Consultation begins on £3bn developer levy

Consultation has begun for the government’s building safety levy, a tax on development that seeks to raise £3bn over the next 10 years. Developers will now have 10 weeks to respond to proposals for the levy, which was first proposed in February 2021. Under the proposals drawn up by the Department for Levelling Up, Housing and Communities, developers of residential buildings will have to pay the levy as part of the building control process, regardless of the height of their schemes. Unless the levy is paid, development will not be permitted to continue. The DLUHC has noted this “could lead to project delays and impact future revenues”. Minister for local government and building safety, Lee Rowley, said: “We have been clear that developers must pay to fix building safety issues and the building safety levy is an important part of making that a reality. Today’s consultation will give industry and local authorities an opportunity to work with us going forward.” Under the plans, 60% of the levy would be payable at the “notice to commence” stage, while the remaining 40% would be due prior to final certification. The proposals include an option to alter levy rates depending on where in the country the building is, with lower rates in areas where land and house prices are less expensive. It also suggests that local authorities will be best placed to act as the collection agents as they have the necessary systems, data, knowledge and relationships in place with the developer sector. Because it is tied to the building control process in England, developers will have to pay the levy regardless of where the company is based. Rowley added: “By having these plans in place, we can ensure that all leaseholders are protected, regardless of whether their developer has pledged to remediate or not.” Affordable homes will be exempt from the charge, alongside community buildings, NHS facilities, children’s homes, domestic abuse refuges and military barracks. The department has also proposed that developments of less than 10 flats will not be charged, and is asking for views on whether the levy should apply to conversions. The government is proposing that the levy be reviewed every three years and adjusted to take account of changing circumstances, such as wider economic conditions. It also proposes that the levy be applied per flat or on a per square metre basis. The levy is in addition to developer pledges which were announced earlier this year. Under the pledges, 49 of the UK’s biggest housebuilders have committed to fix fire safety defects in buildings standing at 11m and taller they had a hand in developing in the past 30 years. That developer tax has raised at least £2bn. It will also be in addition to the community infrastructure levy, the residential property developer tax and section 106 payments. The government has attempted to play down the impact of the levy on development, pointing out that, in 2018/19, developers contributed about £7bn through CIL charges and section 106 contributions. “Over 10 years that would be around £70bn,” the consultation states. “A £3bn levy over 10 years represents around 4% of that figure.” The consultation asks developers what proportion of the levy should be retained by local authorities, but there is no suggestion that this will become a mechanism to fund the planning system. The government previously consulted on the levy between July and October last year. Since then it has expanded the policy to apply to all new residential buildings that require building control. The Building Safety Act, which enabled legislation for the levy, became law in April.   To send feedback, e-mail piers.wehner@eg.co.uk or tweet @PiersWehner or @EGPropertyNews