The Building Safety Levy: An additional cost property developers can’t ignore

The Building Safety Levy comes into effect on 1 October 2026 for most new residential developments in England, where the application for building control approval is submitted on or after that date. If your residential scheme’s building control application is due to fall in late 2026, you’ll want to ensure your project programme takes account of this date and, if applicable, the Levy is included in your viability appraisals early. You don’t want it as an awkward surprise that might affect viability after you’ve committed time and money to your scheme.

What is the Levy?

The Levy is a tax on new residential buildings in England, aimed at raising c. £3.4 billion over 10 years to fund the remediation of unsafe buildings. It applies to new residential buildings requiring building control approval, above 10 dwellings, and purpose build student accommodation (PBSA) schemes with 30 or more bedspaces. It also applies to existing buildings undergoing a change of use to residential.

The Levy is a £/m2 charge calculated on chargeable floorspace (i.e. gross internal area (GIA)). The applicable rate is set for each local authority area. Importantly, the levy applies to communal areas, such as lobbies, stairs, and other resident communal areas), which is relevant for apartment-led and BtR schemes that have “non-saleable”.

Previously Developed Land vs Non-Previously Developed Land - The site history matters

There are two rates that apply:

• Non-Previously Developed Land (i.e. greenfield) rate – the full rate
• Previously Developed Land (PDL, i.e. brownfield) rate – a 50% discounted rate

The definition of “previously developed” generally considers whether at least 75% of the land within the redline qualifies as previously developed, assessed by reference to the planning permission.

The Levy rates – Worked examples

To provide a picture of how this may impact some typical developments, we’ve prepared two tables below showing.

• In the first table, we look at typical inner-city apartment conversion schemes, applying the Levy (PDL rates) applicable in the top 10 English cities, what this equates to in terms of addition to £/ft2 in build cost and the total PDL levy that would apply to a 3,000 m2 project (i.e. a medium 40 apartment scheme);
• In the second table, we look at typical suburban new-build housing schemes, applying the Levy (both PDL and non-PDL rates) applicable in a selection of potential suburban greenfield areas, what this equates to in terms of addition to £/ft2 in build cost and the total non-PDL levy that would apply to a 7,000 m2 project (i.e. an average hectare site with 80 dwelling).

Typical Inner-City Apartment Conversion Scheme

Typical Suburban New-Build Housing Scheme

Why the Levy matters / key developer takeaways

Programme sensitivity

If your building control approval application for your residential project will (or may) drift beyond 1 October 2026, the Levy cost becomes real for your project. You will need to build this consideration into your project programme, if you want to attempt to avoid paying the Levy. You might also consider this for key dates and/or condition precedents in your project and construction agreements. 

Appraisal accuracy

If you are considering scheme viability or cost planning a scheme, you must be alive to the Levy and build this into your cost plan. The impact of the Levy is clear in the tables outlined above and can be in the order of £100k for even medium-sized schemes. These are significant numbers and could have a material impact on profitability – particularly if they are not considered beforehand!

Apartment schemes may bear more Levy

As the £/m² Levy is on GIA, including communal areas that serve chargeable dwellings/PBSA, apartment and student residence focused schemes are likely to carry more levy than a traditional housing project. Cost planners will need to ensure that they don’t limit models to net saleable/rentable area. 

Site strategy

 The PDL discount is material at 50% of the full Levy. This should be considered when identifying sites, as well as applying early due diligence on planning redline composition and site history to reduce “classification surprises” later. 

Contracting and risk allocation

 If you’re entering into a forward funding, JV, or D&B procurement route, you should be very clear as to who carries (a) the Levy liability, (b) what measurement assumptions (GIA/communal) apply, and (c) what happens if there are scope or design changes increase chargeable floorspace – who bears that risk?

A simple checklist for schemes targeting late 2026 and beyond

1. Identify the applicable local authority (and for London, the specific borough) at feasibility stage and note the appliable Levy, including whether PDL or non-PDL.
2. Plan your redline development area carefully if you are looking to fall within the PDL Levy.  Stress-test PDL vs non-PDL outcomes and evidence requirements.
3. Model the Levy as £/m² on chargeable floorspace, not just NSA / NIA.
4. Pin the Levy date risk to the building control approval submission, build this in as a key milestone date in your project programme and build in contingency, in terms of (a) time, to reduce risk of failing to issue the submission before 1 October 2026 and/or (b) cost, to ensure the project remains sufficiently profitable if the Levy does apply.