Building Safety Levy: Social Housing and Planning Obligations

The Background

With the imminent implementation of the Building Safety Levy (BSL) in October 2026, it is important that developers and registered providers are considering the implications of the BSL on delivery and viability. 

For the purposes of housing developments, the BSL will be a charge (per sq. meter) on the residential floor space of major residential development (major residential development being any scheme of 10 or more dwellings). See our previous insight for a more detailed review of the BSL provisions.

Unlike the Community Infrastructure Levy, the legislation includes an explicit requirement for two types of affordable housing tenures to be bound by planning obligations in order to benefit from affordable housing exemptions. The planning obligation must secure that the affordable housing is either let for no more than 80% of market value, or sold for no more than 70% of market value. Where developers negotiate higher percentage sale, or rent, values, they risk losing the exemption. 

What are the Affordable Housing Implications?

Residential floorspace will be exempt if either: 

1. The Client (the person or body corporate applying for a BSL liability calculation at building regulation approval) is a non-profit registered provider of affordable housing; or
2. Ordinarily chargeable residential floorspace is exempt because it is ‘Social Housing’. 

What are the Exemptions for Affordable Housing?

Residential floorspace is ‘Social Housing’, and exempt from the BSL if:

1. It is provided by non-profit registered providers under recognised tenancy types and rent is no more than 80% of market value.
2. The dwelling is occupied under shared ownership where:
   1. The initial purchase valuation of the dwelling does not exceed 75% of market value AND;
   2. The annual rent is not more than 3% of value of unsold interest AND;
   3. Restricted Rent increases are in place.
3. The dwelling is let by a non-registered provider:
   1. Under recognised tenancy types AND;
   2. Rent is no more than 80% of market value AND;
   3. Dwelling is let to a person whose needs are not served by the commercial housing market.
4. The first sale (and future sales) of the dwelling is for no more than 70% of the market value.

Importantly, exemptions 3 and 4 above require a planning obligation to be in place securing the dwellings as affordable housing at the maximum rent and sale values set out in the legislation. 

If a s106 agreement has a provision tying first sale and subsequent sales to, say, 75% of market value rather than 70%, this floorspace will not be exempt from the BSL. In short then, where LPAs are persuaded to agree to higher rent and sales values to increase revenue, perhaps to ensure the viability of the scheme, then the potential loss of the BLS exemption will need to be considered