LendInvest and MDA Consulting have published guidance for property lenders and developers ahead of the introduction of the Building Safety Levy, warning that the charge will need to be factored into scheme viability and funding requirements.

The levy applies to qualifying residential developments in England and is intended to raise about £3.4 billion over 10 years towards the cost of addressing historic building safety defects.

Under the rules, developments creating 10 or more homes, or at least 30 purpose-built student accommodation bedspaces, can fall within its scope. The levy is not restricted to high-rise buildings.

COSTS VARY BY LOCATION

LendInvest and construction monitoring consultancy MDA said the charge could have a material effect on development appraisals because rates vary significantly between local authorities.

Their joint whitepaper, Building Safety Levy: Implications for Lenders & Monitoring Surveyors, cites rates ranging from £12.70 per sq m in County Durham to £100.35 per sq m in the Royal Borough of Kensington & Chelsea.

Developments on previously developed land can qualify for a 50% discount where at least 75% of the consented site meets the statutory definition. The paper says lenders and monitoring surveyors will need sufficient evidence to establish whether schemes qualify when assessing funding requirements.

It also highlights the timing of the payment as a potential issue for development finance. The levy is payable before the first completion or occupation certificate is issued, meaning an unfunded liability could prevent certification and delay sales, refinancing and repayment of development facilities.

Building control applications submitted before 1 October 2026 are exempt, provided works substantively commence within three years of the initial application.

Dan Lohn, relationship manager at LendInvest, said: “As property development lenders, our role extends beyond providing capital; it’s about offering certainty as developers navigate major regulatory shifts like the Building Safety Levy.

“With the Levy directly impacting scheme viability, cash flow timing and completion sign-offs, proactive partnerships are essential. By joining forces with MDA Consulting, LendInvest is delivering practical clarity on complex calculations, brownfield exemptions and adapted funding structures to help SME developers manage these obligations and keep projects moving forward securely.”

Chris Chadwick, director at MDA Consulting Ltd, said: “Where much of the post-Grenfell reform agenda is procedural, the Building Safety Levy is a direct cash cost sitting on every qualifying scheme’s balance sheet.

“Calculated on measured floorspace and varying by local authority, its mechanics demand disciplined, stage-by-stage verification so costs are not overlooked.

“In collaboration with LendInvest, MDA is sharing practical guidance to help lenders, developers, and surveyors successfully manage this shared financial risk from initial appraisal right through to final completion certification.”