The National Federation of Builders made its frustration clear in July 2026 when the government confirmed it was removing a proposed exemption from the Building Safety Levy for medium-sized development sites. For many UK builders and developers, the Levy is an unfamiliar piece of legislation with significant financial implications. This guide explains what it is, who it affects, how it works, and what the NFB's challenge means in practice.
What Is the Building Safety Levy?
The Building Safety Levy (BSL) is a charge on new residential development in England. It was created under the Building Safety Act 2022 and is intended to raise funds to pay for the remediation of unsafe cladding and fire safety defects on existing high-rise residential buildings. These defects came to wider public attention after the Grenfell Tower fire in 2017, and subsequent surveys found thousands of residential buildings across England with cladding or other fire safety issues that their current owners could not afford to fix.
The principle behind the Levy is that new residential development should contribute to fixing the legacy problem. The government's reasoning is that the construction and development sector as a whole benefited from regulatory frameworks that allowed unsafe buildings to be constructed and sold, and that a sector-wide contribution is therefore appropriate.
Who Pays the Building Safety Levy?
The Levy is charged on developers who apply for building control approval on new residential buildings in England. In practice, this means any person or company constructing new homes for sale or for other residential purposes.
The Levy is charged per dwelling, with the rate varying depending on the location of the development (broadly higher rates in London and the South East, lower rates elsewhere) and the type of housing (houses and flats have different per-unit rates). Affordable housing units are exempt.
The developer pays the Levy at the building control stage, meaning it is paid before construction starts in earnest. For a developer building 20 homes in the Midlands, the Levy will represent a real upfront cost that must be factored into project finance before a spade goes in the ground.
What Was the Proposed Exemption for Medium-Sized Sites?
During the consultation and drafting process for the Building Safety Levy regulations, the government proposed exempting smaller and medium-sized development sites from the charge. The exemption was intended to protect smaller developers and builders who already operate on tighter margins than large volume housebuilders, and who were seen as less directly responsible for the mass-market cladding failures that the Levy is funding.
Definitions of what counted as a "medium-sized site" within the proposed exemption were subject to the regulations, but the principle was that sites below a certain threshold of dwellings would not attract the Levy.
What Changed in July 2026?
The government announced amendments to the Building Safety Levy regulations that, in the NFB's reading, confirm that the proposed exemption for medium-sized sites has been removed. The revised regulations "confirm definitions and remove the proposed exempt" categories, according to the source text from Professional Builders Merchant.
This means that medium-sized sites that the industry expected to be exempt are now likely to be subject to the Levy. For a builder developing a site of 20 to 50 homes, the difference between being exempt and being in scope represents a material cost increase on the project.
The NFB's Position
The National Federation of Builders is one of the UK's primary representative bodies for small and medium-sized construction contractors. Its membership is largely made up of the kind of business that builds 10 to 100 homes at a time rather than the large volume housebuilders.
The NFB's argument is that removing the medium-site exemption is a disproportionate burden on the companies least responsible for the cladding crisis. Large volume housebuilders were more directly involved in the construction of high-rise residential blocks with cladding issues. Smaller and medium-sized builders, many of whom operate on projects that bear no resemblance to the failed high-rise residential developments that the Levy is funding, are now being asked to contribute to a problem they did not create.
The NFB has also raised concerns about the timing and the cumulative effect of regulation. UK construction is already facing cost pressures from materials inflation, skills shortages, and planning delays. Adding a per-unit levy to medium-sized residential development projects reduces the viability of some schemes and may result in fewer homes being built.
Practical Impact for UK Builders and Developers
Increased project costs. Any builder or developer constructing new homes for sale in England now needs to budget for the Building Safety Levy as a real project cost. This applies even on relatively modest schemes.
Cash flow implications. The Levy is charged at building control stage, meaning cash leaves the project before significant construction spend. For smaller developers without large balance sheets, this is a meaningful liquidity consideration.
Viability assessments. Sites that were marginal in terms of financial viability before the Levy may now not stack up. Planning viability assessments will need to account for the Levy as a fixed project cost.
No change for affordable housing. Units delivered as affordable housing remain exempt. Schemes that include a high proportion of affordable housing are therefore less affected per unit than purely market-rate developments.
Self-build and custom build. The precise treatment of self-build and custom build under the final regulations is something affected parties should confirm with their planning and legal advisers, as rules for these categories can differ from standard residential development.
How the Levy Rates Work
The Building Safety Levy is charged per dwelling. The government published a rate schedule as part of the regulations, with rates varying by area. London rates are higher than rates in the rest of England, reflecting higher land and property values. Rural areas typically carry lower rates than urban areas.
As a rough illustration (indicative, not the final published rates): a developer in a mid-tier English city building 30 market-sale homes might face a Levy of several thousand pounds per dwelling, producing a total Levy liability on the project running into six figures. For a larger urban scheme, the total Levy across all units can be a significant fraction of total project cost.
Builders should consult the full rate schedule published by the government and factor this into their project financial models at the earliest stage of scheme development.
What Happens to the Money?
The revenue from the Building Safety Levy goes to the government's Building Safety Fund, which funds the remediation of fire safety defects in qualifying buildings. This includes work to remove or replace unsafe cladding, address structural fire safety issues, and bring buildings up to current regulatory standards. The fund is administered by Homes England on behalf of the Department for Levelling Up, Housing and Communities (now the Ministry of Housing, Communities and Local Government following machinery of government changes).
Building owners, freeholders, and leaseholders in qualifying buildings can apply to the fund for remediation support. The levy is therefore a redistribution: new residential development funds the remediation of legacy failures in existing residential stock.
What Should Builders Do Now?
Review project financial models. Any live or pipeline residential development scheme should be stress-tested with the Levy included as a project cost at the applicable per-unit rate for the scheme's location.
Seek advice on scheme viability. For sites where financial viability is already tight, a planning consultant or development finance adviser should review the scheme in light of the confirmed Levy liability.
Monitor the NFB's challenge. The NFB's public objection is on record. While the government is unlikely to reverse the decision quickly, the NFB and other industry bodies may succeed in amending the regulations during the transition period. Builders should stay informed through their trade association or professional adviser.
Check affordable housing provisions. If your scheme includes affordable housing, confirm exactly which units are exempt and ensure your building control applications correctly identify these.
Is the Building Safety Levy the same as Community Infrastructure Levy (CIL)?
No. The Community Infrastructure Levy is a separate charge on development imposed by local planning authorities to fund local infrastructure. The Building Safety Levy is a national charge that goes to the Building Safety Fund. A development may be subject to both.
Does the Building Safety Levy apply to extensions and conversions?
The Levy applies to new residential dwellings. Extensions to existing homes and conversions where no new dwelling is created may not be caught, but this depends on how the regulations define a "new dwelling" for this purpose. Specific cases should be confirmed with a building control professional.
What is the timeline for the Building Safety Levy?
The Levy was introduced under the Building Safety Act 2022, but secondary legislation confirming the rates and definitions has been progressed through 2023 to 2026. The July 2026 announcement confirms that medium-sized site exemptions are being removed. Developers should check the current implementation timetable with their advisers.
Can the Levy be appealed or challenged?
The rate itself is set by secondary legislation. Individual liability decisions (for example, whether a specific project is in scope) can be challenged through the building control process and, ultimately, through the courts. Challenges to the rate or scope of the Levy itself require parliamentary or judicial action, which is what industry bodies like the NFB are pursuing through advocacy.
How does the Levy affect self-build projects?
The Levy applies to developers, not necessarily to self-builders building their own home. The precise definition of "developer" for this purpose is contained in the regulations and guidance. Anyone undertaking a self-build project should confirm their position with their building control body or a planning solicitor.
Does the Levy apply in Scotland, Wales, and Northern Ireland?
No. Building safety legislation and any associated levies are devolved matters. The Building Safety Levy applies in England only. Scotland, Wales, and Northern Ireland have their own building safety frameworks. ---