The introduction of the Building Safety Levy (BSL) will worsen London’s housing crisis, ministers have been warned.
By Kumail Jaffer, Local Democracy Reporter
The introduction of the Building Safety Levy (BSL) will worsen London’s housing crisis, ministers have been warned.
The tax, introduced on Thursday (October 1), was created to help fund the remediation of historical building safety defects. However, new research has warned that the new tax for developers which is applied to newly constructed homes could undermine the viability of housebuilding in London amid a continuing shortage of supply in the capital.
In 2025, construction started on just 5,547 private homes in London, down 84 per cent from 33,782 in 2015.
The crisis prompted ministers to strike a deal with City Hall to implement an emergency package of measures, including a time-limited discount for Community Infrastructure Levy (CIL) – a tax charged on new developments.
Analysis from BusinessLDN, however, has suggested that the cost associated with the BSL “risks undermining the positive impact of the CIL relief”.
In a briefing paper from earlier this year, the group said: “It [BSL] adds to the significant cost commitments already made by leading developers through the Building Safety Pledge, which requires them to remediate life-critical fire safety works in buildings over 11 metres that they have played a role in developing or refurbishing over the last 30 years in England.
“In some cases, the mandatory BSL payment will outweigh the financial benefit of the discretionary CIL relief, particularly for smaller schemes or sites already facing high construction costs. Without careful consideration of how these policies interact, there is a risk that the BSL limits the ability of the emergency measures to unlock new development.”
Their analysis claims that of the 92 different residential borough CIL charging rates in London, developers will be worse off in 31 locations, than if both the CIL relief and the BSL were scrapped.
BusinessLDN also says that for smaller schemes that have lower CIL rates, the “pressures are likely to be even more acute”, putting small and medium sized housebuilders at risk in the capital.
The same issue has already been raised by the Home Builders Federation (HBF), who warned last year that the BSL “will have a substantial impact on housing supply in the short and medium term and will likely suppress delivery in the long term”.
In 2023, the Mayor of London said he was “supportive of the principle of raising funding to address building safety remediation” but raised concerns over “impact that this could have on the delivery of affordable housing and infrastructure needed to support development”.
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In response to a written question from Assembly Member Lord Bailey in June, he said that it was important the BSL “works for London and balances the need for new housing at a time where housebuilders are experiencing significant viability challenges”.
He pledged to “monitor the delivery environment in London and engage with the sector on viability”.
