The Building Safety Levy: consultation

Question 1

Scope of the consultation

Accepted Answer

Topic of this consultation:

This consultation seeks views on the design and implementation of the Building Safety Levy (the Levy). The Levy will be paid by developers and charged on new residential buildings requiring building control approval in England, for the purpose of meeting building safety expenditure.

The levy was announced in February 2021 and will ensure the taxpayer and leaseholders do not pay for the necessary remediation of building safety defects.

It covers the following areas:

1) Overview and update

2) Exclusions

3) Supportive measures

4) Impact on industry

5) Sanctions and incentives

6) Appeals

Scope of this consultation:

All residential buildings in England. Exclusions may apply.

Geographical scope:

These proposals relate to England only.

Impact assessment:

An Equality Impact Assessment and New Burdens Assessment will be published alongside the government response.

A draft Regulatory Impact Assessment was previously published as part of the Building Safety Bill.

Question 2

Basic information

Accepted Answer

Body/bodies responsible for the consultation:

Department for Levelling Up, Housing and Communities

Duration:

This consultation will last for 10 working weeks from 22 November 2022 to 7 February 2023.

Enquiries:

For any enquiries about the consultation please contact: buildingsafetylevy@levellingup.gov.uk

How to respond:

You may respond by completing an online form. This is the preferred way to respond.

Alternatively, you can email your response to the questions in this consultation to: buildingsafetylevy@levellingup.gov.uk

If you are responding in writing but not using the online survey, please make it clear which questions you are responding to.

When you reply, it would be very useful if you confirm whether you are replying as an individual or submitting an official response on behalf of an organisation and include:

your name,
your position (if applicable),
the name of organisation (if applicable),
an address (including post-code),
an email address, and
a contact telephone number

Question 3

Chapter 1: Executive summary

Accepted Answer

This consultation seeks views on the technical details and implementation of the Building Safety Levy (hereinafter the levy), which will apply to new residential buildings requiring building control approval in England, for the purpose of meeting building safety expenditure.

This levy was announced in February 2021 to ensure the taxpayer does not pay for the necessary remediation of buildings safety defects.

This consultation covers the following areas:

Chapter 1: Executive summary

Chapter 2: This consultation: purpose and how to respond

Chapter 3: How the levy will work

Design of the levy
Collection Agency
Levy review period
Delivery, process, and timings
Sanctions

Chapter 4: Levy rate

Basis for levy calculation
Differential levy rates
- Geography
- Land type
Illustrative levy rate

Chapter 5: Exclusions

Annex A: Glossary of terms

Annex B: List of questions

Key proposals

1. Set out below is a summary of the key proposals for the technical detail and implementation of the levy, building on the consultation already undertaken in 2021 and the powers as set out in the Building Safety Act 2022. Further details can be found in the relevant chapters.

Scope: The levy will apply to all new residential buildings requiring building control approval, in England only and will be paid by the “Client” – the responsible developer.
Exemptions: so as not to obstruct the development of community facilities, we are proposing to exclude certain buildings from the levy, including Affordable Homes, NHS Hospitals, NHS Medical Centres, and NHS GP Centres, Residential Care Homes and Children’s Homes, Refuges and Residential Domestic Abuse Facilities, Criminal Justice Accommodation, Military Barracks and other Military Establishments. We also suggest that we exclude Small Developments (under 10 units) to protect small businesses, and we are seeking views on the exclusion of Conversions.
Basis of levy calculation: we set out options on which basis the levy rate is applied either on a ‘per unit’ basis (that is, per dwelling in a development), or a ‘per square metre’ basis. We suggest setting differential rates based on local authority boundaries, to reflect land value and house prices, and based on whether the site is brownfield/greenfield. We suggest regular reviews of the levy, perhaps every 3 years.
Protection for Small and Medium Sized Enterprises (SMEs): We are seeking views on how best to support SMEs. This is why we are suggesting excluding developments under 10 units or the square metre equivalent.
Delivery and collection: We are considering that local authorities be asked to act as the collection agency for the levy, as they are central to the building control regime. We suggest a 2-step process for the collection of the levy which will allow the use of stop notices within the building control process.

Question 4

Chapter 2: Responding to this consultation

Accepted Answer

Purpose

2. This consultation seeks views and evidence on the high-level design principles of the levy. Results of this consultation will inform final decisions on the operational design of the levy and the secondary legislation which will specify the details of the levy. It will also inform an impact assessment of the levy.

3. The body responsible for the consultation is the Department for Levelling Up, Housing and Communities (DLUHC).

Duration: This consultation will last for 10 working weeks from 22 November 2022 to 7 February 2023.

Enquiries For any enquiries about the consultation please contact: BuildingSafetyLevy@levellingup.gov.uk

How to respond:

4. It is preferred that you respond on the online form.

5. We are mindful of ensuing full accessibility. If you cannot access, or use the online form, then please email your response to BuildingSafetyLevy@levellingup.gov.uk.

6. If emailing, please make it clear which questions you are responding to, and we ask that you confirm whether you are responding as an individual or submitting an official response on behalf of an organisation and include:

your name
your position (if applicable)
the name of the organisation you are responding on behalf of (if applicable),
a full postal address (including post-code)
an email address and
a contact telephone number

7. If you are responding as an individual, it would be helpful if you can explain your interest in the levy.

Workshops and surgeries

8. The Building Safety Levy team would like to engage with interested parties, especially developers of all sizes, building control professionals and local authorities, and will facilitate informative surgeries during the 10 working week consultation process.

9. If you would like to be included, please contact us at BuildingSafetyLevy@levellingup.gov.uk by Friday 2 December 2022.

Why are we consulting?

10. Government carried out a public consultation on the Building Safety Levy from 15 July to 21 October 2021. We thank those who responded for their valuable and informative contribution.

11. Since that consultation, and following the government’s announcement in February 2022, the scope of the levy has expanded to apply to all new residential developments that require building control approval. Section 58 of the Building Safety Act 2022 gives the Secretary of State broad powers to raise a levy on any relevant building which is defined as “a building in England consisting of or containing

A) one or more dwellings, or

B) other accommodation, (and “accommodation” here includes temporary accommodation for example in a hotel or hospital)

12. This means the levy can be applied on any new development considered as “residential”, that is any development with a room purpose built for a person to sleep in.

13. Following Royal Assent of the Building Safety Act in April 2022, we are now designing how the levy will work, and on what basis it will be applied.

14. This consultation sets out government intentions in relation to the levy. Final decisions will not be taken until this consultation is complete and the results have been analysed. We will publish a response to this consultation in due course. All views and representations are welcome.

Expanded scope

15. The levy is part of an existing package of measures to ensure that the burden of paying to fix historical building safety defects does not fall on leaseholders and DLUHC have already taken the necessary primary powers to implement the levy.

16. On 10 January 2022, the then Secretary of State for Levelling Up, Housing and Communities (DLUHC) made a statement in the House of Commons giving an update on building safety. In that statement he made it clear that government had already committed £5.1 billion of taxpayers’ money to fix building safety problems. The Building Safety Bill was amended to expand the scope of the levy to cover all residential buildings requiring building control approval, Following Royal Assent on 28 April 2022, the Building Safety Bill became the Building Safety Act 2022.

17. On 13 April 2022, the Secretary of State for Levelling Up, Housing and Communities announced a wide-ranging agreement with major homebuilders who had pledged to commit £2 billion to fix their own buildings and that the intention was to deliver an estimated £3 billion from the levy.

18. Given the changes from the previous proposed scheme we consider it necessary to engage in a further consultation.

Design approach

19. In implementing the levy, we are seeking to support government’s aims to support the Levelling Up agenda, minimise the impact on housing supply, particularly in relation to Affordable Housing and protect taxpayers and leaseholders from paying to fix problems they did not cause.

20. As part of the government’s ‘Levelling Up Agenda’ we recognise geographical inequality and are committed to giving different areas across England a fair opportunity to flourish. Regenerating towns and cities is one aspect of the Levelling Up agenda. One way that will happen is through the remediation of brownfield land.

21. In support of both, we are considering setting differential levy rates based on two factors: one based on average house prices in local authority areas and a second based on brownfield versus greenfield developments. Brownfield developments are typically contaminated, under-utilised, or abandoned sites, while greenfield sites are undeveloped land within or outside a city, typically on agricultural land. See Chapter 4 on Differential Levy Rates.

Geographical scope

22. These proposals relate to England only.

Who will be responsible for payment of the Building Safety Levy?

23. The ‘Client’ will be responsible for payment of the Levy. By ‘Client’ we mean any named person or organisation for whom a construction project is carried out, including as part of their business.

24. The Client will usually be the industry/developers carrying out the building works. We consider that as the Client holds responsibility for the construction project, they should also be responsible for payment of the levy.

25. The levy must be paid by the ‘Client’ on all new residential developments in England that require building control approval. As such it is tied to the building control process in England and qualifying projects will be required to pay the levy regardless of where the developer is based. Unlike the Residential Development Property Tax (hereinafter RDPT), the levy is not based on profit.

Relationships with other taxes and charges on the sector

26. This consultation focuses on the Building Safety Levy. We are aware there are other charges in place on the building industry, including the RPDT and the Community Infrastructure Levy (CIL) in around half of local authorities. We are considering the cumulative impact of these measures, and this may be taken into consideration in setting levy rates.

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?

See Annex A for further definitions and glossary of terms.

Question 5

Chapter 3: How the levy will work

Accepted Answer

Overview of the design of the levy including delivery process and sanctions

27. This chapter seeks views on the suggested levy design which includes how the levy will work, the levy rates, who must pay the levy, what is in scope of the levy, what sanctions and enforcement will apply, and who is responsible for collecting the levy. Full details of how the levy will work, including levy rates, will be set out in secondary legislation for Parliamentary approval.

28. We have considered several design options for the collection of the levy. In principle we want the process to be as administratively simple as possible for both the collection agency and for clients. It should be an additional step that fits naturally in the existing process and, where the levy is paid in full and on time should not cause any undue delay. Regulations will make it clear that unless the levy is paid, the client cannot move on to the next stage of the building process. We are also considering whether there should be financial penalties for non-payment of the levy. Paying the levy will be a compulsory requirement of the Building Control process.

29. The levy will be applied on all new residential building developments in England and will contribute towards funding remediation of buildings over 11m in height.

30. The Secretary of State will set the levy rate (or rates, if there are to be differential rates).

Collection agency

31. We suggest that local authorities are best placed to act as the levy collection agency.

32. As local guardians of the building control regime, local authorities have established systems, data, knowledge, and relationships in place with the developer sector. They also have systems in place for the collection of fees. Given the statutory responsibilities of local authorities for building control, we think local authorities are best placed to act as the collection and administration agency. However, all building control authorities will have a role to play in the levy collection process, and we will set out these expectations in guidance.

33. In furthering this suggestion, we will work with local authorities to help shape the levy design including identifying the administrative and costs burden. We are especially keen to hear local authority views on this section.

34. Payment of the levy will be an integral part of the building control process for developments that require approval. Checks and balances to monitor payment will be in place and non-compliance may result in sanctions and / or enforcement measures. To note we refer to the collection agency throughout this document even though we suggest that local authorities act in that capacity.

35. We appreciate that acting as the collection agency is a new burden on local authorities outside of the current statutory responsibilities in relation to building control. We intend to allow the collection agency to retain a proportion of levy receipts to pay for the additional administrative burden, as provided for in the Building Safety Act, section 58:

(8) The regulations must provide for any amount received by a designated person by way of a levy to be paid to the Secretary of State, subject to retention of an amount, determined by or in accordance with the regulations, in respect of the costs of administering the levy.

36. The amount that the collection agency can retain will be set by the Secretary of State. As a comparator, local planning authorities can retain up to 5% of the Community Infrastructure Levy they collect to meet administration costs.

37. Receipts from the levy, minus the agreed amount to cover administration costs will be returned to DLUHC by the collection agency on a regular basis with agreed management information. We suggest that receipts be returned to DLUHC every quarter.

Question 2: Who do you think should act as the collection agency for the levy? Please give reasons for your answer.

Question 3: What proportion of receipts do you think the Collection Agency should retain? What administration costs will that need to cover?

Question 4: How frequent should revenue returns be provided to DLUHC? Please give reasons for your answer.

Levy review point

38. The levy will be used to pay for remediation of cladding in buildings over 11m in height. We are grateful to those developers who have signed up to remediate cladding in buildings they have been involved with over the past thirty years. We estimate that we need to raise £3 billion to pay for those buildings not covered by this commitment, and which will not be funded through the £5.1 billion already committed by the government.

39. We are aware that this figure may need to be adjusted, up or down, to reflect changes in the number of buildings that require remediation. We are also aware that the sector needs a level of certainty on the levy rates to allow them to project plan effectively. We are also aware that the levy will have an impact on the viability of some projects. We will want to take all of the above into consideration during the lifetime of the levy. We therefore propose that we review the levy rate and design of the levy regularly and are considering regular reviews every 3 years.

40. In considering the review points we would want to balance providing certainty over levy rates to allow the sector to plan ahead, with the ability to respond to changing circumstances, including the needs of the remediation programme or impact on housing supply.

41. We welcome views on whether reviews should be more frequent to respond quicker to changing circumstances.

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

Delivery, process, and timings

42. The government aims to make the levy as transparent and simple to pay and administer as possible.

43. We anticipate an element of self-assessment by the client as part of the system for the levy, supported by documentation provided by the client, which will then be reviewed by the collection authority.

44. We will set out in secondary legislation any additional documentation to that already required by Building Regulations that needs to be supplied to facilitate the collection of the levy. We anticipate requirements will be in line with the documents that currently need to be submitted in a building control application.

45. We suggest that levy payments be split into two. Set out below is a step-by-step description of how we envisage the levy assessment and payment process will work.

Prior to giving notice of commencement, the client self-assesses the total amount of levy to be paid based on the levy rate in that area, size of the project (either number of housing units or square metres) and any differential rate that is applicable. Documentation supporting that self-assessment should be provided to the collection agency.
Payment of majority of the total levy: we suggest 60% of the levy is payable at the “notice to commence” stage and should be sent to the relevant collection agency within a set timeframe.
The collection agency will issue a receipt of payment to the relevant Building Control Officer to pass on to the client.
The local authority will issue a stop notice if the levy payment is not received within the set timeframe.
The remaining percentage of the levy, we suggest 40%, will be due prior to final certification stage.
At final inspection the relevant Building Control Officer will assess the actual completed project as part of the final inspection. Any variance between the total amount and the self-assessed amount will be applied at this point by the collection agency, who will issue an invoice
Client pays the levy to the relevant collection agency.
The collection agency will issue a receipt of payment to the relevant building control professional.
Neither Completion nor Final certification can be issued by the relevant building control professional until they have receipt of payment.

46. We suggest collection of a proportion of the levy at notice of commencement stage as government is keen to apply the levy at the stage where commitment to the project is fixed. We also consider it important the levy is applied earlier in the building control process to enable us to prevent progression if the levy is not paid.

47. We consider a two-step process necessary as projects can change during construction, becoming larger or smaller. The two-step process allows clients to self-assess their levy amount based on what they intend to build and gives the collection agency a clear step in which to adjust that self-assessment based on what is actually built, with minimum delay.

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

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.

Question 8: 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.

Sanctions and appeals

48. The government suggests that the principal sanction for non-payment of the levy be halting the progress of a development, either through issuing a stop notice or withholding final certification.

49. We are looking at setting out a range of approaches to sanctions beyond the withholding of building control approval. This could include punitive fines for deliberately sending misleading information, withholding information, late payment or seeking to evade or non-payment of the levy.

50. We note the sanctions in relation to the Residential Property Developer Tax (RPDT). The RPDT was designed to be part of corporation tax and is using the existing corporation tax penalties regime. In this regime the amount of the penalty is calculated by applying a percentage to the amount of tax that you owe. The percentage applied depends on whether the failure was:

careless - a lack of reasonable care
deliberate - such as intentionally sending incorrect information
deliberate and concealed - such as intentionally sending incorrect information and taking steps to hide the error or intentionally attempting to avoid payment of the levy

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

Question 10: Do you think that the failures outlined above may occur in operation of the levy? If so, how best can they be avoided?

Question 11: Is it reasonable to consider the sanctions regime of the RPDT in relation to the levy?

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

Question 6

Chapter 4: Basis of levy calculation

Accepted Answer

51. When in force, the levy will represent an additional cost to developers: we anticipate therefore that there will be an impact on the viability of some more marginal projects which in turn would affect the overall numbers of homes being built. In the medium and long term, we anticipate the levy will feed through into land prices, as it will reduce the sum developers are willing to pay for land.

52. Government is also aware of the different charges on the sector including the RPDT and CIL. In deciding on the final levy rate, the government will consider the potential cumulative impacts of all these charges on the supply of housing.

53. In setting the rates, the Secretary of State will therefore take into account impacts on housing supply – seeking to minimise them as far as possible through design of the levy, whilst ensuring the levy can generate the revenue required to remediate historic building safety defects.

54. In addition to the impact on the viability of some projects, the government is aware that the levy could have a greater effect on smaller developers who may lack the capital and or credit arrangements to pay the levy in a timely way. We are minded therefore to put in place measures to protect smaller developers.

Basis for levy calculation and differential rates

55. In seeking to generate revenue from the levy and minimise the impact on housing supply, this section seeks views on how the levy rate will be applied.

56. As noted above, we suggest that we review the levy rates regularly, possibly every 3 years and will consider adjusting for inflation at the review points as needed.

Basis on which to calculate the levy

57. We set out below two options by which the levy could be calculated. We are keen to hear your views on which would be best.

Option 1: The levy is calculated on a ‘per unit’ basis

Government sets out the levy rate to be applied on each unit built in a development. For example, in a development of 200 housing units the total levy change would be 200 times £[levy rate].

58. This would be administratively simple but may drive a behavioural change encouraging developers to build fewer but larger homes leading to a net impact of reducing supply.

59. In this option we suggest the levy is not applied on small developments, below 10 units in total, to avoid disproportionate administrative costs and protect small developers.

Option 2: The levy is calculated on a ‘per square metre’ basis

Government sets out the levy rate to be applied on a per square metre (m²) basis on any development regardless of the number of homes being built. For example, a development of 10,000m² the levy rate would be 10,000 times £ [levy rate].

60. We consider this is also administratively simple. In addition, it is the basis on which the Community Infrastructure Levy is calculated, therefore it can be assumed that the industry is accustomed to factoring charges made on this basis.

61. In this option we would set the per square metre figure below which the levy is not applied to avoid disproportionate administrative costs and protect small developers.

Question 13: Which of the options above do you think is the best basis on which to implement the levy? Please give reasons for your answer.

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

Differential levy rates

62. The Levelling Up agenda is a moral, social, and economic programme for the whole of government to spread opportunity more equally. We are seeking your views on how best to set levy rates that will best support those aims and capture the different values from developments in different areas on as equitable a basis as possible.

63. Although we announced in April 2022 that we expect to deliver £3 billion for housing remediation through the levy, there is scope to weight levy rates to reflect geographic differences in land value, housing markets, and the impact of the levy on the viability of new developments.

64. In considering responses to the options and questions below, government will seek to balance tailoring the levy to local circumstances with administrative simplicity, thus maximising efficiency and effectiveness.

Differential rate by geography

65. We are considering setting a differential levy rate based on geography in order to protect the viability of projects where land values and house prices are lower than in other areas. Set out below are 2 options.

Option one: set a differential levy rate based on local authority boundaries.

This option would set a differential levy rate based on average house prices in local authority (LA) areas. It would reflect different values at a more granular level than regionally and is therefore likely to result in flatter and slightly lower supply impacts than a regionally based levy. This is government’s preferred option.

Option two: set a differential levy rate on a regional basis.

This option would set a differential levy rate based on average house prices in each of the regions. It is slightly simpler than a LA based levy but it does not consider the difference in LA level house prices across the region so it is expected to lead to larger viability impacts, with more units at risk in those local authorities where average house prices are below the regional average.

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.

Question 16: Which of the two options outlined above would you prefer? Please give your reasons for your answer.

Differential rate by land type

66. In addition to a geographic differential rate, we are also considering setting a differential levy rate based on land type, that is between brownfield and greenfield developments, as defined in the National Planning Policy Framework. This would allow the levy rates to take account of the higher viability risk associated with developments on brownfield land due to higher existing land use values and site clearance costs. To ensure simplicity we suggest that this differential should be consistent in every geographic area.

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?

Levy rate and transitional arrangements

67. We will want to take account the responses to this consultation to help us finalise what will be in scope and how the levy will work. As such we are not setting out possible levy rates in this consultation.

68. As was announced on 13 April 2022, the government’s intention is to raise £3 billion for remediation from the Levy. It is anticipated that the first year of operation will provide only a proportion of that amount with revenue increasing over year 2 and 3 of the levy when it will reach a “steady state”. A government intends to minimise the impact that the levy will have on viability of projects and therefore protect housing supply through its design and the levy rates.

69. There is uncertainty about the impact on housing supply, which will in part, hinge on behavioural responses by developers. However, we note that in 2018/19, developers contributed about £7 billion through Community Infrastructure Levy charges and “section 106” contributions which is mainly for provision of affordable housing. Over 10 years that would be around £70 billion. A £3 billion levy over 10 years represents around 4% of that figure.

70. We intend to set up transitional arrangements for the first year of operation which detail whether a development is subject to the levy dependent on which point within the building control process it has reached when the levy comes into operation. It is anticipated that projects that are already at commencement stage on the date the levy goes live will not be subject to the levy and that there will be a grace period for any project that has already entered the building control process on the date the levy comes into operation.

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

Question 7

Chapter 5: Exclusions

Accepted Answer

Exclusions from payment of the levy.

71. The scope of the levy in the Building Safety Act is broad and covers “all relevant buildings”.

It is further defined as “a building in England consisting of, or containing –

a) One or more dwellings or

b) Other accommodation (and ‘accommodation’ here includes temporary accommodation, for example in a hotel or hospital).

72. 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. We are proposing therefore certain exclusions which are detailed below. We welcome your views on these.

73. We are mindful that the greater the number of exclusions that apply, the higher the levy amount on projects that remain in scope of the levy will be. Any exclusions potentially increase complexity, risk, and market distortion, whilst reducing revenue and that needs to be balanced with the government’s commitment to the Levelling Up agenda and to increase the stock of affordable housing.

74. The proposed exclusions are:

75. We have not yet determined an approach for the Build to Rent, purpose-built student accommodation and older people’s housing sectors given their varying business models, the different timescales at which profit is realised and the feedback we are seeking on design elements of the levy. We will consider the case for each following the consultation process and wider engagement with industry.

Question 19: What are your views on the above exclusions? Please set out whether you agree or disagree and give reasons for your answers.

Question 20: Do you have any views on Build to Rent developments, purpose-built student accommodation, older people’s housing. If so please set them out.

Question 21: Do you agree Affordable Homes should be excluded from payment of the levy?

Please give reasons for your answer.

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

Please give reasons for your answer.

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

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

Please give reasons for your answer.

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

Please give reasons for your answer.

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

Please give reasons for your answer.

Question 27: Do you agree Domestic Abuse facilities should be excluded from payment of the levy?

Please give reasons for your answer.

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

Please give reasons for your answer.

Question 29: Do you agree Criminal Justice Accommodation be excluded from the levy?

Please give reasons for your answer.

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

Please give reasons for your answer.

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

76. As set out elsewhere in this consultation, we are proposing that affordable housing will be exempt from the Levy. We think it is important that the design of the Levy recognises the particular value of delivering more affordable housing. Therefore, we are also proposing that, where a development includes a specified proportion of affordable housing, the remainder of that development could benefit from a significantly discounted levy rate – in addition to the exemption for the affordable housing as part of that development.

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 or affordable housing?

Question 8

Annex A: Glossary of terms

Accepted Answer

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

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.

Although the build-to-rent sector is profit-making it has benefitted from government support along with other parts of the building industry. Therefore, there is an argument for it to contribute to levy.

We are aware that the profits from this sector take the form of longer-term rental yields rather than an upfront one-off profit, and therefore an upfront application of the levy may have a disproportionate impact on the viability of some build-to-rent projects. 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. Draft Regulations on the responsibilities of duty-holders in construction have been published alongside the Building Safety Bill. See details here:

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.

Duty holder

Anyone (or any entity) that has responsibility for a defined thing, (in construction that would usually be a project or aspect of a project).

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.

Local planning authority

The public authority whose duty it is to carry out specific planning functions for a particular area.

All references to local planning authority apply to the district council, London borough council, county council, Broads Authority, National Park Authority, and the Greater London Authority, to the extent appropriate to their responsibilities.

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.

The government is minded to exclude refurbishments where these are subject to building control approvals. We consider including such refurbishments would present a barrier to landlords maintaining the quality and safety of existing dwellings. Whilst for leasehold properties the levy would be likely charged back to leaseholders. This is not the intention of this policy.

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)

The is no official government definition of SMEs.

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

Typically:

Micro Builders = 1-10 homes per year.

Small Builders = 11-100 homes per year.

Smaller Medium Builders = 101 – 500 homes per year.

Larger Medium Builders = 501 – 2,000 homes per year.

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.

Question 9

Annex B: List of questions contained within consultation

Accepted Answer