Small housing developers face another blow as Building Safety Levy looms: James Wimpenny

To address this, in April 2022 the Residential Property Developer Tax was conceived to levy a charge on the large developers to share some of this burden.

The procurement process for housing is long and complex and involves not only the builder but also designers, specifiers, material manufacturers and building control. I’m not intending to absolve some builders for poor quality implementation but blame must be apportioned appropriately across the board. This is not a straightforward process and cannot be rushed.

That said, it transpires that the Government is now introducing yet another tax to further contribute to the growing costs of remediation. This is the Building Safety Levy (BSL) which appears on the face of it to be a part duplication of the Residential Property Developer tax.

Briefly this is to be a mandatory charge applicable to most new residential developments in England as a contribution to high rise remediation costs. This financial burden will fall on the shoulders of all developers, with the same questions to be addressed about true liability.

The BSL is intended to raise between £3bn and £3.5bn over the next decade removing the costs from the leaseholders and taxpayers. The BSL will apply to all new housing projects (with a few certain exemptions) of more than 10 dwellings.

Now, bear in mind that SME developers (commonly building up to 30 houses) make an important contribution to new housing stock and local economies. They employ local architects, engineers, tradespeople and local suppliers.

So let’s consider the bigger picture. The Government has set a target of 1.5m new homes during this current Parliament. A noble suggestion and we all know these houses are desperately needed.

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But how is this going to be achieved, bearing in mind the following obstacles put in the way of developers? Firstly, it is a well known fact that the country’s planning system is in turmoil with virtually every planning authority getting further and further behind with applications, causing unprecedented delays in gaining an approval.

Secondly, where are all the tradespeople going to come from? Past governments have encouraged school leavers to go to university rather than taking a vocational career path.

The levy is largely irrelevant to what SME housebuilders provide, which is primarily low volume, low rise homes. They are not responsible for the high rise problems yet are expected to cough up as they are ‘developers’. On it’s own, despite the ever increasing costs elsewhere, developers could face charges of £2,000 or more per house, which of course is going to have to be borne by the already stretched homebuyers.

To the smaller developers, particularly those working to tight margins, the BSL means a further brake on schemes as they become less and less viable. Sites will be cancelled, delayed or restructured.

The Government must engage in much greater detail with the SME sector before it comes to Parliament later this year.

James Wimpenny is director of Wimpenny Construction/Wimpenny Land & Build Consultant and chair of Kirklees Development Consortium