More than 100 housebuilders sign letter calling for Reeves to rethink £3.4bn building safety levy

The Home Builders Federation (HBF) has written to the chancellor to call for the forthcoming £3.4bn building safety levy on new housing developments to be reconsidered

The letter, which is signed by more than 100 housebuilders, said the confirmation that the government will proceed with the levy “has raised significant concerns from all areas of the new build sector.”

It said: “This additional burden will result in many fewer homes, including affordable homes, being built and likely threaten the existence of some hard-pressed SME home builders.”

The levy, originally proposed by previous housing secretary Michael Gove, is expected to be implemented later this year. It will see developers pay a fee on new housing developments which require building control approval and is expected to raise £3.4bn.

In its letter the HBF said the levy is “palpably unfair” given house buildershave already contributed £2bn towards building safety through a precept on corporation tax and a further £4.4bn through voluntary self-remediation commitments, while product manufacturers and overseas developers active on high-rise developments in the UK have not contributed anything.

The letter said no formal impact assessment has been conducted to estimate the levy effect on housing supply. It also said work to more accurately assess how much funding might required will only be carried out during 2025.

The letter argues that the need for the new tax has not been clearly demonstrated as £2.5 billion remains unallocated in the existing £5.1 billion Building Safety Fund. It calls for a more thorough analysis before proceeding with the levy and the publication of an impact assessment to consider how the tax will affect the delivery of both private and affordable homes.

It said: “Because of the stance of the previous government and its general approach to development, it seems likely that the levy was devised and designed to reduce housing supply, particularly in parts of the country with the greatest housing affordability pressures. This levy on new homes will add thousands of pounds to the cost of providing each new home. “

It said the timing and process for collecting the new tax is “punitive” as housebuilders will pay the levy at the point of the first home completion, meaning they “will be forced to pay what will amount to hundreds of thousands of pounds in additional taxes at the point of peak capital outflow on each site”.

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The letter says it is not too late to reconsider the levy. It said the government should complete the work to determine how much funding is needed for remediation and “be braver” in tackling product manufacturers.

The levy will be set at dvarying rates s based on house prices in local markets and there will be a discounted rate for developments on brownfield sites.

 A government spokesperson denied the levy will prevent the 1.5m homes target from being met.

He added: “It is right that we protect leaseholders and taxpayers from the costs of fixing unsafe cladding and that developers contribute their fair share. The Building Safety Levy was announced by the previous government and has been hard-wired into developer planning. We are working closely with industry on its design and will announce further details shortly.”