National Housing Federation expresses concern at indirect impact of Building Safety Levy on registered providers

The National Housing Federation (NHF) has called for further measures to ensure the Building Safety Levy does not adversely impact the supply of new affordable homes.

In its response to the Government’s consultation, the NHF acknowledged that there are a number of proposed exemptions from the levy, including:

• Developments consisting of fewer than 10 units.
• Supported housing (other than private tenure supported housing).
• The development of affordable housing.
• Developments of non-affordable homes by not-for-profit registered providers and their wholly-owned subsidiaries.

However, it said that, despite these exemptions, there were circumstances where the Building Safety Levy might be borne indirectly by registered providers.

The NHF highlighted how it was not uncommon for registered providers to acquire completed or partially completed buildings from commercial housebuilders.

If the Building Safety Levy is paid by the developer on those homes, the developer “will likely seek to pass that cost onto the registered provider through an increase in the purchase price”, it warned.

The NHF has urged the Government to introduce a mechanism so the levy can be refunded to a developer when a building is subsequently transferred to a registered provider and used to provide affordable homes.

In its response the NHF said that many housing associations develop homes of various tenures - including homes for sale or rent on the open market - through limited liability partnerships with commercial housebuilders or local authorities.

A proportion of the profits from the development are then returned to the participating housing association, providing funds for the development of new affordable homes.

“If the Building Safety Levy is payable by the limited liability partnership in relation to the development of non-social homes, this will reduce the profits available, which in turn reduces the funds to reinvest in affordable homes and their residents,” the NHF said.

It has therefore asked the Government to introduce a reduced rate of levy for limited liability partnerships where a not-for-profit registered provider has a direct or indirect interest, proportionate to their share of the partnership’s profits.

The NHF meanwhile noted that the Government intends that developments which have begun the building control process before the ‘launch date’ will not be subject to the levy, but those that submit an application for building control approval or an initial notice on or after that date will be.  

“As there is no suggestion of when the ‘launch date’ will be, we have asked government to give ample prior notice so developers have sufficient time to anticipate and manage the resulting cost and cashflow implications,” it added.

The Government’s second consultation on the building safety levy closed on 20 February 2024.