Consultation outcome

​​Building Safety Levy: response to consultation ​

Updated 23 January 2024

Introduction

The Building Safety Act 2022 introduced powers to impose a levy on new residential buildings requiring certain building control approvals in England, to raise revenue to be spent on building safety.^{[footnote 1]}

Following the introduction of the Building Safety Act 2022 government carried out a public consultation on the Building Safety Levy (the levy). The full consultation document can be read online.

The consultation document posed a series of questions about government proposals covering the following areas:

• Scope: which new residential developments will be in scope of the levy and who would be required to pay it.
• Exemptions: what new residential developments would be excluded from the levy.
• Options for how the levy will be charged and the basis for how government will calculate it.
• Protections for small and medium sized entities.
• Delivery and collection options: including local authorities (LAs) acting as collection agents on behalf of government, a suggested process and sanctions.

The consultation ran from 22 November 2022 to 7 February 2023. It was published online, and members of the public were able to respond using the online response tool provided and by email.

The government has undertaken extensive stakeholder engagement to ensure that the issues raised in the consultation have been considered fully and to help inform the design of the levy.

As part of the formal consultation, we invited interested parties to register their interest in attending workshops to give their views directly and help develop their responses to the consultation. This led to 8 facilitated online workshops which were grouped by sector (in order to minimise conflicts of interest and ensure all voices were heard) – details of the workshops are set out in the table below. Whilst feedback received during the workshops complemented the consultation, comments were not taken as formal responses and attendees were encouraged to submit responses to the consultation.

Date	Event
13/12/22	Workshop with developers
09/01/23	Workshop with developer representative bodies
10/01/23	Workshop with developers and housing representative bodies
16/01/23	Workshop with wider industry and individuals
19/01/23	Workshop with specialist housing representative bodies
24/01/23	Workshop with specialist housing representative bodies
31/01/23	Workshop with local authorities and individuals
06/02/23	Workshop with specialist housing representative bodies

Government received a total of 138 responses to the consultation.

Breakdown of respondents

Developer	44	32%
Local Government	46	33%
Other	48	35%

For the purpose of the consultation analysis, respondents have been grouped into three categories: Developer, Local Government and Other. All respondents that develop and build properties have been classed as developers, whilst all levels of local government have been classed as local government. All other respondents, including those associated with the building industry such as architects, some trade bodies and members of the public have been classed as other.

Consultation responses

The responses to consultation questions are set out below. Please note the totals may not sum to 100% due to some respondents not answering all questions and / or rounding methods. Feedback for each question is structured as follows:

• numerical and statistical breakdown of responses to the question, except where responses were qualitative only
• summary of qualitative responses to the question
• government response

In reporting the overall response to each question, ‘majority’ indicates the view expressed by the highest number of responses to that question. In some cases this will equate to less than 50% of overall respondents, particularly where not all respondents provided an answer. Where we have used the term “some” this reflects where several respondents made the same point, but it does not constitute a majority.

Question 1
Do you think the Building Safety Levy charge will impact on other charges made in relation to residential buildings including Community Infrastructure Levy and Section 106 payments or the Infrastructure Levy that will replace the existing system of developer contributions? If so, what are they likely to be?

	Response				% of total								% of those that answered
	Yes	No	Unsure	Not answered	Yes		No		Unsure		Not answered		Yes	No	Unsure
Developer	33	3	1	7	75%		7%		2%		16%		89%	8%	3%
Local government	27	4	13	2	59%		9%		28%		4%		61%	9%	30%
Other	30	3	4	11	63%		6%		8%		23%		81%	8%	11%
Total	90	10	18	20	65%		7%		13%		14%		76%	8%	15%

Summary of responses to question 1

Some respondents suggested that the introduction of the levy would result in fewer affordable homes being delivered through Section 106 agreements.^{[footnote 2]} They argued that the increased cost of developing a site would bring it closer to the viability threshold, and that developers would look for means of reducing costs and protecting profit margins. They said that developers would seek to do this by negotiating smaller Section 106 contributions, reducing the pipeline of affordable homes. Similar concerns were raised regarding the Community Infrastructure Levy (CIL). Respondents noted that, unlike other fees and taxes, developers have the ability to negotiate CIL charges, and so would look to reduce their CIL contribution to account for the cost of the levy, leading to less investment in infrastructure projects. A few respondents noted that these issues were particularly likely to occur on sites where developments are already near the viability threshold, e.g. on brownfield sites, where construction costs are higher, or in areas with lower house prices.

Others used this question to raise concerns about the impact on the housebuilding sector of the levy combined with other developer contributions to the remediation of historic fire safety defects. They argued that the levy would be the third charge on developers, alongside the Residential Property Developers’ Tax (RPDT) and Developer Remediation Contracts, to address fire safety issues, and that it would be unfair to target the sector in this way. Some felt that the government was not fulfilling its commitment to the ‘polluter pays’ principle, arguing that manufacturers of construction products, and developers based outside the UK, should have to contribute to remediation costs before further charges are put on developers.

A few respondents felt unable to answer this question without an indication of the amount of the levy charge.

Government response

We appreciate the concerns raised by respondents that the introduction of the Building Safety Levy may result in fewer affordable homes and could impact infrastructure projects being delivered through Section 106 agreements and the Community Infrastructure Levy, as developers seek to negotiate their contributions to reflect the additional cost of the levy. As outlined in the response to Question 21, we intend to exclude affordable housing from the levy charge which should contribute to protecting the pipeline of affordable homes, which remains a government priority.

We are aware that the additional cost of the levy may have a small impact on housing supply, particularly in areas where sites are already close to the viability threshold. We have sought to mitigate this through a range of measures, including implementing a differential levy rate based on house prices in local authority areas, and implementing a discounted rate for developments on brownfield sites. We also intend to introduce a range of exclusions to the levy, including excluding developments of fewer than 10 units, to protect small and medium enterprises (SMEs) whose projects may be more likely to face viability concerns. Details of these measures are outlined in responses to the relevant consultation questions in this document. Over time, the government expects that the cost of the levy will be reflected in the price that developers are willing to pay for land, preserving the viability of new projects.

The government notes respondents’ suggestion that it is unfair to raise the levy alongside other developer contributions to the cost of remediation work, the RPDT and Developer Remediation Contracts. The government’s building safety approach is focused on protecting leaseholders. In our view it is fair that the industry that caused the cladding problem, have profited from government support and gain from the restoration of confidence in the housing market should contribute to remedying the problems they have caused. It should also be noted that, as a profit tax, the RPDT is charged on organisations which are based in the UK with profits over £25 million. The Building Safety Levy can be charged on all new residential buildings in England that require building control approval so developers of qualifying projects will be required to pay the levy regardless of where they are based.

Question 2: Who do you think should act as the collection agency for the levy?

	Response			% of total			% of those that answered
	Local authority	Other	Not answered	Local authority	Other	Not answered	Local authority	Other
Developer	14	10	20	32%	23%	45%	58%	42%
Local government	22	18	6	48%	39%	13%	55%	45%
Other	20	7	21	42%	15%	44%	74%	26%
Total	56	35	47	41%	25%	34%	62%	38%

Summary

The majority of respondents who answered this question (62%) agreed that local authorities (LAs) should be responsible for the collection of the levy. Many suggested that LAs have an overview of housing development underway in their local area, and already hold relationships with developers, and so would be best placed to monitor those developments and ensure the levy is paid at the appropriate time. Others noted that LAs have experience in collecting fees and charges, such as the CIL, and so have the skills necessary to administer the levy. Many who favoured LAs acting as the collecting agent emphasised the need for them to be properly compensated for doing so, to ensure that the new function can be resourced properly.

Many respondents who disagreed with the proposal that LAs collect the levy cited a lack of capacity within LAs. They argued that LA budgets are already under significant pressure, and that the additional administrative burden of collecting the levy would take resource away from existing functions. Some respondents also felt that it would be inefficient for all local authority districts in England (of which there are abouy 300) to set up their own systems for levy collection, suggesting that the levy should instead be collected centrally to ensure the process is standardised. On this basis, some respondents argued that DLUHC should act as the collecting agent for the levy. Others suggested that the Building Safety Regulator would be well placed to collect the levy, as a central body responsible for monitoring building safety across the sector.

Many respondents noted that LAs are not the only bodies responsible for building control, and that further detail was needed on the role of Registered Building Control Approvers (RBCAs) and the Building Safety Regulator (BSR) in the levy collection process. Some also raised concerns that making LAs responsible for the collection of the levy risks damaging the relationship of LA building control teams with potential clients, pushing more developers towards using RBCAs to provide building control services on their development, reducing LA building control income.

Government response

Having considered the responses, the government intends that LAs will act as the collection agents for the levy. As local guardians of the building control regime, LAs have established systems, data, knowledge, and relationships in place with the developer sector operating in their areas. They also have proven systems in place for the collection of taxes and fees. LAs will, as a building control authority, receive some of the building control applications and notices, which will trigger the imposition of the levy. Therefore, we believe they are best placed to collect the levy. We will make the appropriate designations order to give LAs the authority to collect the levy.

We are aware that collecting the levy will create an additional administrative burden on LAs, which is why we are working closely with LA representative bodies, and individual LAs, to design the levy process to be as simple as possible. We will continue to do so over the coming months, working collaboratively to finalise the operational design of the levy and support LAs with their new role. As discussed in the response to Question 3, we also intend to provide funding to LAs to cover set up costs. We will also include in regulations a provision to ensure that LAs’ on-going costs in administering the levy are met from levy receipts.

We are conscious that RBCAs and the BSR also provide building control services to developers. Whilst these bodies will not have responsibility for collecting levy payments, they will have a role in passing on information to LAs in a timely way, to ensure the levy collection process can run smoothly. Further detail on the role of RBCAs and the BSR will be set out in secondary legislation and in guidance. We do not consider it appropriate for the BSR to act as collection agent as their role as prescribed building control body under the gateways process covers buildings 18 metres and above only. The levy applies to all new residential buildings in scope in England. As the majority of new builds are below 18 metres in height we do not consider the BSR would be best placed to collect the levy.

Question 3: What proportion of receipts should the collection agency retain? What administration costs will that need to cover?

	Response				% of total				% of those that answered
	5%	7%	10%	Not answered	5%	7%	10%	Not answered	5%	7%	10%
Developer	13	0	1	30	30%	0%	2%	68%	93%	0%	7%
Local government	9	4	19	14	20%	9%	41%	30%	28%	13%	59%
Other	18	1	4	25	38%	2%	8%	52%	78%	4%	17%
Total	40	5	24	69	29%	4%	17%	50%	58%	7%	35%

Summary

The consultation acknowledged that the collection agency would need to be resourced to administer the levy and asked what a suitable proportion of levy receipts might be to cover this function: 5%, 7% or 10%. Overall, 58% of those that responded to this question agreed that 5% was an appropriate amount, though 59% of local government respondents who answered thought 10% should be retained.

There was general consensus that the volume of work would depend on the design and rate of the levy and the amount of follow up work required to ensure compliance. A number of respondents did not answer as they wanted to know the rate of the levy. Others suggested that the volume of work required was constant regardless of the levy rate.

Some respondents offered alternative figures for retention, these varied from 0% to 20%. Some respondents made more general statements putting forward principles that the retention rate should ensure that sufficient resource is provided to cover costs, avoid mistakes and pay for appeals and delays. Frequent comparison was made to the Community Infrastructure Levy’s 5% administration overhead. The following were also common themes: the need to reduce the impact on stretched local services, the under-resourced nature of existing services, and need to ensure that levy administration is efficient and does not delay developers’ time-sensitive plans.

Several responses compared the fixed nature of administration costs with varying development rates and thus levy income. These responses cited the importance of enabling un-spent administration funding to be carried over between years to cover period of low levy income.

Government response

As has been stated above we will designate that LAs act as collection agents. The government’s new burdens doctrine will apply and ensures local council taxpayers are not funding levy administration .

To comply with requirement that levy income be used exclusively for building safety remediation and levy administration we are no longer proposing the 10%/7%/5% top slicing of levy income.

We will fund LAs’ on-going costs of administering the levy by enabling LAs to cover their costs from levy receipts on an exclusively cost recovery basis, with all net proceeds relayed to DLUHC. This arrangement will be kept under review as part of the planned regular reviews on the levy.  

Question 4: How frequently should revenue returns be provided to DLUHC?

	Response				% of total				% of those that answered
	Monthly	Quarterly	Every 6 months	Not answered	Monthly	Quarterly	Every 6 months	Not answered	Monthly	Quarterly	Every 6 months
Developer	3	12	5	24	7%	27%	11%	55%	15%	60%	25%
Local government	1	20	14	9	2%	45%	32%	20%	3%	57%	40%
Other	1	17	4	24	2%	37%	9%	52%	5%	77%	18%
Total*	5	49	23	57	4%	37%	17%	43%	6%	64%	30%

* 1 respondent thought collection should occur quarterly or biannually, 3 respondents thought it should be annually

Summary

Although the government welcomed views from all of those participating in the consultation, this question was predominantly aimed at local government respondents. As proposed in the consultation, DLUHC believes that LAs are best placed to act as the levy collection and administration agency and this question specifically related to when the levy payments collected by the collection agents should be transferred to central government. This is reflected in the consultation feedback where 55% of developers and 52% of other respondents did not answer the question.

57% of LAs and the majority of developers (60%) and others (77%) who answered agreed with the proposal that the collection agents should transfer levy revenue to DLUHC on a quarterly basis (64% of all respondents). Respondents were of the view that this seemed a sensible level of frequency, striking a balance between adding administration costs and transparency.

Those respondents who thought the collection agents should submit levy revenue to DLUHC on a monthly basis was highest amongst developers (15% of those that answered). Many suggested this would lead to greater transparency and a wish for real time access to the level of funds collected and available for expenditure on remediation.

Some thought that revenue returns to DLUHC should be made on a 6-monthly basis (40% of local government respondents that answered) on the grounds that this would reduce the reporting burden and administration costs. A few suggested that the transfer of revenue should be aligned with the financial year and be considered as part of end of year accounts, again on the grounds of reducing administration costs.

Government response

It is our intention that levy revenue payments from the collection agents to DLUHC will be made on a quarterly basis. The submission of revenue payments and supporting management information on a quarterly basis aligns with other financial controls and many of the returns that LAs provide DLUHC in relation to housing and planning. Quarterly reporting will help government to gauge ongoing levy revenues and provide support to collection agents where returns are low. This information in turn will feed into regular review points (see Question 5).

The government acknowledges that administration costs are a concern to LAs. Question 3 covers how government intends that on-going costs will be covered. Alongside that we intend to provide funding in advance of the levy becoming operational to allow LAs to start making the changes necessary to ensure they are in a position to collect the levy on behalf of government.

Question 5: Do you think there should be regular review points? If so how frequent should they be?

We proposed in the consultation that there should be regular review points on the levy. We still estimate that the overall levy target is £3 billion pounds to be raised over 10 years or more. This figure remains an estimate but will be reviewed by central government regularly as information on the number of buildings requiring remediation, and the cost of doing so, is confirmed.

The tables below separate out figures for the 2 parts of question 5.

Question 5a: Do you think that there should be regular review points?

	Response				% of total				% of those that answered
	Yes	No	Unsure	Not answered	Yes	No	Unsure	Not answered	Yes	No	Unsure
Developer	25	3	2	14	57%	7%	5%	32%	83%	10%	7%
Local government	38	1	3	4	83%	2%	7%	9%	90%	2%	7%
Other	30	0	1	17	63%	0%	2%	35%	97%	0%	3%
Total	93	4	6	35	67%	3%	4%	25%	90%	4%	6%

* One respondent thought the review point should be quarterly and 3 thought it would be 2 yearly.

Question 5b: If so, how frequent should they be?

	Response				% of total				% of those that answered
	Annually	3 yearly	5 yearly	Not answered	Annually	3 yearly	5 yearly	Not answered	Annually	3 yearly	5 yearly
Developer	11	3	8	20	26%	7%	19%	48%	50%	14%	36%
Local government	20	17	1	6	45%	39%	2%	14%	53%	45%	3%
Other	15	7	4	22	31%	15%	8%	46%	58%	27%	15%
Total*	46	27	13	48	34%	20%	10%	36%	53%	31%	15%

Summary

The majority of those who answered this question were in favour of regular review points (90%) with agreement broadly similar across all types of respondents. There was greater variation of opinion on the frequency of reviews, with a majority of those who answered (53%) in favour of annual reviews and many in favour of 3 yearly reviews (31%).

Within the qualitative responses some respondents acknowledged the trade-off between having sufficient certainty against being able to reduce levy rates should wider economic circumstances warrant it. Some suggested there should be at least six months’ notice of any change to levy rates. Some respondents suggested there could be more frequent reviews in the early years until the levy has bedded in.

Points were also made about the need for transparency on the overall target required, amounts being collected and what it is being spent on. Some respondents suggested that knowing the duration of the levy was as important as knowing levy rates. Some respondents noted that reviews should include levy operations in order to make adjustments in light of experience and ensure administration costs incurred by collection agents were being properly covered.

Government response

The government agrees that regular and proper review is appropriate and in the interest of the collection agents, those paying the levy and those whose buildings will be remediated. Regular reviews of the levy will enable us to adjust the levy via amendment regulations in light of further evidence on required and actual revenue, and costs of remediation.

It is our intention to carry out a review every three years. We consider this strikes the right balance between providing the certainty that developers require and flexibility to adjust if necessary. Notwithstanding this intention, government may review the levy at any point where this is necessary or appropriate.

We currently plan to launch the first formal review in the second full year of levy operation with the intention of making any changes required in year three of levy operations. This will ensure we have sufficient information on which to base decisions. It will enable us to adjust the levy in light of data on revenues raised, anticipated revenue based on updated forecasts and greater certainty on the costs of remediation.

This will also give us an evidence base on which to assess how the levy is working in practice and the performance of all parties who will be involved and to adjust our guidance and potentially the sanctions regime if we think there are weaknesses or failures.

Questions 6, 7, and 8
We welcome views on the two-step process and charging points for the levy. Do you agree or disagree? Please give reasons.

What are your views on the percentage split, i.e. charging 60% of the levy prior to commencement stage and 40% at final certification. Are these the right amounts? If not, why not – please give reasons.

If you consider yourself a small or medium enterprise, what impact will these levy payment points have on your ability to build? If so, what could help? To note we intend to exempt developments under 10 units or the square metre equivalent.

The responses to questions 6, 7, and 8 have been combined.

Question 6: We welcome views on the two-step process and charging points for the levy. Do you agree or disagree? Please give reasons.

	Response			% of total			% of those that answered
	Agree	Disagree	Not answered	Agree	Disagree	Not answered	Agree	Disagree
Developer	13	16	15	30%	36%	34%	45%	55%
Local government	14	26	6	30%	57%	13%	35%	65%
Other	21	12	15	44%	25%	31%	64%	36%
Total	48	54	36	35%	39%	26%	47%	53%

Question 7: What are your views on the percentage split, i.e. charging 60% of the levy prior to commencement stage and 40% at final certification. Are these the right amounts? If not, why not – please give reasons.

	Response				% of total				% of those that answered
	Yes	No	Too early to tell	Not answered	Yes	No	Too early to tell	Not answered	Yes	No	Too early to tell
Developer	1	23	4	16	2%	52%	9%	36%	4%	82%	14%
Local government	8	21	10	7	17%	46%	22%	15%	21%	54%	26%
Other	6	18	7	17	13%	38%	15%	35%	19%	58%	23%
Total	15	62	21	40	11%	45%	15%	29%	15%	63%	21%

We received 48 responses to question 8, a statistical breakdown of answers is not provided, as responses were qualitative.

Summary

A majority of stakeholders, albeit a small one, who engaged with these questions disagreed with the proposal to implement a two-step payment process for the levy (53%). Of those who answered 63% disagreed with the proposed percentage split of 60% payment at the commencement stage of a development, and 40% payment upon completion.

Those respondents who disagreed with the proposal considered a two-step payment process to be unnecessarily complex. They suggested that introducing two charging points would double the administrative burden for the collecting agent, which would need to issue invoices, take payments, and implement any enforcement measures twice over. Respondents emphasised the need for the collecting agent to be adequately reimbursed for administering the levy. They also suggested that a more complex system with multiple payment points was more likely to be misunderstood by developers, increasing the risk of non-compliance due to mistakes. On this basis, some stakeholders suggested that a single payment point would be preferable.

Many respondents also felt that introducing a 60% payment at commencement stage would create cashflow issues for developers. They explained that this would require developers to raise funds well in advance of recouping costs at the point of sale. Citing high borrowing costs and the uncertainty of the economic climate, they suggested that this would lead to more sites becoming unviable, negatively impacting housing supply. To mitigate this, suggestions included a single payment point upon completion, a 2-step payment process with a lower percentage due at commencement stage, or a greater number of charging points in order to spread the cost.

These concerns were shared by those who responded to Question 8, who felt that small or medium enterprises in particular would struggle to pay a significant proportion of the levy charge at commencement stage. They noted that SMEs may have less flexible financial arrangements in place, and more limited access to borrowing, than their larger counterparts. Some were concerned that the proposals outlined would therefore disproportionately impact the viability of works undertaken by SMEs. Other responses to Question 8 discussed the proposal to exclude developments of fewer than 10 units. These comments are addressed in the section on Question 14.

Some respondents support the proposal of a two-step payment process. Some stakeholders noted that the scope of a development may change during construction, and that a two-step process would allow for reconciliation, ensuring that the final levy charge reflected the actual size of the completed development.

Respondents also suggested that splitting payment would spread the cost, easing cashflow pressures on developers. Of those who agreed with the proposal, respondents expressed differing views on whether the larger payment should be due at commencement or completion stage. Some felt that charging the majority at commencement would give the collecting agent more time to enforce sanctions such as stop notices in cases of non-payment. Others raised viability issues, as above. Some stakeholders also noted that Approved Inspectors/ Registered Building Control Approvers (RBCAs) would need to engage with LAs, should they be selected as the collecting agent, so that they would know when the levy payment was due and when enforcement action was needed. They asked for greater clarification on the role of RBCAs in the levy collection process.

Government response

We agree with respondents that the levy collection process should be as simple and transparent as possible, in order to minimise ambiguity and reduce the possibility of mistakes. We appreciate stakeholders’ concerns that the two-step payment process introduces unnecessary complexity. We therefore intend to introduce a single levy payment. We also appreciate the concerns raised by stakeholders about the challenges of large payments at commencement, and note differing views and concerns also being raised about payments being due at later stages. Taking into account all these concerns, we intend developers to have some flexibility to decide when this payment is made, but it must be paid ahead of a completion certificate being issued or a final certificate being accepted for the development. This will also minimise the administrative burden placed on the collecting agents.

We appreciate the concerns that respondents raised regarding the viability impact of requiring a levy payment to be made at the commencement of a development, and the concern that this will disproportionately affect SMEs. We intend to design the levy in such a way as to minimise the negative impact on housing supply; giving developers some flexibility over when they make their levy payment will help them to manage cashflow and reduce reliance on borrowing.

We note that LAs, as collecting agents, will need engagement from RBCAs and the Building Safety Regulator, who also carry out building control functions for some developments. Whilst these bodies will not have responsibility for collecting the levy, we consider that they should communicate with LAs, passing on information in a timely way to ensure that the levy can be collected effectively. We will set out the roles of RBCAs and the BSR in secondary legislation and in guidance.

Question 9: What do you think should be the principal sanction to ensure the levy is paid?

We received 93 responses to question 9, a statistical breakdown of answers is not provided, as responses were qualitative.

Summary

Many stakeholders agreed with the government’s proposal that the principal sanction for non-payment of the levy should be stalling the progress of a development, either through the use of stop notices, or withholding of final certification. They suggested that this would effectively deter non-payment, as any additional delays in the construction or sale of development would incur costs for the developer.

There was particularly strong support amongst respondents for the withholding of final certification as the primary sanction. Stakeholders suggested that this represented a strong sanction that would incentivise compliance, as developers would struggle to sell their homes without certification. Respondents also felt that this would be a relatively simple sanction for the collection agents to operate, reducing administrative burden and associated costs. Others were concerned that withholding final certification risked delaying the sale of a property, which could impact homebuyers.

Some respondents favoured the use of stop notices, as these could be applied during the construction of a development, capturing non-compliance early on. They also pointed out that using stop notices would align with the Community Infrastructure Levy, where they form part of the enforcement regime. However, some suggested that stop notices are time consuming and resource intensive to administer, requiring input from legal teams, as well as inspectors monitoring compliance onsite.

A range of other sanctions were suggested by respondents. Some proposed a fine be imposed for late payment, so as not to cause costly delays to construction. Others felt that a range of enforcement options of increasing severity should be open to the collecting agent, so that sanction strength can be varied according to whether or not non-compliance is deliberate, consistent etc. Some proposed that developers who repeatedly fail to pay the levy should be prevented from gaining planning or building control approval on future developments.

Government response

We intend that the consequence for non-payment of the levy should be withholding or rejection of final certification on a development. We agree with stakeholder comments that this represents a compelling repercussion, as developers who have failed to pay the levy will struggle to sell their homes. It is also relatively simple for the collecting agent to administer, in contrast to stop notices, which many respondents felt would be too resource intensive to implement.

We appreciate calls from some stakeholders for further enforcement options to be available to a collecting agent, to reflect whether or not non-compliance is intentional or sustained. However, we do not want to introduce more complexity to the levy collection and enforcement process than is necessary. Further detail on the operation of the levy enforcement regime will be set out in guidance.

Question 10
Do you think that the failures outlined above (careless, deliberate, and/or concealed failure to comply with the levy process) may occur in operation of the levy? If so, how best can they be avoided?

	Response				% of total				% of those that answered
	Yes	No	Unsure	Not answered	Yes	No	Unsure	Not answered	Yes	No	Unsure
Developer	11	1	5	27	25%	2%	11%	61%	65%	6%	29%
Local government	24	3	9	10	52%	7%	20%	22%	67%	8%	25%
Other	15	2	4	27	31%	4%	8%	56%	71%	10%	19%
Total	50	6	18	64	36%	4%	13%	46%	68%	8%	24%

Summary

Some respondents raised concerns with the self-assessment element of the proposed levy process, suggesting that developers may accidentally or intentionally provide the wrong information, and therefore pay the wrong amount. They stressed the importance of the collecting agent being able to check and monitor payment calculations. Some felt that strong sanctions would be necessary to ensure compliance.

Other stakeholders stressed the need for simplicity in the levy process, suggesting that a more streamlined process would be easier for developers to navigate and therefore more likely to result in a high compliance rate. They also felt that the calculation of the levy amount should be simple and transparent, to avoid disputes between developers and the collecting agent. Some suggested that clear guidance outlining the roles and responsibilities of each party, along with strong communications well in advance of the launch date of the levy, would reduce the risk that developers were unaware of the new duties that will arise as a result of the levy arrangements.

A few respondents noted that failures of communication may occur between the collecting agent and RBCAs, where RBCAs are providing building control services on a development. They suggested that LAs do not always receive notification of commencement or completion from an RBCA in a timely way, and that this would impede the LA’s ability to issue a levy invoice at the right time or carry out enforcement action. Some asked for greater clarity on the role of RBCAs in the levy collection process.

Government response

We agree that designing the levy collection process to be as simple and streamlined as possible is the best way to ensure high compliance and mitigate the risk of failures in the system. That is why, as outlined in the response to Questions 6 and 7, we intend to implement a single point of payment, with the withholding of final certification as the primary sanction for non-payment.

We will also publish guidance in advance of the launch of the levy, to ensure that all parties involved are clear on their roles and responsibilities. This will include guidance on any new duties imposed on RBCAs, so that the collecting agent is provided with the information it needs to operate the levy in a timely way.

Question 11: Is it reasonable to consider the sanctions regime of the RPDT (Residential Property Developer Tax) in relation to the levy?

	Response				% of total				% of those that answered
	Yes	No	Unsure	Not answered	Yes	No	Unsure	Not answered	Yes	No	Unsure
Developer	7	12	7	18	16%	27%	16%	41%	27%	46%	27%
Local government	19	7	10	10	41%	15%	22%	22%	53%	19%	28%
Other	10	9	5	24	21%	19%	10%	50%	42%	38%	21%
Total	36	28	22	52	26%	20%	16%	38%	42%	33%	26%

Summary

The majority of stakeholders who engaged with this question agreed that it was reasonable to consider the sanctions regime of the RPDT in relation to the levy. They noted that RPDT sanctions increase in severity depending on whether non-compliance was deliberate and/or concealed and felt that this would prevent honest mistakes in levy payment from being punished too harshly.

Others disagreed, pointing out that the RPDT is based on corporation tax, and therefore it is appropriate that its sanctions regime mirrors that of corporation tax. As the levy will be calculated and implemented differently, they felt its sanctions regime should also be different. Some felt that the RPDT sanctions would be unnecessarily complex to enforce the levy, creating additional administrative burden for the collection agent.

Some respondents suggested that it would be more appropriate for the levy sanctions regime to mirror that of the Community Infrastructure Levy, as it is collected and enforced by LAs, whom the government proposes be the collecting agent for the levy.

Government response

As outlined in the response to Questions 6,7, and 8, we intend that the consequence for non-payment of the levy will be the withholding of completion certification or the rejection of final certification. The regime for the levy will therefore not reflect that of the RPDT sanctions. The RPDT is a profits tax and therefore has the same penalty regime as Corporation Tax. We consider that the RPDT sanctions would be too complex for the collecting agent to implement, increasing the administrative burden and associated costs.

We appreciate respondents’ suggestions that the severity of the sanction should reflect whether non-compliance was deliberate and/or concealed. By making the levy process and sanctions as simple as possible, we will mitigate the risk of accidental errors.

Question 12: How might levy design avoid mistakes, gaming, and fraud, or else maximise positive incentives?

We received 80 responses question 12, a statistical breakdown of answers is not provided, as responses were qualitative.

Summary

Many respondents emphasised the need for the levy collection process to be as simple and transparent as possible, in order to minimise ambiguity regarding the levy liability, and reduce the possibility of mistakes. They suggested that a clear communications campaign in advance of the launch would ensure developers were well informed of their new responsibilities regarding the levy. Some emphasised the need for comprehensive guidance on levy operations to be published, which included guidance on roles and responsibilities for non-standard developments.

Others felt that the collecting agents should have the ability to implement a range of sanctions, to discourage non-compliance. Some suggested that non-compliance should be recorded and monitored, and that DLUHC should publish the names of those developers who consistently fail to pay the levy.

A few respondents were concerned that the proposed exemptions could create opportunities for gaming. Some suggested that a developer could split a larger development into plots of fewer than 10 units, in order to exploit the measure proposed to protect SMEs. Referring back to a planning application to establish the size of the site was suggested as a potential solution to this issue. Others suggested that a developer might apply to construct a build-to-rent development in order to benefit from this proposed exemption, and then ‘flip’ it to a for-sale property within a number of months or years. A suggested solution was to create a condition that a Build to Rent property must not be sold within a certain number of years following completion, or else be liable for a levy charge.

Government response

In designing the levy there is value in making the process as simple as possible in order to minimise the scope for mistakes, gaming, and fraud. That is why we intend to introduce the simple one-step payment process outlined in the response to Questions 6 and 7. The levy arrangements, as will be set out in the regulations, will aim to minimise the opportunities to game the system.

We appreciate respondents’ comments on the need for clear communications and guidance to support the levy collection process. We will set out the process for collecting the levy from those who are liable to pay it in secondary legislation. This process will be designed so that those who are liable to pay the levy are aware (a) of their liability to pay; (b) the amount they are required to pay; (c) the date by which payment must be made; and (d) of any information that they must provide the collecting agent to facilitate the collection on the levy. Secondary legislation will be supported by comprehensive guidance.

Question 13
Which of the options above (charging per unit or per square metre) do you think is the best basis on which to implement the levy? Please give reasons for your answer

	Response			% of total			% of those that answered
	Per unit	Square metre (m²)	Not answered	Per unit	Square metre (m²)	Not answered	Per unit	Square metre (m²)
Developer	9	25	10	20%	57%	23%	26%	74%
Local government	16	24	6	35%	52%	13%	40%	60%
Other	11	21	16	23%	44%	33%	34%	66%
Total	36	70	32	26%	51%	23%	34%	66%

Summary

The majority of respondents to this question suggested that the levy should be charged on a per square metre rather than a per unit basis. Many suggested that, as the square metre area of a development is already calculated for the collection of the Community Infrastructure Levy, it would be administratively simple to use the same figure to charge the levy. Some were concerned that charging per unit would incentivise developers to build fewer, larger homes, in order to reduce the levy charge on a plot. Others pointed out that the square metre area of a development was more reflective of its overall value, meaning a per square metre levy charge would be more closely tied to sale value.

Those respondents who supported a per unit levy charge suggested it would be simpler to administer, as it would remove the need to measure floorspace. They also suggested that charging per square metre would lead to more disputes between developers and the collecting agent over the levy charge, as there may be disagreement over which areas should and should not be included. Others expressed concern that charging per square metre would incentivise developers to build smaller homes to reduce their levy charge.

Government response

We intend to charge the levy on a per square metre basis, subject to further work on how floorspace would be measured and levy rates set. We have carefully weighed the arguments and consider a per square metre charge is fairer as it will reflect the difference in value between different sizes of new developments and avoid for example a 5-bedroom house being charged the same levy amount as a 1-bedroom flat within the same area.

We note also that the chargeable area of a development in square metres is already calculated as part of the administration of the Community Infrastructure Levy (CIL). Therefore, the administrative burden of calculating levy payment based on floorspace may be reduced for developments within those LAs already collecting CIL. We are aware that not all LAs collect CIL and so we considering how to make this process as administratively simple as possible for all LAs.

Question 14: How best can we protect small and medium sized builders? Is exempting smaller developments the best way?

We received 99 responses to question 14, a statistical breakdown of answers is not provided, as responses were qualitative.

Summary

A range of protections for SMEs were suggested in response to this question. Many respondents agreed with the proposal to exempt developments of fewer than 10 units, or the square-metre equivalent. They felt that the proposal struck the right balance between protecting the supply of housing developed by SMEs and ensuring the tax base remained wide enough to spread the cost of the levy. Some noted that smaller sites tend to be nearer the viability threshold, and that excluding developments of fewer than 10 units was an appropriate measure to stop those sites becoming unviable, protecting housing supply and the activity of SMEs.

Others felt that, whilst an exclusion based on the number of units in a development was an appropriate measure for protecting SMEs, 10 units was not the right number. Some argued that SMEs typically build sites of up to 50 units, and that this is therefore where the threshold should be set. Others felt that 10 units was too many, and that the threshold should be set at 5 units.

Some respondents argued that small developments should not be excluded, but that SMEs should have the flexibility to agree a payment schedule with the collecting agent, to allow them to spread the cost of the levy and manage their cash flow. Others felt that SMEs should be allowed to pay the levy charge only upon completion of a build, as this would put payment close to the point of sale and reduce the reliance on borrowing. Some respondents suggested that DLUHC should set a threshold of homes completed per year, below which a developer should be exempt from the levy charge.

A few respondents argued that no additional protections should be put in place for SMEs, suggesting that the tax base should be kept as broad as possible in order to reduce the average levy rate.

Government response

Having considered the responses we intend to exempt developments of fewer than 10 units^{[footnote 3]} from payment of the levy. We believe this strikes the right balance between protecting the viability of smaller sites, whilst maintaining a broad tax base, allowing government to raise the revenue needed to address remediation issues. We are aware that it is not easy to split some types of purpose-built student housing into “units” and therefore we propose to exempt developments of purpose-built student housing of fewer than 30 bedspaces from payment of the levy.

An alternative would be for Levy regulations to define what is considered an SME for the purposes of the levy and to exclude sites built by such entities from payment of the levy. There is a generally understood definition of SMEs within the UK as being any organisation that has fewer than 250 employees and a turnover of less than €50 million or a balance sheet total less than €43 million. The exemption of fewer than 10 units is preferred given it will be simple for LAs to administer as part of the levy collection process as it will not require them to access information which they may otherwise not have a record of; for example, if SMEs were exempt from paying the levy this would require LAs to access information on the number of employees within a developer organisation, or the overall turnover of the organisation which may be burdensome for LAs to administer.

We note arguments from some respondents that SMEs would benefit from payment schedules to allow them to spread the cost of the levy. As set out in the response to questions 6, 7, and 8, we intend to give developers greater flexibility over when they make the levy payment, to allow them to manage their finances appropriately.

Questions 15, 16, and 17
The responses to questions 15, 16, and 17 have been combined.

Do you think government should set differential levy rates based on geography based on the different land values and house prices in different areas? Please give reasons.

Which of the two options outlined above would you prefer (differential geographic rate based on region or local authority boundaries)? Please give your reasons for your answer.

Do you think there should be different levy rate applied on brownfield and greenfield developments in the same geographic area? If so, do you think that the differential should be the same in every geographic area?

Question 15: Do you think government should set differential levy rates based on geography based on the different land values and house prices in different areas? Please give reasons

	Response			% of total			% of those that answered
	Yes	No	Not answered	Yes	No	Not answered	Yes	No
Developer	22	6	16	50%	14%	36%	79%	21%
Local government	33	6	7	72%	13%	15%	85%	15%
Other	26	3	19	54%	6%	40%	90%	10%
Total	81	15	42	59%	11%	30%	84%	16%

Question 16: Which of the two options outlined above would you prefer (differential geographic rate based on region or local authority boundaries)? Please give your reasons for your answer.

	Response			% of total			% of those that answered
	Local authority boundaries	Regional basis	Not answered	Local authority boundaries	Regional basis	Not answered	Local authority boundaries	Regional basis
Developer	19	5	19	44%	12%	44%	79%	21%
Local government	35	3	8	76%	7%	17%	92%	8%
Other	21	4	23	44%	8%	48%	84%	16%
Total*	75	12	50	55%	9%	36%	86%	14%

* One respondent recommended a joint approach of both regional and local authorities

Question 17: Do you think there should be different levy rate applied on brownfield and greenfield developments in the same geographic area? If so, do you think that the differential should be the same in every geographic area?

	Response				% of total				% of those that answered
	Yes	No	Unsure	Not answered	Yes	No	Unsure	Not answered	Yes	No	Unsure
Developer	28	4	2	10	64%	9%	5%	23%	82%	12%	6%
Local government	23	11	8	4	50%	24%	17%	9%	55%	26%	19%
Other	21	5	5	17	44%	10%	10%	35%	68%	16%	16%
Total	72	20	15	31	52%	14%	11%	22%	67%	19%	14%

Summary

84% of those who responded to question 15 agreed that government should set differential levy rates based on geography, to reflect land value and house prices in different areas. Respondents felt that setting a differential geographic rate would help protect housing supply. They noted that projects being brought forward in areas with lower house prices are at greater risk of becoming unviable with increased costs and felt having a levy rate which reflected that would mitigate against that risk.

On this basis, the majority of those who responded to question 16 supported the proposal for a differential rate based on local authority area (85% of those who responded), as the more granular approach which would more accurately reflect the local housing market. Some also noted that, as LAs are the proposed collecting agent for the levy, a rate set at local authority level would be simple for them to administer.

Some respondents called for a differential levy rate to be set at an even more granular level, noting that house prices and land values vary within a LA, and suggesting that the levy rate should be tied to the sale value of the development to reflect that.

Those who disagreed with the proposal to set a differential levy rate at a local authority level felt that it would add too much complexity to the collection of the levy, noting that a regional rate would have fewer variations.

There was also broad support for the proposal to apply a differential levy rate on brownfield and greenfield developments in the same geographic area. Of those who responded to Question 17, 66% agreed with the proposal, 16% disagreed and 18% were unsure. Those who opposed the proposal expressed concern regarding the added complication of multiple rates. Those who supported the proposal cited the higher costs associated with developing a brownfield site, noting that a lower levy rate would mitigate against brownfield developments becoming unviable due to the levy charge. Some also felt that a lower brownfield rate was aligned with government’s aims of promoting brownfield development.

Government response

We are mindful of stakeholders’ concerns that the increased cost of development represented by the levy may have an impact on the viability of some projects. Protecting housing supply is a priority, and so we intend to set a differential geographic levy rate at a local authority level, as this will reflect local land values and house prices at a more granular level than could be achieved through setting a regional rate. We note some respondents’ comments that the housing market may vary even within a local authority area but feel that additional granularity would add too much complexity to the levy calculation, adding further administrative burden to the collecting agents and for developers in calculating their liabilities.

We also intend that brownfield sites will be charged at a rate that is 50% of the greenfield rate within a LA because of the higher costs of developing a brownfield site, and the greater risk that these projects become unviable.

Question 18: What grace period should be set for projects that have already started the building control process on the date the levy goes live?

We received 104 responses to question 18, a statistical breakdown of answers is not provided, as responses were qualitative.

Summary

A range of grace period lengths were suggested in response to this question.

Some respondents felt that the proposal to exempt developments which had already reached commencement stage by the date of the levy launch did not represent a long enough transition period. They noted that financial arrangements for a development would already be set, and that introducing an additional cost at this stage would threaten the viability of a site and potentially prevent them from being built out. Some suggested that any development which had already received planning approval before the levy launch should be exempt. They argued that developers would not have had the opportunity to factor the additional cost of the levy into their plans ahead of seeking planning approval, which could threaten the viability of a site and/or create financial difficulties for the developer.

Others suggested that a longer transition period of 2 to 3 years was appropriate, as this would give developers more of an opportunity to factor the cost of the levy into land buying, again mitigating the risk that sites become unviable partway through their development.

On the other hand, some respondents felt that the proposed transitional arrangements were too generous. Some felt there should be no formal grace period, suggesting that, as long as the levy rate and launch date was communicated well in advance, developers would have time to incorporate the additional cost into their financial planning.

Government response

We appreciate concerns that exempting developments that have commenced works at the date the levy goes live may not offer a sufficient grace period. Protecting housing supply by limiting the impact of the levy on viability is a priority. On this basis, we intend that developments which have begun the building control process, i.e. submitted a full plans application, or an initial notice, or a gateway 2 application, before the launch date will not be subject to the levy charge. Developments that submit an application for building control approval or initial notice on or after the levy launch date will be subject to the levy charge. This will minimise the administrative burden placed on the collecting agents. Given that an application for building control approval is valid for up to three years after submission, we feel it is appropriate that there is no grace period after the levy launch date.

Question 19
What are your views on excluding Affordable Housing, NHS Hospitals, NHS Medical Centres and NHS GP practices, Supported Housing, Residential Care Homes, Children’s Homes, Conversions, improvements to owner/occupied homes and refurbishments, Refuges and residential domestic abuse facilities, Criminal Justice Accommodation, Military Barracks and other Military establishments, and small developments? Please set out whether you agree or disagree and give reasons for your answers.

	Response			% of total			% of those that answered
	Yes	No	Not answered	Yes	No	Not answered	Yes	No
Developer	18	9	17	41%	20%	39%	67%	33%
Local government	29	6	11	63%	13%	24%	83%	17%
Other	28	3	17	58%	6%	35%	90%	10%
Total	75	18	45	54%	13%	33%	81%	19%

Summary

Qualitative responses to the proposed exclusions are outlined under questions 20-30, so that arguments around each type of development can be represented separately.

In answering questions relating to exclusions, many respondents commented on the need to distinguish between profit-making and non-profit-making institutions. We address this point under questions 20 to 30 where appropriate.

Government response

As stated in the consultation document, it is not in the spirit of government’s ambition or in line with the Levelling Up agenda to penalise unnecessarily or prevent the development of important community facilities. In light of that and taking into account the consultation responses we therefore propose to exclude the following developments from payment of the levy:

• affordable housing, including social rented, affordable rented and intermediate housing, provided to specified eligible households whose needs are not met by the market
• non-social homes built by not-for profit Registered Providers (and their subsidiaries) as it is a component of their operating model to provide more affordable homes and to reinvest profits to benefit social/ affordable housing tenants
• NHS hospitals, NHS medical homes, and NHS GP practices
• supported housing (save for private tenure supported housing)
• children’s homes
• domestic abuse facilities
• criminal justice accommodation
• accommodation for our armed forces
• care homes and nursing homes

We intend to set out in regulations and guidance the detailed information that developers will be required to submit in order to qualify for these exemptions.

We also intend to exclude improvements to owner occupied homes and refurbishments. We do not consider it appropriate for individual homeowners to pay for the remediation of building safety issues caused by industry. We also do not wish to disincentivise improvements to existing housing stock.

We intend to charge the levy on conversions/change of use, where buildings are being converted to residential use, (subject to these not falling within other exemptions, such as developments of fewer than 10 units), due to the profit-making nature of these developments.

We also intend to charge the levy on private older people’s/ retirement housing, due to the profit-making nature of these developments.

Question 20
Do you have any views on build to rent (BtR) developments, purpose-built student accommodation, and older people’s housing? If so, please set them out.

We received 107 responses to question 20, a statistical breakdown of answers is not provided, as responses were qualitative.

Summary

Some respondents were in favour of charging the levy on build to rent developments, purpose-built student accommodation and older people’s housing. Of these, many argued that developers gain large profits from these types of developments, and it would therefore be unfair to treat them differently to for-sale properties. Some pointed out that developers of these sorts of properties compete for land with developers of for-sale properties, and felt that excluding BtR, student accommodation and older people’s housing would give these developers a market advantage over their competitors. Others felt it was important to charge the levy on these developments in order to maintain a broader tax base, lowering the average levy rate.

Some argued that BtR developments should be excluded on the basis that, rather than making a profit at the point of completion and sale of a property, developers of these buildings accrue profit over a longer time period. They therefore felt that charging the levy on these buildings would put disproportionate financial pressure on these developers, which may mean some sites become unviable and are not built out. Some suggested that BtR accommodation should be excluded from the levy on the basis that it tends to be constructed in high density urban areas where housing demand outstrips supply, and that it therefore plays a social function in helping to alleviate housing shortages in these areas. Some respondents also suggested that student accommodation should be excluded from the levy charge on this basis, noting the shortage of supply in some areas. A few respondents also argued that it would be unfair to charge the levy on BtR and student accommodation, as these do not form part of the leaseholder sector, and developers of these properties therefore do not have access to government support for the remediation of building safety issues.

Some respondents argued that older people’s housing should be exempt on the basis that it serves an important social function, particularly in the context of an ageing population. They suggested that the cost of building accommodation which is adapted to the needs of older people is often higher than the cost of building other residential developments, meaning these sites are closer to the viability threshold and would be more likely to become unviable with the addition of the levy charge.

Government response

Having considered these responses, we intend to include build to rent developments and purpose-built student accommodation (PBSA) within the scope of the levy. While we understand that the profit models for BtR and PBSA are different to the for sale market they both remain profit-making parts of the house-building sector. We consider that excluding BtR and PBSA from the levy would give this sector a competitive advantage over build for sale as both compete for land in the same way.

We intend to charge the levy on private older people’s housing, commonly known as retirement housing. While retirement housing does provide social benefits it remains a type of private housing for sale on the open market, and is therefore intended to be included within the levy charge alongside other types of for-sale private housing, BtR and PBSA.

Question 21: Do you agree affordable homes should be excluded from payment of the levy?

	Response			% of total			% of those that answered
	Yes	No	Not answered	Yes	No	Not answered	Yes	No
Developer	26	5	13	59%	11%	30%	84%	16%
Local government	35	5	6	76%	11%	13%	88%	13%
Other	36	4	8	75%	8%	17%	90%	10%
Total	97	14	27	70%	10%	20%	87%	13%

Summary

The majority of stakeholders who answered this question (87%) agreed that affordable homes should be excluded from payment of the levy. Many agreed protecting the supply of affordable homes should be a priority for the government and industry and felt that charging the levy on affordable homes would bring them closer to the viability threshold and disincentivise developers from building them. Some also pointed out that excluding them would be in line with Community Infrastructure Levy policy. Others specifically stated their support for the proposal in paragraph 74 that the exclusion of affordable housing should cover the exclusion of non-social homes built by registered providers and their subsidiaries, pointing to the essential role that these play in cross-subsidising the construction of affordable homes.

Those respondents who disagreed with the proposal to exclude affordable homes suggested that the levy should instead apply to all new residential units, for the sake of parity. Some argued that affordable homes should be included in order to increase the tax base for the levy and therefore bring the average levy rate down.

Government response

Having considered the responses, we intend to exclude affordable housing and non-affordable housing built by not-for-profit Registered Providers. For more information, please see the answer to question 19.

Question 22: Do you agree NHS hospitals, NHS medical homes, and NHS GP practices should be excluded from payment of the levy?

	Response			% of total			% of those that answered
	Yes	No	Not answered	Yes	No	Not answered	Yes	No
Developer	25	1	18	57%	2%	41%	96%	4%
Local government	38	2	6	83%	4%	13%	95%	5%
Other	25	4	19	52%	8%	40%	86%	14%
Total	88	7	43	64%	5%	31%	93%	7%

Summary

The majority of respondents who answered this question (93%) agreed with the proposal that NHS hospitals, NHS medical homes, and NHS GP practices should be excluded from payment of the levy. Many agreed that these buildings have an essential role in the community, and that increasing the cost of a development by charging the levy risked impeding their construction. Many also noted the high level of public funding committed to developing these buildings and argued that charging the levy on them would essentially result in a charge on the taxpayer.

A few respondents disagreed with the proposal, citing the need to keep the tax base as broad as possible in order to lower the average levy rate.

Government response

Having considered the responses, we intend to exclude NHS hospitals, NHS medical homes, and NHS GP practices from payment of the levy. For more information, please see the response to question 19.

Question 23: Do you agree conversions, improvements to owner occupied homes and refurbishments should be excluded from payment of the levy?

	Response			% of total			% of those that answered
	Yes	No	Not answered	Yes	No	Not answered	Yes	No
Developer	23	4	17	52%	9%	39%	85%	15%
Local government	30	9	7	65%	20%	15%	77%	23%
Other	29	6	13	60%	13%	27%	83%	17%
Total	82	19	37	59%	14%	27%	81%	19%

Summary

The majority of respondents who answered this question (81%) agreed with the proposal to exclude conversions, improvements to owner occupied homes, and refurbishments from payment of the levy. Many argued that it would be wrong to charge, and therefore risk disincentivising, upgrades to existing housing stock to improve their quality, energy efficiency, and safety. Some also noted that it would be unfair to charge individual homeowners to pay for the remediation of buildings, when the government has stated that it should be industry’s responsibility to pay. Some also pointed to the significant number of these types of works being carried out, suggesting that it would create a disproportionate burden on the collecting agent to administer, should they be included.

Those respondents who disagreed with the proposal primarily objected to the exclusion of conversions. They noted that larger conversion projects, where multiple new residential units are created, may have a high profit margin, and felt it would therefore be equitable for the levy to be applied.

Government response

Having considered the responses, we intend to exclude improvements to owner occupied homes and refurbishments from payment of the levy. However, we intend to charge the levy on conversions. For more information, please see the response to question 19.

Question 24: Do you agree supported housing should be excluded from payment of the levy?

	Response			% of total			% of those that answered
	Yes	No	Not answered	Yes	No	Not answered	Yes	No
Developer	22	4	18	50%	9%	41%	85%	15%
Local government	35	4	7	76%	9%	15%	90%	10%
Other	30	5	13	63%	10%	27%	86%	14%
Total	87	13	38	63%	9%	28%	87%	13%

Summary

The majority of respondents who answered this question (87%) agreed with the proposal that supported housing should be excluded from payment of the levy. Many argued that supported housing holds an essential community function, and that charging the levy would risk pushing these developments closer to the viability threshold, threatening the supply of these dwellings. Many also noted the high level of public funding committed to developing these buildings and argued that charging the levy on them would essentially result in a charge on the taxpayer.

A few respondents disagreed with the proposal, citing the need to keep the tax base as broad as possible in order to lower the average levy rate. Some also noted that some supported housing is profit making and felt that the levy should be applied in these cases.

Government response

Supported housing includes a wide range of types of accommodation and can include older people’s housing with some support facilities. Having considered the responses, we intend to exclude supported housing from payment of the levy save for private tenure supported housing (such as private retirement housing with an element of support) which will be included in the levy charge. For more information, please see the response to question 19.

Question 25: Do you agree care homes should be excluded from payment of the levy?

	Response			% of total			% of those that answered
	Yes	No	Not answered	Yes	No	Not answered	Yes	No
Developer	20	6	18	45%	14%	41%	77%	23%
Local government	33	7	6	72%	15%	13%	83%	18%
Other	30	4	14	63%	8%	29%	88%	12%
Total	83	17	38	60%	12%	28%	83%	17%

Summary

The majority of respondents who answered this question (83%) agreed with the proposal that care homes should be excluded from payment of the levy. Many respondents agreed that care homes hold an essential community function, particularly in the context of an aging population, with increasing demand for these facilities. They argued that charging the levy on these buildings would push them closer to the viability threshold, disincentivising their development and threatening supply.

Those respondents who disagreed with the proposal primarily argued that a distinction should be made between profit-making and non-profit-making care homes, suggesting that the levy should be charged on the former.

Government response

Having considered the responses, we intend to exclude care homes and nursing homes from the payment of the levy. For more information, please see the response to question 19.

Question 26: Do you agree that children’s homes should be excluded from payment of the levy?

	Response			% of total			% of those that answered
	Yes	No	Not answered	Yes	No	Not answered	Yes	No
Developer	23	3	18	52%	7%	41%	88%	12%
Local government	39	1	6	85%	2%	13%	98%	3%
Other	30	3	15	63%	6%	31%	91%	9%
Total	92	7	39	67%	5%	28%	93%	7%

Summary

The majority of respondents who answered this question (93%) agreed with the proposal that children’s homes should be excluded from payment of the levy. Many respondents agreed that children’s homes hold an essential community function. They argued that charging the levy on these buildings would push them closer to the viability threshold, disincentivising their development and threatening supply.

The few respondents who disagreed with the proposal suggested that a distinction should be made between facilities which are profit-making and those which are not, arguing that the levy should be charged on the former.

Government response

Having considered the responses, we intend to exclude children’s homes from the payment of the levy. For more information, please see the response to question 19.

Question 27: Do you agree facilities for victims of domestic abuse should be excluded from payment of the levy?

	Response			% of total			% of those that answered
	Yes	No	Not answered	Yes	No	Not answered	Yes	No
Developer	18	1	25	41%	2%	57%	95%	5%
Local government	33	1	12	72%	2%	26%	97%	3%
Other	30	2	16	63%	4%	33%	94%	6%
Total	81	4	53	59%	3%	38%	95%	5%

Summary

The majority of respondents who answered this question agreed with the proposal that domestic abuse facilities be excluded from payment of the levy (95%). Many respondents agreed that domestic abuse facilities hold an essential community function. Some argued that charging the levy on these buildings would push them closer to the viability threshold, disincentivising their development and threatening supply.

Government response

Having considered the responses, we intend to exclude domestic abuse facilities from payment of the levy. For more information, please see the response to question 19.

Question 28: Do you agree residential care homes be excluded from payment of the levy?

	Response			% of total			% of those that answered
	Yes	No	Not answered	Yes	No	Not answered	Yes	No
Developer	22	5	17	50%	11%	39%	81%	19%
Local government	34	6	5	76%	13%	11%	85%	15%
Other	30	3	15	63%	6%	31%	91%	9%
Total*	86	14	37	63%	10%	27%	86%	14%

* 1 respondent was unsure

Summary

The majority of respondents who answered this question (86%) agreed with the proposal that residential care homes be excluded from payment of the levy. Many respondents agreed that care homes hold an essential community function, particularly in the context of an aging population, with increasing demand for these facilities. They argued that charging the levy on these buildings would push them closer to the viability threshold, disincentivising their development and threatening supply.

Those respondents who disagreed with the proposal primarily argued that a distinction should be made between profit-making and non-profit-making residential care homes, suggesting that the levy should be charged on the former.

Government response

Having considered the responses, we intend to exclude care homes and nursing homes from the payment of the levy. For more information, please see the response to question 19.

Question 29: Do you agree criminal justice accommodation be excluded from the levy?

	Response			% of total			% of those that answered
	Yes	No	Not answered	Yes	No	Not answered	Yes	No
Developer	23	4	17	52%	9%	39%	85%	15%
Local government	34	4	7	76%	9%	16%	89%	11%
Other	27	4	17	56%	8%	35%	87%	13%
Total*	84	12	41	61%	9%	30%	88%	13%

* 1 respondent was unsure

Summary

The majority of respondents who answered this question (88%) agreed with the proposal that criminal justice accommodation be excluded from the levy. Many respondents agreed that criminal justice accommodation provides an essential public service. They argued that charging the levy on these buildings would push them closer to the viability threshold, disincentivising their development and threatening supply. Many also noted the high level of public funding committed to developing these buildings and argued that charging the levy on them would essentially result in a charge on the taxpayer.

Those respondents who disagreed with the proposal primarily argued that a distinction should be made between profit-making and non-profit-making accommodation, suggesting that the levy should be charged on the former.

Government response

Having considered the responses, we intend to exclude criminal justice accommodation from payment of the levy. For more information, please see the response to question 19.

Question 30: Do you agree military establishments be excluded from the levy?

	Response			% of total			% of those that answered
	Yes	No	Not answered	Yes	No	Not answered	Yes	No
Developer	19	6	19	43%	14%	43%	76%	24%
Local government	34	5	7	74%	11%	15%	87%	13%
Other	25	4	19	52%	8%	40%	86%	14%
Total	78	15	45	57%	11%	33%	84%	16%

Summary

The majority of respondents who answered this question (84%) agreed with the proposal that military establishments be excluded from the levy. Many respondents agreed that military establishments provide an essential public service. They argued that charging the levy on these buildings would push them closer to the viability threshold, disincentivising their development and threatening supply. Many also noted the high level of public funding committed to developing these buildings and argued that charging the levy on them would essentially result in a charge on the taxpayer.

Those respondents who disagreed with the proposal primarily argued that a distinction should be made between profit-making and non-profit-making establishments, suggesting that the levy should be charged on the former.

Government response

Having considered the responses, we intend to exclude accommodation for armed services personnel (by which we mean accommodation constructed for service personnel from the army, navy and air force) from the payment of the levy. For more information, please see the response to question 19.

Question 31
Would excluding developments under 10 units (or the square metre equivalent) protect small and medium sized enterprises? What might the alternatives be?**

	Response				% of total				% of those that answered
	Yes	No	Unsure	Not answered	Yes	No	Unsure	Not answered	Yes	No	Unsure
Developer	12	14	1	17	27%	32%	2%	39%	44%	52%	4%
Local government	23	9	8	6	50%	20%	17%	13%	58%	23%	20%
Other	14	12	5	17	29%	25%	10%	35%	45%	39%	16%
Total	49	35	14	40	36%	25%	10%	29%	50%	36%	14%

Summary

Half of those respondents who answered this question supported the proposal to exclude developments under 10 units (or the square metre equivalent), to protect small and medium sized enterprises (SMEs). Some felt that the proposal struck the right balance between protecting the supply of housing developed by SMEs and ensuring the tax base remained wide enough to spread the cost of the levy. Some noted that smaller sites tend to be nearer the viability threshold, and that excluding developments of fewer than 10 units was an appropriate measure to stop those sites becoming unviable, protecting housing supply and the activity of SMEs.

Others felt that, whilst an exclusion based on the number of units in a development was an appropriate measure for protecting SMEs, 10 units was not the right number. Some argued that SMEs typically build sites of up to 50 units, and that this is therefore where the threshold should be set. Others felt that 10 units was too many, and that the threshold should be set at 5 units.

Some suggested alternative protections, such as charging a lower levy rate on developments constructed by SMEs or excluding developers who can demonstrate that they build below a certain number of units per annum. Some respondents argued that no protections should be made for SMEs, suggesting that it would be fairer for all developers to be treated the same. On the other hand, some felt that SMEs should be exempt from paying the levy entirely. They argued that few SMEs are responsible for having constructed residential buildings over 11m which now require remediation work, and so asking them to pay the levy goes against the polluter pays principle.

Government response

As set out in the response to question 14, we intend to exclude developments of fewer than 10 units in order to protect SMEs.

Question 32: Do you consider that we should set a discounted levy rate for the entirety of a development where that development provides a specified proportion of affordable housing?

	Response				% of total				% of those that answered
	Yes	No	Unsure	Not answered	Yes	No	Unsure	Not answered	Yes	No	Unsure
Developer	22	7	1	14	50%	16%	2%	32%	73%	23%	3%
Local government	16	16	8	6	35%	35%	17%	13%	40%	40%	20%
Other	19	9	6	14	40%	19%	13%	29%	56%	26%	18%
Total	57	32	15	34	41%	23%	11%	25%	55%	31%	14%

Summary

Just over half over respondents (55%) agreed with the proposal to set a discounted levy rate for the entirety of a development where that development provides a specified proportion of affordable homes. Many emphasised the importance of protecting the supply of affordable homes and felt that the proposal would incentivise developers to increase the number they construct.

Others argued that the proposal to exclude affordable homes from payment of the levy was sufficient protection for the pipeline of affordable housing, and a further discount on the development should therefore not be provided. Some pointed out that the proportion of affordable housing required as part of a development is decided by individual LAs, reflecting local plans, and so setting a national policy on the appropriate proportion of affordable housing may compromise negotiations on developer contributions at a local level. Others suggested that the proposal introduced unnecessary complexity to the levy administration, particularly where the proportion of affordable housing may change during the construction of a development. This would create additional uncertainty over costs for developers, and additional administrative burden for the collecting agent.

Government response

We do not intend to set a discounted levy rate for the entirety of a development purely because that development provides a specified proportion of affordable homes. Protecting the supply of affordable homes remains a priority for the government, and we believe that excluding them from the levy charge is the most effective way of ensuring that the levy does not adversely impact supply (see answer to question 19). The average subsidy required for the construction of an affordable home is likely to be much higher than the average levy rate, so we do not believe that offering a discounted rate on sites with a certain proportion of affordable homes will incentivise the construction of more affordable housing.

Next steps

The government will carry out a further consultation on a number of detailed policy questions. It will include the following areas:

• The methodology for the calculation of the Building Safety Levy
• The collection process
• Managing disputes.
• Further exemptions

This further consultation will run for 4 weeks starting from 23 January 2024 to 20 February 2024.

Following analysis and publication of the government’s response to this further consultation we intend to lay secondary legislation in parliament.

Summary of intended approach

As set out in the consultation we intend that local authorities will be designated as the collection agent for the levy; they will be provided with government funding for set-up costs and will be entitled to retain a proportion of annual levy receipts for running costs. We intend for there to be a single payment point for the levy: developers will have some flexibility as to when to pay, provided it is ahead of the issue of a completion building control certificate or approval of a final building control certificate for a development. Exclusions from the levy will include affordable housing, and other community facilities such as NHS hospitals and other NHS care facilities, accommodation for our armed forces, criminal justice accommodation, and domestic abuse shelters. We also intend to exclude developments of fewer than 10 units. Developments of build-to-rent, purpose-built student accommodation and private older people’s housing will be subject to the levy. Levy rates will vary per LA area to reflect local land values and house prices within the LA and developments on brownfield sites will be charged at a 50% rate. We intend for the levy to be charged on a per square metre basis (subject to further work on how floorspace would be measured and levy rates set) and will be reviewed every 3 years. Developments which have begun the building control process, that is, submitted a application for building control approval, or an initial notice, or a gateway 2 application, before the launch date will not be subject to the levy charge.

Many thanks to all those who responded to the Building Safety Levy consultation. For further queries please contact buildingsafetylevy@levellingup.gov.uk

Definitions

Affordable housing

Government recognises that social housing falls under affordable housing.

Social rented, affordable rented and intermediate housing, provided to eligible households whose needs are not met by the market. Eligibility is determined with regard to local incomes and local house prices.

Affordable housing should include provisions to remain at an affordable price for future eligible households or for the subsidy to be recycled for alternative affordable housing provision.

Social rented housing is owned by local authorities and private registered providers (as defined in section 80 of the Housing and Regeneration Act 2008), for which guideline target rents are determined through the national rent regime. It may also be owned by other persons and provided under equivalent rental arrangements to the above, as agreed with the local authority or with the Homes and Communities Agency.

Affordable rented housing is let by local authorities or private registered providers of social housing to households who are eligible for social rented housing. Affordable Rent is subject to rent controls that require a rent of no more than 80% of the local market rent (including service charges, where applicable).

Intermediate housing is homes for sale and rent provided at a cost above social rent, but below market levels subject to the criteria in the Affordable Housing definition above. These can include shared equity (shared ownership and equity loans), other low-cost homes for sale and intermediate rent, but not affordable rented housing.

Homes that do not meet the above definition of affordable housing, such as “low-cost market” housing, may not be considered as affordable housing for these purposes.

Brownfield sites

By “Brownfield” site we intend to reflect the commonly understood term “previously developed land”. “Previously developed land” is referred to in the National Planning Policy Framework as land which is or was occupied by a permanent structure, including the curtilage of the developed land (although it should not be assumed that the whole of the curtilage should be developed) and any associated fixed surface infrastructure.

This excludes:

• land that is or was last occupied by agricultural or forestry buildings.
• land that has been developed for minerals extraction or waste disposal by landfill,
• where provision for restoration has been made through development management procedures; land in built-up areas such as residential gardens, parks, recreation grounds and allotments.
• and land that was previously developed but where the remains of the permanent structure or fixed surface structure have blended into the landscape.

Build-to-rent

Build-to-Rent (BtR) refers to purpose-built for-rent housing developments, which are retained by an investor on an ongoing basis. Developments, which in the UK are generally located in high-demand urban areas, can be attractive to institutional investors as the offer the potential for steady return over several years.

BtR was an effectively nascent tenure type in 2011. Since then, and in part due to government support, the sector has grown and is now a more established feature of the UK housing market to meet demand for high-quality, well-managed rental housing.

Build-to-rent is a relatively new industry, having only become established in the last decade.

Building control

Building regulations are minimum standards for design, construction, and alterations to virtually every building. The regulations are developed by the UK government and approved by Parliament.

The Building Regulations 2010 cover the construction and extension of buildings and these regulations are supported by Approved Documents.

Collection/Administration Agency (CAA)

This will be the conduit and collection body to recover the levy.

Change of use

Change of use is defined as a change in the fundamental purpose of a building where that change requires building control approval. This would include, but not be confined to, the refurbishment of commercial premises to convert it to residential premises.

Client

The powers in the Building Safety Act allow the Secretary of State to specify who is to pay the levy.

We propose to make the ‘Client’ of a project within scope of the prospective Building Safety Regime responsible for paying, or ensuring payment of, the levy. By ‘Client’ we mean any person or organisation for whom a construction project is carried out, including as part of their business. The Client will have specific functions as a duty-holder within the strengthened regulatory system as part of the Building Safety Act. We consider that as the Client holds responsibility for the construction project, they should also be responsible for payment of the levy.

The Client may be a company or an individual and may also be the Principal Designer and/or Principal Contractor. If the Client changes with levy payments outstanding, then we propose that the new Client would take on responsibility for these payments.

Community Infrastructure Levy (CIL)

The Community Infrastructure Levy can be charged by local authorities on new developments in their area.

It is an important tool for local authorities to use to help them deliver the infrastructure needed to support development in their area.

The CIL only applies in areas where a local authority has consulted on, and approved, a charging schedule which sets out its levy rates and has published the schedule on its website.

Greenfield sites

A ‘greenfield site’ is previously undeveloped land.

It is often agricultural land, but it can also be undeveloped land in otherwise developed areas. Such sites typically require less preparation for development, which is reflected in viability thresholds, making them more attractive for developers.

However, existing policy constrains development on greenfield that is additionally listed as greenbelt. This limits urban sprawl around metropolitan centres and supports brownfield re-development.

Refurbishment

Building work as defined in regulation 3 of the Building Regulations 2010 connected to an existing residential building. This includes building work listed under Schedule 3 of the Building Regulations 2010.

Residential Property Developer Tax (RPDT)

RPDT is a tax on the trading profits of residential property developers charged in addition to standard Corporation Tax (CT). It applies to profits arising from residential property development activity from 1 April 2022, including a proportion of profits of accounting periods that straddle that date.

RPDT is an additional tax at the rate of 4% on profits of a company which are attributable to the development of residential property, and which exceed a £25 million annual profits allowance (spread between any group of companies).

Full details can be found in the Residential property developer tax manual.

Small housing developments

Government recognises that small housing developments should play a greater role in the development of additional homes. Small housing developments offer an opportunity to increase residential density of an area whist offering homes that are respectful of local character.

Small housing development sites typically consist of 0.25 hectares or less.

Small and Medium-sized Enterprises (SMEs)

Government is keen to put supportive measures in place for SMEs and welcome views.

Typically:

Micro Builders = 1 to 10 homes per year.
Small Builders = 11 to 100 homes per year.
Smaller Medium Builders = 101 to 500 homes per year.
Larger Medium Builders = 501 to 2,000 homes per year.

There is a generally understood definition of SMEs within the UK as being any organisation that has fewer than 250 employees and a turnover of less than €50 million or a balance sheet total less than €43 million.

Supported housing

Supported housing provides help to some of the most vulnerable people in our country. Supported housing is provided alongside support, supervision, or care to help people live as independently as possible. This includes

• older people
• people with a learning disability
• people with a physical disability
• autistic people
• individuals and families at risk of homelessness
• people with experience of the criminal justice system / Accommodation
• people recovering from drug or alcohol problems
• young people with supported needs
• people with mental ill health
• people fleeing domestic abuse

Transitional arrangements

This refers to the arrangements government will set in place so that projects will not attract the levy if they are already at a certain point of the Building Control System on the date the levy becomes operational.

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1. The Building Safety Act 2022 amends the Building Act 1984 so that regulations can be made which make provision for the imposition of a levy. ↩

2. Section 106 agreements, or planning obligations, are legal obligations entered into to mitigate the impacts of a development proposal. ↩

3. By “unit” we mean one residential dwelling such as a flat or a house. ↩