Building Safety Levy: Who should pay, how much, and by when?

The 2017 Grenfell Tower fire tragedy forced the UK Government to look at ways of addressing the funding required for important remedial works on residential buildings with unsafe cladding. The outcome was the Building Safety Act 2022. Provisions empower authorities to levy fees on specific new residential constructions. A consultation was conducted in 2023, leading to the recent publication of findings on implementing such measures.

What legislation does the Building Safety Levy arise from?

The Building Safety Act 2022 grants the Secretary of State authority to introduce a new levy integrated into the building control process. The goal is to recover the government's costs by providing financial assistance for remedying building safety defects. The government initiated a consultation regarding the proposed levy in November 2022. The outcomes of this consultation, along with the government's response, were published in January 2024.

The Department for Levelling Up, Housing, and Communities (DLUHC) conducted an initial consultation on implementing the levy, which concluded on 7 February 2023. The technical consultation is focused on critical aspects such as the methodology for levy calculation, the collection process, procedures for disputes and appeals, and additional exemptions.

How will the Building Safety Levy be calculated?

Industry experts have recommended that the levy be assessed on a square meter basis rather than per house. This will discourage the construction of more homes. They are happy that the government is willing to adopt this approach.

How much does the government aim to raise from the UK Building Safety Levy?

They have also welcomed the UK Government's promise to reassess the revenue target as more information on the extent of building safety issues becomes available. The initial fixed target of 3 billion raised concerns, as insufficient funds could burden leaseholders with additional costs. Experts feel it is vital to balance a rigorous process for prompt payments and provide developers with a clear picture of their liabilities and payment flexibility. The proposal to establish levy liability within five weeks could hamper the viability of developments, particularly for small and medium-sized developers. They recommend shortening this timeframe to 21 days. In the initial consultation, alignment was acknowledged between collecting the Building Safety Levy (BSL) and the existing responsibilities of local authority building safety and planning teams.

There is recognition of the current under-resourcing of these teams. They also face the hassle of additional workload and alterations to planning and building regulation. Hence, simplifying the collection process to a single charge is welcomed. Nevertheless, the UK Government is urged to take proactive measures to ensure that teams are adequately equipped to fulfill this new role.

Are public sector buildings exempt from the UK Building Safety Levy?

According to many stakeholders, the right move is to exempt public sector buildings from the Building Safety Levy and empower local authorities by allowing them to seek exemptions. These should apply to premises involved in a social cause, such as hospices, children's homes, rehabilitation centers, and stop-gap homeless accommodations.

How long is the Building Safety levy for developers expected to last?

The estimated overall levy target is 3 billion, which is intended to be raised over ten years or longer. Both the target amount and duration will be subjected to periodic reviews. The current plan is to conduct a review in the second full year of levy operation, followed by subsequent reviews every three years. This approach will allow the government to adjust the levy based on revenue data and updated forecasts. Some would argue that buildings constructed by social housing providers such as RPs and housing associations already suffer proportionally from more remedial costs. This is because, unlike house builders, they tend to procure contracting companies to build rather than act as house builders themselves, thereby having a greater reliance on 3rd party contractors' quality control systems.

Non-payment of the levy will result in the authorities withholding or rejecting the final building control certification on a development. This, of course, means that properties cannot be sold.