Building Safety Levy: What developers need to do before 1 October 2026

The Building Safety Levy (BSL) comes into force on 1 October 2026 and will introduce a potentially significant new cost for major residential development. With levy rates reaching more than £100/m² in some areas and payment linked to the building control process, developers should now be reviewing project pipelines, live transactions, viability assumptions, funding models and exemption opportunities.

The Building Safety Levy (England) Regulations 2025 have provided much of the detail developers have been waiting for. Although aspects of the regime continue to evolve, including proposed amendments to the previously developed land (PDL) discount, the key features are now sufficiently clear for developers to assess the likely impact on future projects.

In this article, we look at how the BSL will operate in practice, the commercial risks for developers and the steps developers should be taking in September before commencement.

In summary, developers should now: identify schemes that may be caught; check whether relevant building control steps will fall before or after 1 October 2026; revisit appraisals and funding assumptions; review existing and proposed transaction documents; assess exemptions; and gather evidence for any PDL discount claim.

Why BSL matters

The BSL forms part of the Government's wider building safety reforms following the Grenfell Tower tragedy. Its purpose is to ensure that the development industry contributes towards the cost of remediating historic building safety defects, reducing the burden on leaseholders and taxpayers.

Importantly, the BSL sits within the building control regime rather than the planning system. While there are similarities with Community Infrastructure Levy (CIL), liability arises through the building control process rather than through implementing a planning permission. That distinction is likely to have significant practical consequences for developers, including schemes that already have planning permission or are moving through a transaction process, but where building control applications, notices or approvals will be made after 1 October 2026.

BSL is not just another development cost. Because it sits within the building control regime, it has the potential to affect project delivery and completion in a way that CIL generally does not.

Which developments are caught?

Broadly, the BSL applies to major residential developments and purpose-built student accommodation, including:

• developments comprising 10 or more dwellings; or
• purpose-built student accommodation providing 30 or more bedspaces.

The BSL may also apply to certain extensions, conversions and changes of use where relevant floorspace thresholds are met.

The amount payable is calculated by reference to chargeable floorspace and location-specific rates set out in the Regulations. Different rates apply across local authority areas. For non-previously developed land, the rates range from £100.35/m² in Kensington and Chelsea to £12.70/m² in County Durham. The highest rate is almost eight times the lowest, demonstrating the potentially significant impact of location on overall BSL liability.

For larger schemes or developments in higher value areas, BSL may represent a material development cost that needs to be reflected in land bids, appraisals and funding assumptions.

Who is liable to pay the BSL?

The client named in the relevant building control application is liable to pay the BSL. Developers should ensure that responsibility for the BSL has been considered when structuring development arrangements, particularly where developments involve landowners, promoters, development managers, joint ventures, forward funding, forward sale arrangements or phased delivery structures.

Developers should also consider whether existing contractual arrangements adequately deal with the BSL. Agreements entered into before the detail of the regime became clear may not contain appropriate provisions dealing with levy risk, exemptions, discounts or responsibility for payment. This should be checked in land contracts, option agreements, conditional contracts, promotion agreements, development management agreements, forward funding agreements and sale agreements.

Exemptions remain critical

The Regulations contain a number of exemptions aimed at developments delivering a wider social or community benefit, including social housing, supported housing, care homes, hospital accommodation, school accommodation, temporary accommodation for homeless people and domestic abuse refuges.

Given the potentially significant sums involved, developers should assess at an early stage whether any exemptions may apply and ensure that they can evidence their eligibility.

Encouragingly, the social housing exemption largely mirrors the categories of housing which currently qualify for social housing relief under CIL. Registered providers and developers delivering affordable housing products which already benefit from CIL social housing relief are therefore likely to find the BSL exemption familiar. Importantly, the Regulations do not require a section 106 agreement to be in place, meaning that grant-funded units may also qualify for the exemption.

Brownfield development and the 50% PDL discount

One of the most significant aspects of the BSL is the 50% discounted rate available for qualifying PDL. If the proposed 2026 amendments are made in their current form, the discount could have a material impact on the viability of brownfield and regeneration schemes.

By way of illustration, a residential development delivering 150 apartments and 12,500m² of chargeable floorspace in an area with a levy rate of £40/m² could generate a BSL liability of approximately £500,000. If the scheme qualified for the PDL discount, that liability could reduce to approximately £250,000.

Following publication of the Regulations, questions were raised about what types of land would qualify for the discount, particularly where sites comprise hardstanding or other developed surfaces.

The draft Building Safety Levy (Amendment) (England) Regulations 2026, if made in their current form, seek to provide greater clarity. In particular, they broaden the definition of a 'building' and confirm that:

• land may qualify as PDL where a building currently exists, or has existed, on the site since 1 July 1948;
• certain categories of land remain excluded, including some agricultural, forestry, landfill and mineral extraction sites; and
• at least 75% of the development site must satisfy the PDL criteria before the discounted rate applies.

For some higher value schemes, qualification for the PDL discount could affect land value assumptions, viability assessments and the timing of development decisions. Eligibility should therefore be reviewed at an early stage and supported by appropriate evidence.

Developers seeking to rely on the PDL discount should not assume that a site's planning history will be sufficient. Historic mapping, aerial photography, site investigations and other evidence demonstrating the existence of qualifying development may be required.

The key differences between the BSL and CIL

Many of the enquiries we are seeing originate with planning teams, which is perhaps unsurprising given the similarities between BSL and CIL. However, while both are development-related charges, they serve different purposes and operate through different statutory regimes. Developers familiar with CIL should be cautious about assuming that BSL will work in the same way.

In particular:

The key takeaways

Much of the discussion around the BSL has focused on cost. However, for many developers, the more significant challenge may be understanding how the levy interacts with project delivery, funding and building control processes.

With commencement now one month away, developers should be considering not only the potential financial impact of the levy, but also how levy liability will be identified, managed and factored into project planning from the outset. There are a number of practical steps that developers may wish to consider, including:

1. Timing matters – Developers with residential schemes progressing towards implementation should carefully consider whether relevant building control applications, notices or approvals are expected before or after 1 October 2026.
2. Review transaction documents – the BSL should also be considered when allocating development costs and risks under land contracts, option agreements, conditional contracts, promotion agreements, development agreements, development management agreements, forward funding arrangements and sale agreements, particularly where project appraisals were prepared before the levy was introduced.
3. Review potential exemptions – A careful assessment of the available exemptions may have a material impact on development costs. This is likely to be particularly significant for schemes involving social housing, supported housing and other forms of development intended to deliver a wider social benefit.
4. Consider eligibility for the previously developed land discount –For brownfield and regeneration schemes, qualification for the 50% previously developed land discount could result in a significant reduction in BSL liability. Developers should therefore ensure that sufficient evidence is available to demonstrate eligibility where appropriate.
5. Engage early – Early engagement between planning, legal, development and technical teams is likely to reduce the risk of delays, additional costs and compliance issues later in the development process.

Looking ahead

With commencement now one month away, attention is increasingly turning to what the BSL will mean in practice.

While developers now have greater certainty about how the BSL will operate, the proposed 2026 amendments show that some aspects are still being refined. The changes relating to previously developed land are a good example and, if made in their current form, could make a real difference to the cost and viability of many brownfield and regeneration schemes.

Developers and funders should also consider the potential implications of unpaid BSL for practical completion, drawdown mechanics, sales completions and exit strategies.

Whatever the final detail, it is already clear that the BSL will become a key consideration alongside CIL, section 106 obligations and other development costs. Developers should therefore be considering now whether the BSL will apply to their projects, whether any exemptions or discounts may be available, and how potential liability has been factored into project budgets and transaction documents.

The key question is no longer whether the BSL will arrive, but which projects it will affect and how that impact will be managed. Developers who identify affected schemes before the BSL comes into force, assess levy exposure, review transaction documents, test exemption opportunities and gather evidence for the PDL discount will be better placed to manage viability, avoid delays and maintain programme certainty.

If you would like to discuss the Building Safety Levy or its interaction with Community Infrastructure Levy and other development costs, please contact James Clark or Chloe Wood. We would be happy to discuss the potential implications for your projects and development pipeline.