5 December 2022
Under construction - December 2022 – 1 of 5 Insights
A second consultation on the design of the proposed Building Safety Levy has been launched seeking views on its design and implementation.
The proposed Building Safety Levy is now intended to cover all new residential developments in England that require building control approval (regardless of height) so is no longer limited in scope to ‘higher risk’ buildings. The expanded scope reflects Government's policy to secure financial commitment from industry for remediation of medium-rise residential buildings (11 – 18 m). This follows the pledge by residential developers to remedy buildings over 11 metres that they have played a part in developing (both 11 -18 m and 18 m+ buildings) over the last 30 years, and the introduction of the leaseholder protection provisions in the Building Safety Act 2022.
The Building Safety Levy is expected to raise £3bn and it will be used to help fund the remediation of unsafe 11 – 18 m residential buildings where developers cannot be traced or identified.
The key proposals for the Building Safety Levy are:
The power to create the Building Safety Levy is set out in the Building Safety Act and is described as a “levy on applications for building control approval etc”.
The proposed Building Safety Levy will apply to all new "relevant buildings" in England which require building control approval, regardless of height. Relevant buildings are buildings consisting or containing:
A number of exclusions are proposed although the Government has still not decided whether Build to Rent, purpose-built student accommodation, or the older persons sector should be excluded from the scope of the Levy. This will be determined post consultation.
The proposed exclusions are:
The intention is that the Levy will be paid in two tranches which would allow for a re-calculation should the project change during construction:
The local authority will collect the Levy which reflects the fact that they are central to the building control regime.
The local authority would be able to issue stop notices if works were to be commenced without payment of the first tranche of the Levy, and non-payment of the second tranche of the Levy could result in completion or final certificates being withheld.
The Consultation suggests two alternatives:
which would be adjusted depending on the geographic location of the building to reflect disparities in property values. The adjustments would be based either on the average house prices in local authority areas or average house prices in regions.
It is also likely that there will be differential rates based on whether a site is brownfield or greenfield land to reflect the higher viability risk assumed with development of brownfield land.
The actual rate will be set out in further secondary legislation and may be varied over time.
Reviews of the rate are expected to take place every 3 years.
It is intended that the client – the person or organisation for whom a construction project is carried out - will be responsible for payment of the Levy; or be responsible for ensuring that the Levy is paid. This reflects the Government's view that as the client holds responsibility for the construction project and so should also pay the levy.
As the Levy is tied into the building control process for buildings in England, this means that he Levy will need to be paid regardless of where the developer itself is based.
Although the principal sanction would be the halting of the progress of works until the Levy is paid, punitive fines are also being considered.
The Consultation closes on 7 February 2023.
There is as yet, no confirmation when the Levy would come into force although generally thought to be sometime in 2023.
Once the Levy is in force, there are proposed transitional provisions so that:
The Building Safety Levy represents an additional cost to the residential development sector which will be on top of the already significant commitments made by developers under the Building Safety Pledge and the introduction of the Residential Property Developer Tax.
Government is aware that the Building Safety Levy may impact on the viability of some more marginal projects and will consider the potential cumulative impacts of these charges on the supply of housing when determining the Levy rate.
However, given the Government's recent announcement of the launch of the Medium-Rise Remediation Fund which is to be funded by the Building Safety Levy, it is clear that implementation of the Building Safety Levy is just around the corner.We will keep you posted on the outcome of the consultation.
19 December 2022
by Luke Newman
Higher-risk buildings (HRBs)
by multiple authors