The UK Government’s upcoming Building Safety Levy (BSL) marks one of the most significant regulatory shifts in the property sector since the Building Safety Act 2022. Designed to fund the remediation of unsafe residential buildings, the Levy will come into force on 1 October 2026, a year later than originally planned. Despite the delay, developers should start preparing now to manage the financial and administrative impacts it will bring.

Why the Levy Matters

The BSL aims to raise around £3.4 billion over the next decade to cover the costs of building safety remediation, ensuring that leaseholders and taxpayers aren’t footing the bill for historic defects. The government has made it clear: those profiting from development must contribute to making buildings safe.

This Levy will operate as a charge per square metre of residential floorspace, payable by the developer before a building can be completed or occupied. The funds will be collected by local authorities and passed on to central government.

Who Will Be Affected

The Levy applies broadly to most new residential developments in England that meet three key criteria:
1. The works create or increase residential floorspace – for example, new builds, conversions, or extensions.
2. The project qualifies as a “major residential development” that is, 10 or more dwellings, or 30+ bedspaces for purpose-built student accommodation (PBSA).
3. The developer is not exempt under the regulations.

In other words, if you’re developing housing, student accommodation, or build-to-rent schemes, chances are you’ll be caught within scope.

Implications for Developers

The BSL is not just another tax—it will directly affect project viability, cashflow, and timing. Developers are already managing multiple charges, including Section 106 obligations, Community Infrastructure Levy (CIL), and the Residential Property Developer Tax (RPDT). The addition of the BSL could further squeeze margins, particularly for high-density or communal schemes such as student accommodation and build-to-rent projects.

Developers May Respond By:

– Reassessing scheme scale and mix to reduce chargeable floorspace.
– Exploring mixed-use developments to shift part of the GIA into non-residential uses.
– Prioritising brownfield sites to benefit from the 50% discount.
– Considering refurbishment over redevelopment to avoid triggering the Levy altogether.
– Factoring in exemptions and reliefs early in financial models and planning negotiations.

How It’s Calculated

The Levy is based on the Gross Internal Area (GIA) of the chargeable residential floorspace, including communal areas used mainly by residents. Rates are set per local authority, reflecting regional housing market values. For example:
– Kensington & Chelsea: £100.35 per m² (the highest rate)
– County Durham: £12.70 per m² (the lowest rate)

Developments on previously developed land (brownfield sites) will receive a 50% discount, provided that at least 75% of the site qualifies as previously developed.

Rates will be reviewed every three years, giving the government flexibility to adjust the charge in line with market conditions.

Example Cost Implications to Developers

Here is a worked example of the cost implications to new build developers. If we explore an example of a 40-Unit Residential Scheme built in Manchester

Scenario: A developer proposes a 40-unit apartment scheme within Manchester City Council, where published draft BSL rates are:

• £28.44 per m² for greenfield sites
• £14.22 per m² for brownfield sites (50% discount applied)

Key Data:

• Total residential GIA: 4,000 m²
• Brownfield redevelopment? Yes (qualifies for the £14.22/m² rate)

Calculation:

• 4,000 m² × £14.22/m² = £56,880 total Levy payment

Impact on developer:

This example demonstrates how even mid-sized schemes will need to account for the Levy early in financial modelling.

Practical Steps to Take Now

With just under a year until the Levy’s introduction, developers should:
1. Audit upcoming projects – identify which will fall within scope based on timing and type.
2. Submit building control applications early – any application before 1 October 2026 will avoid the charge.
3. Update financial models – incorporate BSL costs into land bids and viability assessments.
4. Plan for cashflow impacts – remember, payment is due before completion, not spread across the build.
5. Engage advisors – work with planning, tax, and legal teams to ensure compliance and optimise structuring.

Looking Ahead

The Building Safety Levy represents a significant policy step in the UK’s efforts to address the legacy of unsafe buildings. While it will inevitably add to developer costs and administrative burdens, its objective, to ensure building safety funding is fair and sustainable, remains clear.

As October 2026 approaches, the key for developers is preparation. Early planning, accurate cost modelling, and strategic structuring will be essential to managing the Levy’s impact. For further information about the Building Safety Levy and how this may affect you and your developments, contact Phil Morrison, Head of Construction at Tyr.