As the industry prepares for the Building Safety Levy, new research from the Home Builders Federation (HBF) and Quantum Development Finance reveals widespread concern about its impact on housing delivery.
The research, based on a survey of SME home builders across England, found that more than nine in 10 (91%) believe the levy, due to come into force on 1 October, will make developments financially unviable. More than one-third (36%) said they have already delayed, redesigned, or cancelled schemes in anticipation of its introduction.
The levy will add further pressure to an industry already facing sharply rising development costs, HBF says. Its recent Viability Crunch report found that the cost of building a typical new home has increased by around £76,000 over the past five years. The Building Safety Levy accounts for £2,320 of this increase, alongside other taxes, levies and inflationary pressures. This will further compound the financial pressures facing smaller home builders, adding to an already growing burden of taxes, levies, policy requirements, and inflationary cost pressures.
SME home builders also expressed disappointment that an exemption was ruled out for medium-sized developments. Unlike larger developers, SME builders will also be required to pay the levy when the first home on a site is completed, placing additional pressure on cash flow at one of the most financially constrained stages of development.
HBF is calling on the Government to pause the introduction of the Building Safety Levy and undertake a full assessment of its necessity and potential impact before it comes into force. This should include a clearer analysis of the remaining remediation costs and the effect the levy could have on the delivery of both private and affordable homes, particularly given that more than £2.5bn of the existing £5.1bn Building Safety Fund remains unallocated.
Neil Jefferson, Chief Executive of the HBF, said: “The Government has set ambitious housing targets, but the ongoing layering on of costs onto development by successive Governments has made a growing proportion of potential house building sites unviable.
“The new levy, compounded by other rising costs, tighter margins and challenging market conditions, will make even more developments unviable. SME developers in particular are being forced to rethink investment decisions, delay sites and reduce output as costs continue to increase.
“The home building industry is already making a substantial contribution towards the cost of remediating historic building safety issues, yet this levy places a further burden on developers who played no part in creating those problems.
“We are urging the Government to pause the introduction of the levy and assess whether it is still necessary, particularly given the significant unallocated funding that already exists.”