Building Safety Levy comes into effect, with brownfield schemes charged at half the rate

The Building Safety Levy, a long-awaited charge on new residential development, has now come into effect in England.

It applies to relevant building control applications and initial notices submitted on or after 1 October 2026 where the works constitute, or form part of, a development of ten or more new homes or 30 or more purpose-built student accommodation bedspaces. Individual phases below those thresholds may therefore still be chargeable where they form part of a larger qualifying development.

The government estimates that the levy will raise £3.4bn over around ten years. The revenue will contribute towards the remediation of building safety defects in existing residential buildings, including where responsible developers cannot be identified or held liable.

How the levy is calculated

The government sets the rates per square metre of chargeable new residential floorspace, measured using gross internal area, and the rates vary by local authority area. Each area has two rates: a discounted rate for previously developed land and a standard rate for non-previously developed land.

The lowest rates are in County Durham, at £6.35 per sq m on previously developed land and £12.70 elsewhere. The highest are in Kensington and Chelsea, at £50.17 and £100.35. Leeds sits towards the lower end, at £12.29 and £24.57.

Any levy due must be paid before completion or occupation, whichever occurs first. In practice, the full levy must be settled before the relevant completion certificate can be issued or the final certificate accepted.

Defined forms of social housing and supported housing are exempt, while developments undertaken by non-profit registered providers of social housing, or their wholly owned subsidiaries, may also qualify for exemption. Other excluded accommodation includes care homes and hospices, hospitals, hotels and hostels, qualifying school accommodation and temporary accommodation for homeless people.

The brownfield and greenfield split

The rate for previously developed land is half the standard rate. To qualify, at least 75 per cent of the land within the planning red-line boundary must meet the statutory definition. Broadly, this means land containing, or which has contained at any time on or after 1 July 1948, a permanent building or other qualifying permanent man-made structure. Certain land is excluded, including land associated with agricultural or forestry buildings, mineral extraction, landfill and unlawful development. Developments granted planning permission through permitted development rights are charged at the discounted rate.

The gap is significant. By way of a simplified example, a Leeds scheme containing 5,000 sq m of chargeable residential floorspace would attract a levy of £61,450 at the previously developed land rate, compared with £122,850 at the standard, non-previously developed land rate. For schemes charged at the standard rate, that is one more fixed cost to take off the land value alongside Section 106 obligations and the Community Infrastructure Levy. On mixed sites close to the 75 per cent threshold, the extent of the planning red-line boundary can therefore have a direct cost consequence.

Industry interpretation

For developers of high-rise residential and mixed-use schemes, the issue is less the levy in isolation than its addition to an already pressured viability appraisal. The charge is calculated on gross internal area, meaning qualifying communal areas can add to the liability even though they do not generate a direct sales or rental receipt.

On large apartment schemes, the resulting cost can be material and must be considered alongside construction and financing costs, affordable housing and Section 106 obligations, the Community Infrastructure Levy, and the wider cost and programme implications of the higher-risk building regime. Because the levy is a fixed development cost rather than one linked to project profitability, it may reduce residual land value, narrow developer returns or increase the funding requirement.

For marginal schemes, particularly complex urban projects with long delivery periods, the cumulative effect may be another factor affecting whether the development proceeds in its current form, is rephased, or requires its tenure, specification or planning obligations to be revisited.

What to watch for next

The levy generally applies only where the original building control application or initial notice is submitted on or after 1 October 2026. Applications made before that date are normally outside the regime, including subsequent variation applications and commencement notices relating to them. However, a pre-October application that is rejected or invalidated and then resubmitted on or after 1 October may become liable.

The next questions are whether the cost is passed back to landowners through lower land prices or absorbed by developers, and how quickly viability assessments start to account for it.

If you would like to discuss the Building Safety Levy or any of our service lines, complete the form below and a member of the BTG Eddisons team will be in touch.