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Imposition of Building Safety Levy moves closer for developers

06 December 2022

PROPOSALS FOR how developers would pay to fix unsafe buildings have been set out by the Government as the Conservative Party at Westminster moves a step closer to imposing its new Building Safety Levy. The Government has now begun consulting developers and other interested parties on the plans, which will see an estimated £3 billion collected over the next decade.

Under the proposals drawn up by the Department for Levelling Up, Housing and Communities, the developers of residential buildings – regardless of building height – will have to pay the Building Safety Levy contribution as part of the building control process.

In real terms this will mean that, unless the Building Safety Levy is paid, a developer could not move on to the next stage of the building process, which may then lead to project delays being realised and result in future revenues being negatively impacted.

Lee Rowley, minister for Local Government and Building Safety, explained: “We have been clear that developers must pay to fix building safety issues and the Building Safety Levy is an important part of making that a reality. The Government’s consultation will afford industry and local authorities an opportunity to work with us going forward.”

Rowley continued: “By having these plans in place, we can ensure that all leaseholders are protected, regardless of whether their developer has pledged to remediate or not.”

Altering Levy rates

The Government’s proposals include an option to alter Building Safety Levy rates depending on where in the country the building is located, with lower rates pertaining in those areas where land and house prices are less expensive.

It also suggests that local authorities will be best placed to act as the collection agents as they have the necessary systems, data, knowledge and relationships in place with the developer sector.

In order to protect the supply of affordable homes, it’s proposed that they be exempt from a Building Safety Levy charge. This is alongside a number of community buildings, including NHS facilities, children’s homes and refuges, among them those set aside for the victims of domestic abuse.

The Building Safety Levy will be reviewed on a regular basis such that it can be adjusted to take account of changing circumstances (eg wider economic conditions). There are also plans afoot to protect SMEs by excluding smaller projects.

The Building Safety Levy will run alongside the developer pledges announced earlier this year. Under the pledges, 49 of the UK’s biggest homebuilders have committed to fix life-critical fire safety-related defects in buildings over 11 metres in height where they had a role in developing those buildings in the last 30 years. This amounts to a commitment of at least £2 billion.

Historic defects

The Building Safety Levy was first announced in February last year and plans to extend it to cover all residential buildings were confirmed back in April. The Building Safety Levy is one of the ways in which the Government will ensure that the burden of paying for fixing historic building safety defects does not fall on the shoulders of leaseholders or taxpayers.

The consultation seeks views on the delivery of the Building Safety Levy, including how it will work, what the rates will be, who must pay, what sanctions and enforcement will apply and who’s going to be responsible for collecting the Building Safety Levy monies.

The consultation is open for ten working weeks from 22 November 2022 and seeks the views of all interested parties, particularly so developers of all sizes, building control professionals and local authorities.

All respondents’ views will be taken into account before any final decisions are made by the Government next year.