On 21 July 2021 the then Ministry for Housing, Communities and Local Government (now the Department for Levelling Up, Housing and Communities), launched a consultation on the high-level design principles of a Building Safety Levy (BSL). The levy (previously the ‘Gateway 2 Levy’) was announced in February 2021 as part of a package of measures, which included the Residential Property Developer Tax (RPDT), to help fund the remediation of unsafe cladding.
The BSL will be introduced by the Building Safety Bill as part of a new building control regime for ‘higher-risk’ buildings. Higher risk buildings are buildings with at least two residential units, care homes or hospitals that are at least 18m in height, or have at least seven storeys. In order to be able to commence construction work, consent will be required under ‘Gateway 2’ of a new building control regime, and will only be given if the BSL has been paid. Liability for the BSL will lie with the person or organisation for whom a construction project is carried out.
In order to lessen the impact on the supply of affordable housing, the government proposes to exclude the development of affordable housing from the scope of the levy. However, there is no mention of a specific exclusion for registered providers of social housing as developers.
The NHF, together with RSM and a number of its members, met with the Department for Levelling-Up, Housing and Communities (DLUHC) to discuss the impact that the BSL is likely to have on the social housing sector.
The NHF supports the policy intent of the levy – contributing to the costs of making all buildings safe. However, many high-rise developments by housing associations would not be financially viable without the inclusion of market sale units (which are within the proposed scope of the levy) in order to cross-subsidise the development of affordable homes and the provision of community facilities that are operated on a non-commercial basis. It is therefore the NHF’s view that the BSL, if payable by non-profit registered providers of social housing or their subsidiary companies, would negatively impact the financial viability of developing ‘higher-risk’ buildings at a time when housing associations are experiencing cost pressures.
Given this, and the fact that housing associations are already undertaking significant remediation and mitigation works to buildings that need them, the NHF has recommended to the government that non-profit registered providers of social housing and their wholly owned subsidiary companies should be excluded, in line with the exemption granted for the RPDT.
In addition, we have pointed out to the government that it is not uncommon for registered providers to acquire completed or partially completed buildings from commercial housebuilders, other than under the terms of planning obligations. In these circumstances, the commercial housebuilder would have paid the BSL at the Gateway 2 stage of the new building safety regime, and would inevitably seek to pass that cost on to the housing association through an increase in the purchase price.
We have therefore requested a mechanism whereby the BSL can be recouped in the event that any part of a building in respect of which the levy was paid is subsequently transferred to a registered provider of social housing and used to provide affordable homes.
Finally, as a transitional measure, we have recommended that the BSL is not payable in relation to developments for which planning permission was granted before the BSL is introduced. Otherwise, if such developments are subject to the levy, the existing financial appraisals will inevitably need to be revised, and the development could be found to be unviable.
The NHF responded to the consultation which closed on 15 October 2021 – its outcome has yet to be announced.
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