 October, what steps do developers need to take now?

Elayna: Given how close we are to the levy going live, I would hope that any developers who have been able to put their building control applications in ahead of 1 October will have already done so so I am just focusing on practical steps on or after 1 October.

For new applications there are four key steps.

First submitting the building control application, whether it is a full plans application, initial notice or a gateway 2 application for a higher-risk building you must include initial levy information, such as the number of dwellings and the planning permission status. Get this right first time because incomplete applications can be rejected.

Second, when works commence, you have five days to submit a commencement notice, including detailed levy charging information, so for example your floor space, data, exemption evidence and supporting documentation.

Third, calculating charge. The local authority will calculate the charge and issue either a liability notice or a notice of no charge. This is typically within five weeks but can be extended by agreement, or to eight weeks if they carry out a spot check.

Fourth, paying the levy. A developer can pay at any point between receiving the liability notice and notifying the completion, but the full levy charge must be paid before a completion certificate can be issued. That is a hard stop so must be factored into cashflow planning.

Emma: But what about projects that already have their building control applications in before 1 October?

Elayna: There are no formal transitional provisions, but any building control application made before 1 October 2026 is not subject to the levy and can still be varied without tripping the charge. However, if that application is rejected and a new application has to be submitted, the new application will be chargeable. So if any developers have outstanding pre 1 October applications, they must make sure they are robust enough to be approved. I would also flag that even pre 1 October applications will lapse if works have not commenced within three years. Submitting early does not give indefinite protection. Developers need to get on site within that window.

Emma: That is a lot for developers to take on board. If you had to sum up the key messages, what would they be?

Elayna: Three things:

1. The levy will very soon be live and applied broadly, so if you are building ten or more homes in England, you are almost certainly in scope.
2. The exemptions for social housing and exempt persons are valuable, but need careful planning and evidence. We will not fully understand how these are applied until we have seen how local authorities apply them in practice.
3. Get your applications and your floor space calculations right from the start because the consequences of getting it wrong: rejected applications, spot checks and plot completion certificates are all serious.

Emma: Great summary, thank you Elayna. We hope today's discussions has given you a practical overview of the Building Safety Levy, the developments it will affect and the key steps developers should be taking ahead of its introduction on 1 October 2026. If you would like to learn more about the Building Safety Levy and wider developments in the Building Safety landscape, you can explore our latest insights on the Gowling WLG website.

Thank you for listening.

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