Call for rural exemption as Building Safety Levy threatens housing delivery

Press Release

The Building Safety Levy (Scotland) Bill risks exacerbating Scotland’s rural housing crisis unless exemptions and safeguards are put in place to protect fragile rural markets, Scottish Land & Estates (SLE) has said.

The rural business organisation commented after providing evidence to the Scottish Parliament’s Finance and Public Administration Committee on Tuesday (November 11).

The Bill will introduce a new tax on developers constructing residential buildings, with funds raised intended to support the remediation of unsafe cladding.

However, SLE warned that unless the levy is carefully calibrated, it could worsen the housing emergency that already exists in large parts of rural Scotland.

Anna Gardiner, Senior Policy Adviser (Business & Property) at Scottish Land & Estates, said:

“We absolutely support the principle of improving building safety and addressing the legacy of unsafe cladding – but rural Scotland must not become collateral damage in the process.

“Rural Scotland is already facing a housing emergency. Build costs have risen sharply while values remain static, and the private rented sector is shrinking year on year. In regions such as Highland and Dumfries & Galloway, the loss of even one or two new homes in a small village can have far-reaching effects – from local school rolls to workforce availability.

“The cost of delivering homes in rural Scotland is already high and property values are comparatively low, which often makes projects marginal or unviable without public support. If the building safety levy reduces housing delivery, the consequences for rural communities will be devastating. There is already heavy reliance on the Rural and Islands Housing Fund and, if viability is stretched further by a levy, the dependency is likely to grow which means that the levy will have the result of robbing Peter to pay Paul. This is a levy designed to make buildings safer in cities but if there is no exemption it will be at the expense of delivering new homes in rural Scotland.”

SLE urged the Scottish Government to introduce a rural exemption, mirroring the approach taken for island areas. The organisation also raised concerns about how the Bill may treat the ‘scale’ of developments, stressing that large does not always mean profitable or easily deliverable in a rural context.

Anna continued: “A rural exemption is essential to protect fragile housing markets where costs are high, margins are tight, and housing need is acute. There are clear areas that could be exempted in the same way as island communities, and we will engage with officials to develop a fair and workable definition.

“We also need to be careful about how scale is defined. Many rural projects appear large on paper but are built in small phases over several years, dictated by local market demand and cashflow. While urban developments might benefit from economies of scale, those savings are often eroded in rural areas by logistical challenges and slower sales. The viability of rural housing is market-driven, not simply a function of project size.”

SLE also pointed to the cumulative impact of multiple policy burdens on rural development, and also criticised the short timescale for industry to prepare, and the lack of clarity around key details that will only be set out in secondary legislation.

Mrs Gardiner concluded: “On top of the Building Safety Levy, the new Scottish Passivhaus Standard is expected to add £12,000 to £20,000 per unit. When you also factor in Section 75 obligations and other abnormal costs, the financial strain becomes overwhelming.

“The time for the sector to prepare for this levy is also completely insufficient, with much of the crucial information still being held back for secondary legislation. Developers and landowners need as much detail as possible on the face of the Bill to reduce uncertainty and to plan confidently.

“In a market where buyers have limited ability to absorb extra costs, it’s hard to see how Scotland’s housing emergency can be resolved while government policies continue to pull in opposite directions.”