The introduction of the Building Safety Levy, a tax on developers to raise money to pay for cladding remediation and protect leaseholders from costs, has been delayed by a year.
The levy was set to come into force this autumn but will now be launched in 2026, the government announced.
Pressure from housebuilders
This comes days after the Home Builders Federation (HBF) wrote to the government to suspend the levy, saying it would negatively impact plans to deliver one-and-a-half million new homes.
The charge was expected to raise around £3.4bn over 10 years.
HBF argued that no formal impact assessment had been carried out and said it would place a financial burden on developers, particularly SMEs.
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It said builders had already contributed nearly £6.4bn towards building safety remediation and argued that product manufacturers were yet to contribute financially.
HBF said the government had not demonstrated the need for the levy, considering £2.5bn of its £5.1bn Building Safety Fund was yet to be allocated.
Time to prepare
The government said the delay would allow local government, the Building Safety Regulator, and Registered Building Control approvers around 18 months to prepare for the levy and for housing developers to factor this into their financial planning.
The levy was set to be charged on all new dwellings and purpose-built student accommodation (PBSA) in England, with local authorities collecting the tax on behalf of central government.
Certain developments would have been exempt, such as affordable housing, care homes and children’s homes.
The charge will be based on the floor space of the development and rates will be higher in areas with higher house prices. There will also be a 50% discount on the levy rate for developments built on brownfield land.
Developers who do not pay will have their building control completion certificate withheld, which could prevent them from selling and occupying the property, as many lenders require this documentation.
Manufacturers should contribute to levy, HBF says
Neil Jefferson, chief executive at HBF, said the delay was “welcome recognition” from the government that additional costs would “inevitably constrain housing supply”.
However, he said the news that the government would eventually proceed with the “grossly unfair levy rather than obtaining contributions from powerful product manufacturers” was a “disappointment”.
Jefferson added: “As proposed, it will add thousands of pounds to the cost of new homes, threatening the viability of sites across swathes of the country at a time when industry is striving to reverse the decline in homebuilding numbers that we have seen in recent years.”
“UK housebuilders are already paying over £6bn to remediate all their own buildings as well as those built by other parties through the pre-existing building safety tax. Surely the companies that tested and supplied the dangerous materials, still yet to contribute a penny, should be targeted before government imposes yet another tax on British businesses, many of whom have never built anything taller than a typical family house.”
Conversely, Henry Griffith, policy and campaigns officer at Propertymark, said the decision was “disappointing”.
He noted that the delay came after figures from Parliament showed less than a third of funding to replace unsafe cladding had been committed, adding that “the rest presumably would be covered by the levy”.
Griffith said it was also a missed opportunity to use the levy to accelerate remediation by targeting developers that were failing to do this.
“In short, the entire housing sector is paying for the costs of remediation, which risks reducing supply, while those responsible for the cladding crisis can benefit from discounts.
“We fear that this will only prolong the cladding crisis,” he added.
Last week, the Public Accounts Committee (PAC) criticised the government’s cladding plan and said it was at risk of missing its 2029 deadline to remediate all buildings.
