More than nine in 10 SME housebuilders believe the new Building Safety Levy will make developments financially unviable, according to research by the Home Builders Federation (HBF) and Quantum Development Finance.
The survey of SME homebuilders across England found that 91% expect the levy, due to come into force on 1 October, to affect site viability. More than a third (36%) said they had already delayed, redesigned or cancelled schemes in anticipation of its introduction.
The levy will add to development costs that have already risen sharply. HBF’s recent Viability Crunch report found that the cost of building a typical new home has increased by around £76,000 over the past five years, with the Building Safety Levy accounting for £2,320 of that increase.
The research also highlighted concerns about the impact on smaller and medium-sized developments. Unlike larger developers, SME builders will be required to pay the levy when the first home on a site is completed, potentially creating additional cash-flow pressures.
Neil Jefferson, Chief Executive of HBF, said: “The Government has set ambitious housing targets, but the ongoing layering on 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.”
More than two-thirds (69%) of SME builders said the levy would make them less likely to invest in new development opportunities.
HBF is calling on the Government to pause the levy and assess its necessity and potential impact before it comes into force, particularly given that more than £2.5 billion of the existing £5.1 billion Building Safety Fund remains unallocated.
