Relationships with other taxes and other charges on the sector
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 of developer contributions’? If so what are they likely to be?
There is potential for the BSL to impact contributions associated with Section 106 (S.106) in terms of scheme viability and use of viability assessments to negotiate down or avoid developer contributions. Viability assessments are already prevalent within the planning system, and there is a risk that we will see more instances of its use with schemes that otherwise would have been viable but are subsequently left unviable as a result of the additional charge. However, the extent of the impact is highly dependent on the proposed BSL rates, and we don’t have that information yet, making it difficult to provide a considered response to this question.
We are also concerned that the BSL may lead to a reduction in the quality, sustainability standards or overall size of new homes as developers seek to reduce the overall cost of development, and/or an increase in house prices, in order to maintain profit margins.
If these unintended consequences materialise as a result of the introduction of the BSL– it will mean that local communities will ultimately pay the price for historic failures in regulation and practice, with less capacity for meeting the infrastructure and housing needs of communities. We agree with the government on the stated importance of the design of the BSL to protect the pipeline of affordable housing and also share the ambition for the BSL to feed through into land prices, by reducing the sum developers are willing to pay for land. We would therefore urge the government to address this risk in the revised NPPF and associated planning practice guidance by stating that it would be illegitimate for charges associated with the BSL to be captured within viability assessments. This is because the main driver for the BSL is to ensure that developers cover the costs of the building safety defects that the industry created and those that did not cause those defects are protected from those costs. In addition to leaseholders, this includes local communities that are the beneficiaries of developer contributions. It would be grossly unfair and would undermine the guiding principles of the BSL if this were to occur. More broadly, we would like to see the complete removal of the use of viability assessments under the S.106 system, which will be partially retained following the planning reforms.
The government has stated that the forthcoming Infrastructure Levy (IL) – which will replace the Community Infrastructure Levy (CIL) and partially replace S.106 - will be non-negotiable and has cited the removal of negotiation from the system as one of the key policy changes which will improve the system, which we currently see with S.106. Assuming this commitment is upheld, we would not expect affordable housing or infrastructure to be diminished under the IL a result of the BSL.
How the levy will work
Question 2: Who do you think should act as the collection agency for the levy? Please give reasons for your answer.
To ensure the end-to-end process for collecting and spending the BSL is as streamlined as possible, the collection agency should be the same agency that will be responsible for spending the BSL, which is the government. It would be irregular and inefficient to ask local authorities to collect a levy on behalf of someone else. The government may want to consider the Building Safety Regulator to be the collection agency, or DLUHC, but in any event, it should be a government agency. Notwithstanding our view above, if the government were to appoint local authorities to be the collection agency, this would be an additional burden which must be fully covered in upfront new burdens funding.
Without sufficient new burdens, local authorities will not have the capacity to administer the BSL. The Local Government Workforce Survey (2022) highlighted the recruitment and retention challenges at local authorities, which included building control officers. Therefore, it may be a challenge to recruit the additional staff required, with the right skillset. The government should engage with local government on this issue.
Although the government has stated that the collection agency will be able to retain a proportion of the BSL receipts to pay for the administrative costs, the collection agency will need upfront set-up funding to introduce the service. In addition, as this is a new levy with a new policy framework and charge criteria – which is distinct from CIL and planning fees – it would be unfounded to appoint the local authority to be the collection agency on the grounds that they already have collection systems in place. If local authorities were the collection agent, they would have to set up new processes and systems to implement the BSL.
However, it is our view that rather than having multiple mechanisms for raising the necessary funds for building remediation, the RPDT should be expanded to include more developers by altering the eligibility criteria, for example by reducing the annual allowance for the RPDT from the current £25 million. This would provide a simpler process, by avoiding the varying BSL rates, but would still secure the additional funds for remediation.