A Building Safety Levy will soon come into effect in the UK, the latest addition to the government’s post-Grenfell plan to improve the safety standards of buildings across the country.

The cost of the levy will be absorbed by property developers, so property owners may not be paying much attention as it quietly comes into force early next year. However, in certain circumstances, it may also have an indirect effect on rebuild value, therefore presenting an underinsurance risk.

In this article, we explain what the Building Safety Levy is, and why property owners should pay attention to the charge despite not having to deal with it directly.

What is the Building Safety Levy?

The Building Safety Levy is a charge issued to developers at the building control approval stage of new residential projects. 

The fee will be collected by local authorities, with the funds raised to be allocated to upgrade unsafe buildings in the UK. Due to the nature of the Grenfell Tower tragedy, buildings with cladding issues will be a particular focus.

When does the Building Safety Levy come into force?

The government’s current roadmap suggests the Building Safety Levy will come into effect on the October 1, 2026.

The government had announced an intention to launch the levy in Autumn 2025 as part of the Remediation Acceleration Plan published in late 2024. In March 2025, the government confirmed a delay of a year, pushing the start date back to Autumn 2026 (specified as 1 October 2026 in later updates).

The reason given for the postponement was to allow local government, the Building Safety Regulator, and housing developers around 18 months to prepare for the levy, including factoring the new costs into their financial planning.

Are there any exceptions to the Building Safety Levy?

The levy, which applies to new residential buildings in England that require building control approval, is designed to exclude developments that provide important community facilities or are too small to place a major burden on them.

Key exemptions include:

• Small developments: Developments of fewer than 10 residential units.
  • For Purpose-Built Student Accommodation (PBSA), the threshold is fewer than 30 bedspaces.
• Affordable housing: Most affordable rent, social rent, and intermediate rent dwellings, and non-social homes built by a not-for-profit registered provider of social housing.
• Healthcare and social care:
  • NHS hospitals, medical homes, and GP practices.
  • Care homes and nursing homes.
  • Supported housing (except for private tenure supported housing).
• Other Community Facilities:
  • Children’s homes and domestic abuse shelters/refuges.
  • Accommodation for the armed forces and criminal justice accommodation (e.g., prisons).
  • Hospices.

How does the Building Safety Levy relate to property insurance?

Although the Building Safety Levy is a cost that falls directly on developers, property owners should be aware of its potential impact on rebuild costs.

If the worst happens, and your building is damaged beyond repair after the levy comes into effect, the rebuild would require building control approval. As this is the stage at which the levy is triggered, it may apply to your rebuild, increasing the total reinstatement cost of your property.

Payouts for buildings insured to their pre-levy rebuild value will not cover the additional charge, leaving owners to cover the difference out of pocket.

Learn the difference between rebuild cost and market value.

As with emerging green building standards, post-Grenfell building safety standards are already increasing the cost of rebuilds, with features such as non-combustible cladding materials, mandatory second staircases, and automatic sprinkler systems adding to development expenditures.

These materials costs combined with the new levy threaten to leave a sizeable gap in your coverage unless you seek up-to-date valuations via Reinstatement Cost Assessments.

Find out how often Reinstatement Cost Assessments should be carried out.

Building Safety Levi 2026 – rates

According to the government’s Technical consultation response, The Building Safety Levy will be a variable fee calculated as a rate per square metre of chargeable floor space, with the rate depending on two main factors:

1. The local authority area: Rates are weighted based on average house prices in each local authority area. Areas with the highest prices have the highest levy rates.
   
2. The type of land: There is a 50% discount for development on previously developed land

Local authorities will calculate the levy per building by multiplying the Gross Internal Area (GIA) of chargeable floor space by the applicable local rate. 

The highest rates will be:

• Approximately £100.33 per m2 of non-previously developed land
• Approximately £50.17 per m2 for previously developed land

The lowest will be:

• Approximately £12.70 per m2 of non-previously developed land
• Approximately £6.35 per m2 for previously developed land

Due to the nature of a rebuild, the “brownfield” discount will almost certainly be applied, but even then, for larger buildings, the levy can really stack up.

Consider the following examples:

• High rate local authorities –
  • Small block of flats
    • 10 flats × 80 m² each = 800 m² GIA
    • High-rate local authority: 800 × £50.17 ≈ £40,136
  • Mid-sized block of flats
    • 20 flats × 70 m² each = 1,400 m² GIA
    • High-rate local authority: 1,400 × £50.17 ≈ £70,238

• Low rate local authorities –
  • Small block of flats
    • 10 flats × 80 m² each = 800 m² GIA
    • Low-rate local authority: 800 × £6.35 ≈ £5,080
  • Mid-size block of flats
    • 20 flats × 70 m² each = 1,400 m² GIA
    • Low-rate local authority: 1,400 × £6.35 ≈ £8,890

As the Building Safety Levy effectively functions as an additional development tax, developers are likely to incorporate it into their overall project budget models. This may contribute towards increased construction costs over time, which again, will impact rebuild costs.

Find out why labour shortages in UK construction could mean you’re underinsured.

Book a reinstatement cost assessment with Cardinus

With the Building Safety Levi coming into effect just over a year from now, both property owners and developers have plenty of time to prepare. 

Property owners, it’s important to plan a Reinstatement Cost Assessment as soon as the levy is enforced, providing the up-to-date valuation you need to adjust your coverage and ensure you’re fully protected should your building be severely damaged.

Be prepared – book your Reinstatement Cost Assessment in advance with Cardinus, or explore our range of property services for additional support.