91% of SME house builders say Building Safety Levy will make sites unviable, HBF finds
More than a third (36%) said they had already delayed, redesigned or cancelled schemes because of the levy.
More than nine in 10 (91%) small and medium-sized enterprise (SME) home builders said the Building Safety Levy will make developments financially unviable, according to research from the Home Builders Federation (HBF) and Quantum Development Finance.
The levy is set to come into force on 1st October.
More than a third (36%) said they had already delayed, redesigned or cancelled schemes because of the levy.
The HBF called on the Government to pause the introduction of the Building Safety Levy and carry out a full assessment of its necessity and impact.
69% of SME builders said the Building Safety Levy would make them less likely to invest in new development opportunities, with a further 9% saying it was too early to say.
The impact was felt strongest in London, where 86.7% said the levy would make them less likely to invest in new development.
Respondents in other regions also raised concerns about investing, including the West Midlands at 85.7%, the South West at 82%, the East Midlands at 78.9% and Yorkshire at 76.9%.
Neil Jefferson, CEO of the HBF, said: “The Government has set ambitious housing targets, but the ongoing layering of costs onto development by successive Governments has made a growing proportion of potential house building sites unviable.
“The new levy, compounded by other rising costs, tighter margins and challenging market conditions, will make even more developments unviable.
“SME developers in particular are being forced to rethink investment decisions, delay sites and reduce output as costs continue to increase.”
Jefferson added: “The home building industry is already making a substantial contribution towards the cost of remediating historic building safety issues, yet this levy places a further burden on developers who played no part in creating those problems.
“We are urging the Government to pause the introduction of the levy and assess whether it is still necessary, particularly given the significant unallocated funding that already exists.”
Richard Hemmings, managing director of Quantum Development Finance, said: “Requiring the levy to be paid when the first home on a site completes, rather than on sale, is yet another cost SME house builders are being asked to absorb at a point in time, in both the current economy and the lifecycle of a project, when they can least afford to.
“If we are serious about helping SMEs deliver more housing, this is yet another shift in the wrong direction.
“It’s also difficult to justify applying this charge to medium-sized sites.”
Hemmings added: “Many of these developers have never built a high-rise building, and played no part in the historic safety failings the levy is intended to address. Yet it’s SMEs who are being asked to help foot the bill.
“With £2.5 billion of the existing £5.1 billion Building Safety Fund still unallocated, and the wider market already under significant pressure, we have to ask whether now is really the right time to introduce a further levy.
“Government should pause, use the funding it already has, and properly assess the impact before pressing ahead.”
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