Building Safety Levy consultation response

The government has published its response to the consultation on the Building Safety Levy.

While it confirms important exemptions for the social housing sector, we have called for further measures to ensure it does not adversely impact the supply of new affordable homes. You can read our full response to the consultation here.

The Building Safety Levy is a charge on the development of new residential properties in England that raises funds to remediate unsafe buildings. It is collected as part of the building control process and payable by the person or organisation for whom a housing development is carried out. The levy will be charged on a ‘per square metre’ basis, with the rate being set at local authority level.

The government has confirmed a number of exemptions from the levy, including:

• Developments consisting of fewer than 10 units.
• Supported housing (other than private tenure supported housing).
• The development of affordable housing.
• Developments of non-affordable homes by not-for-profit registered providers and their wholly-owned subsidiaries.

Despite these exemptions, there are circumstances where the Building Safety Levy might be borne indirectly by registered providers.

Change in use of developed residential properties

It is not uncommon for registered providers to acquire completed or partially completed buildings from commercial housebuilders.

If the Building Safety Levy is paid by the developer on those homes, the developer will likely seek to pass that cost onto the registered provider through an increase in the purchase price.

We have called on government to introduce a mechanism so the levy can be refunded to a developer when a building is subsequently transferred to a registered provider and used to provide affordable homes.

Homes developed by partnerships involving registered providers

Many housing associations develop homes of various tenures - including homes for sale or rent on the open market - through limited liability partnerships with commercial housebuilders or local authorities. A proportion of the profits from the development are returned to the participating housing association, providing funds for the development of new affordable homes.

If the Building Safety Levy is payable by the limited liability partnership in relation to the development of non-social homes, this will reduce the profits available, which in turn reduces the funds to reinvest in affordable homes and their residents.

We have asked the government to introduce a reduced rate of levy for limited liability partnerships where a not-for-profit registered provider has a direct or indirect interest, proportionate to their share of the partnership’s profits.

Timing of introduction and transitional arrangements

Government intends that developments which have begun the building control process before the ‘launch date’ will not be subject to the levy, but those that submit an application for building control approval or an initial notice on or after that date will be.  

As there is no suggestion of when the ‘launch date’ will be, we have asked government to give ample prior notice so developers have sufficient time to anticipate and manage the resulting cost and cashflow implications.