On 22 November 2022 the Government launched a further consultation on building safety measures – The Building Safety Levy: Consultation (Consultation). This Consultation seeks views and evidence from within the sector on the technical details and implementation of the Building Safety Levy (Levy). The Levy, which was announced in February 2021 aims to “ensure that the taxpayer does not pay for the necessary remediation of buildings safety defects.” In April 2022 the Secretary of State for Levelling Up, Housing and Communities, having previously committed £5.1bn of taxpayers’ money to fix building safety problems, announced a pledge of £2bn from major housebuilders to fix their own buildings and confirmed that the intention was to deliver an estimated further £3bn from the Levy. This will be used to fund remediation of buildings over 11m in height. In particular, to fund the new Medium Rise Scheme launched last month (Medium-Rise Scheme (MRS) pilot opening: leaseholder factsheet - GOV.UK (www.gov.uk))
The Building Safety Act 2022 (BSA) gives the Secretary of State broad powers to raise a Levy and the scope of the Levy has been significantly expanded since the first consultation, so that it now applies to all new residential buildings that require building control approval, not only those of a particular height. The Consultation emphasises that “this means that the Levy can be applied on any new development considered as “residential”, that is any development with a room purpose built for a person to sleep in.”
At present the remit is extremely wide and precisely where the cost of this £3bn levy will fall is likely turn on the outcome of this consultation to which we would urge all stakeholders with an interest to respond.
To that end, the consultation proposes certain exclusions on which views are invited. These include (amongst others):
- Affordable Homes;
- NHS Hospitals, NHS Medical Centres and NHS GP Practices;
- Supported Housing, Residential Care Homes and Children’s Homes;
- Conversions and Refurbishment Works; and
- Small developments (of under 10 units or equivalent per square metre).
The Consultation seeks further input on:
1. Who will be responsible for payment of the Levy?
The Levy must be paid by the “Client” being any named person/organisation for whom a construction project is carried out. This will usually be the developer carrying out the building works however it is anticipated that, in practice, this cost will be passed on.
The Levy is tied to the building control process in England and payment will not therefore be linked to where the developer is based.
2. How the Levy will work
This includes how the Levy will work, the Levy rates, who must pay the Levy, what is in scope of the Levy, sanctions and enforcement and who is responsible for collection. A significant amount of this detail will follow in secondary legislation and now represents an opportunity for the industry to have their say. The consultation seeks views on:
1. The collection agency. The suggestion is that local authorities are best placed to administer the regime and the Consultation seeks views from those working within local authority as to additional administrative and costs implications this will have for them.
2. The review points. It is proposed that the levy rates are considered every three years.
3. The delivery, process and timing. The proposal is that the Levy payments are made alongside the 2 stage gateway process proposed by the BSA, with 60% of the Levy payable at the “notice to commence” stage, within a set timeframe, and the remaining 40% due prior to final certification stage. Neither Completion or Final certification can be issued by the relevant building control professional until they have receipt of payment. There will be the ability to delay the development for non-payment by withholding final certification under building control and for sanctions to b imposed for late payment or evasion.
4. Sanctions. The principal (and likely most effective) sanction being that the progress of the development will be halted, either through a stop notice or withholding final certification.
3. The basis of Levy calculation
Developers, particularly smaller developers, will be concerned about the potential impact of the Levy on the overall cost of projects and on the viability of more marginal developments. The Consultation confirms that in setting the final Levy rate, the Government will consider the cumulative impact of the Levy alongside other charges on the sector, including CIL and Residential Development Property Tax and also seek to reduce the impact on housing supply whilst generating revenue from the Levy.
The Consultation sets out 2 suggested options for the calculation of the Levy, either on a “per unit” basis or on a square metre” basis.
There are proposals whereby the rate of the Levy could differ depending on the location of the development, to reflect house prices in local authority areas or by reference to differing land types.
It will be difficult to envisage a rate and method of calculation which will satisfy everyone.
The questions being asked under the Consultation are set out at Appendix B of the consultation document. DLUHC is also running consultation meetings to give you the opportunity to discuss your views with policy officials. If you would like to participate in one of these, please let them know by emailing: buildingsafetylevy@levellingup.gov.uk. We would urge anyone with an interest in these matters to provide their responses as soon as possible, prior to the Consultation end date of 2 February 2023.
DAC Beachcroft has a dedicated building safety team with extensive experience advising all stakeholders operating in the as build sector on how best to prepare for, manage and mitigate the implications of the Building Safety Act and associated legislation. As well as proactive advice on how the legislation impacts commercial interests, we help our clients navigate the risks in procurement and contract management, legacy claims, extended exposures under the Act, construction products, commercial disputes and insurance issues. We also offer bespoke training on how the Building Safety Act impacts across the industry.
