Scottish Building Safety Levy: consultation analysis report

3. Analysis Part A – Principles

Part A of the consultation document focused on the principles of the tax. These sections introduced and set out the following:

• The strategic context for the SBSL
• Considerations of scope
• Considerations of calculation

The principle of the SBSL

Question 1: Do you think a new tax on housebuilding, paid by developers, is a fair way to generate revenue to fund the Scottish Government’s Cladding Remediation Programme? Please give reasons for your answer

Of those who answered this question quantitatively (39 respondents), the breakdown of views was as follows:

Response	Total	Percentage
Yes	9	23%
No	30	77%

The majority of those who responded ‘no’ to this question were property developers and organisations representing property developers, with others opposed including some island and rural local authorities. Those who responded ‘yes’ were primarily non-developer organisations. A full breakdown by respondent type is provided in the table below.

Respondent type	Yes	No
Developer	0	12
Other housing/property stakeholder	3	5
Local government organisation	1	5
Other organisation	3	1
Individual	2	7
Total	9	30

Impacts

Housebuilding

A significant number of responses raised a concern that the SBSL could have a negative impact on the housebuilding industry by raising the cost of building homes and threatening the viability of developments. Developers and other housing/property stakeholders in particular emphasised this theme, raising that housebuilders may not be able to absorb the cost of this additional tax and therefore fewer homes will be built, and/or businesses will no longer be viable. This point was frequently highlighted in the context of Scotland’s housing emergency and the urgent need for new homes, including in rural and remote areas.

“We cannot support or sanction a levy which further increases the cost of building homes for the people of Scotland at the time of a housing emergency which will threaten the viability of our business.” - Campion Homes

Some respondents raised this negative impact on housebuilding for Scotland in particular, noting that increased costs may deter investment in Scotland for those businesses which may choose to invest in homes elsewhere.

“Members have made clear through engagement sessions with officials that further regulatory costs will affect investment in homes being built in Scotland. In particular, UK-wide home builders have a choice where investment is made. Every penny not spent on investment in home building in Scotland results in more homes being built elsewhere.” - Homes for Scotland

On this latter point, a couple of responses noted the importance of ensuring parity between Scotland and England in the design of the levies, to avoid cross-border impacts and ensure investment in Scotland is not deterred.

Some responses noted their view that any negative effects of the SBSL on housebuilding would also create negative impacts on the wider economy. Responses discussing this theme noted the jobs and wider economic benefits that are created by the housebuilding industry, and that other industries and infrastructure are reliant on the strength and contributions of the housebuilding sector.

“...as a sector, home building in Scotland supports 79,200 jobs as well as improved health and education outcomes. It also generates over £3bn in annual GVA and invests £332m in affordable housing contributions and a further £179m supporting infrastructure such as schools, healthcare, public open space, transport and sport, leisure and community facilities per annum.” - Homes for Scotland

Cumulative policies and regulations

A significant number of responses (predominantly from developers and organisations representing developers) emphasised that the SBSL would be further adding to cumulative burdens on the housebuilding industry from existing or proposed Scottish Government policies and regulation, and that these burdens are exacerbating an already challenging context which Scottish home builders are operating within.

“Not only is this additional tax burden unnecessary for those developers who have already committed to remediate, but it should also be viewed within the wider context of the challenging operating landscape we face in Scotland. This includes a difficult and lengthy planning process, the advent of Scotland’s Passivhaus standards, rent controls and more.” - Miller Homes

House prices

Some responses expressed the view that the SBSL could have an impact on house prices, with developers seeking to pass on the cost of the SBSL by raising the cost for home buyers. This theme was often discussed alongside the theme of ‘responsibility’, with the view that house purchasers should not be bearing the cost of remediation for which they are not responsible.

“Ultimately the Levy / Tax is likely to be paid by the new Home Owners, who had no responsibility for creating this situation.” - Scottish Building Federation

The view that the tax could raise house prices was mostly expressed by other housing/property stakeholders or other organisations, rather than developers themselves. This perhaps reflects the complexity around determining whether developers would be able to pass on the cost of the SBSL through raising house prices. Homes for Scotland articulates this complexity in their response, noting the view from the Competition and Markets Authority that new build prices are constrained by the second-hand market, and that this view is accepted by the Scottish Government. Homes for Scotland consequently considers that the only other option for developers would be to try to absorb the cost, perhaps by offering a lower price for land, which may not be accepted by landowners and thus may impact development viability and housing supply.

Rural areas

Some respondents (mostly local authorities) raised that the SBSL would place a disproportionate burden on remote and rural areas. This was referenced in part due to existing pressures on and additional costs for housebuilding in these areas, with the proposed Levy having the potential to further disproportionately impact development viability.

“Housing market viability is fragile in our area with the cost of housebuilding often greater than the market value of the home. Any additional burden on housebuilding, such as the Scottish Building Safety Levy, could make these developments unviable.” - South of Scotland Enterprise

Further to this, it was raised that remote and rural areas would be shouldering a disproportionate burden for costs which would mostly (or solely) benefit areas elsewhere in Scotland, given that buildings with unsafe cladding which will be improved with remediation are predominantly in larger cities.

“There are very few properties in the Borders which would benefit from the levy, and this is anticipated to be the case for other rural areas. This creates a risk that rural [local authorities] with less financial means effectively subsidise remediation for more urban areas which may have a better market context and more funds.” - Scottish Borders Council

Responsibility

Many responses referenced the concept of responsibility with regards to the principle of the tax, emphasising that those responsible for the issue of unsafe cladding should be expected to cover the cost of remediation.

A few responses discussed this theme of responsibility in expressing their support for the principle of the SBSL, with the view that the housebuilding industry bears responsibility for the problem of unsafe cladding and should therefore bear the cost of remediation, in line with ‘polluter pays’ principles.

“It is right that interventions be introduced to ensure that industry meets the costs, following polluter pays principles...” - National Fire Chiefs Council

However, this theme was most often raised in the context of opposition to the SBSL. Several respondents expressed that only those developers who were responsible for installing unsafe cladding should bear the cost of remediation, and that it would be unfair for a levy to be imposed on existing developers who have never contributed to this historic problem.

“Developers who can demonstrate that they have not delivered buildings with unsafe cladding should be exempt from any BSL; it would be unfair to penalise those developers.” - Bancon Homes

Furthermore, some respondents argued that buildings now identified as requiring remediation were built in accordance with building standards of the time, therefore government should bear some responsibility.

“...it should be noted that the vast majority of buildings were constructed in accordance with the applicable Scottish Building Standards at the time. This does present an issue in terms of accountability, as reasonably Scottish Government should be contributing.” - Westpoint Homes

Additionally, it was emphasised by several respondents that there are other parties responsible for the supply and installation of unsafe cladding (for example manufacturers and non-UK based home builders), and that these parties should be pursued for the cost of remediation rather than the cost lying solely with developers. On this point, it was further noted by a few respondents that there is no legal mechanism in Scotland for home builders to pursue others to recover the costs of remediation of their own buildings.

“...there are no proposals to seek recourse from product manufacturers despite evidence indicating flaws in many products which home builders used in good faith...” - Homes for Scotland

On this point, several respondents (predominantly developers) characterised the SBSL as an additional cost for developers towards cladding remediation on top of the contributions they are already making. Responses highlighted that many developers have already been working with the Scottish Government to remediate their own buildings directly, and additionally some developers are contributing to the cost of cladding remediation through Residential Property Developer Tax (RPDT). Some respondents were therefore critical of the SBSL as a second or third cost to be covered solely by developers for the same problem.

“Members are actively contributing to two streams of resource to progress cladding remediation, through their own agreement to act, and the payment of the RPDT and have substantial concerns that a third contribution – a “triple dip” – will be unsustainable to their businesses as home builders.” - Homes for Scotland

Clarity on context for tax

Several responses, predominantly from developers, expressed the view that there is a lack of clarity around the context for the tax, and that it is therefore difficult for developers to assess potential impacts.

Much of this uncertainty was referenced in the context of the scope and size of the CRP, the details for which remain unknown, creating uncertainty around the revenue that needs to be raised to support the programme and how this revenue ties in with existing funding streams. It was expressed that further detail was needed on the number of buildings requiring remediation to support the evidence base and rationale for the SBSL, and to help developers understand the funding gap the tax aims to fill and what the impact of the tax may be.

“Scottish Government have no idea of how much money is required. Without understanding the quantum of the tax it is very difficult to comment accurately on the impact to the delivery of housing in Scotland.” - Westpoint Homes

In their response, Homes for Scotland acknowledge the Scottish Government’s revenue target of £30 million per annum, in proportion to the UK Government’s revenue target for the England-only levy. However, they express the view that the UK Government estimates do not yet have a sufficient evidence base, and additionally the scale of Scotland’s CRP and buildings requiring remediation may differ to that of England.

Respondents noted a further lack of clarity on the scope of the tax, and their inability to assess what the cost for developers may be without certainty on the number of homes and developers which would be liable for the SBSL.

Revenue raising approach

Some responses expressed the view that the proposed SBSL would be the most suitable and practical approach to raise revenue required for cladding remediation, and that there is a lack of alternative options, with a couple of respondents noting the need to match the Building Safety Levy which will be introduced in England only. A few responses noted that this tax would spread more manageable costs across the industry and prevent the cost falling on residents of buildings requiring remediation, or on taxpayers. The latter point – that the cost should not fall on taxpayers or residents – was also acknowledged by some respondents who opposed the principle of the SBSL.

Relating to the theme of responsibility, one respondent noted that pursuing only those considered responsible for the problem of unsafe cladding could lead to unknown costs and could take up extensive time and resources, therefore the SBSL could be a better approach to spread the cost across the industry.

Some of these responses which discussed the SBSL as the most suitable approach to fund cladding remediation noted the importance of the SBSL being applied in a way that is proportionate and mitigates potential unintended consequences on the housebuilding industry and housing market.

Commencement and completion of remediation

Several responses raised a concern over a perceived lack of urgency thus far from the Scottish Government to address the problem of unsafe cladding.

“Whilst we welcome the progress that has been made in more recent months, we believe the lack of urgency from the Scottish Government to address both resident and sector concerns has led to unacceptable delays in making progress in this crucial area.” - Homes for Scotland

Relatedly, a few responses noted that the Scottish Government has already received money to fund cladding remediation which has not yet been spent.

Safe construction

A few responses noted the importance of high standards for safety in construction, expressing the view that the proposed Levy should not be introduced in isolation but should be part of a wider holistic approach to support better building safety standards and regulations.

Other

Other comments raised by singular responses included the view that the SBSL should be used to fund wider building safety issues.

Engagement sessions on the principle of the SBSL

Some of the points raised in the engagement sessions which accompanied the consultation align with some of the themes discussed above, including the view that the SBSL would be a further tax burden on developers who are already paying towards the cost of remediation, that the SBSL would disproportionately target developers for this cost despite others in the supply chain holding responsibility, and that the house building industry is already facing wider cumulative burdens. Other points raised in the engagement sessions on the principle of the SBSL included the view that the scope of the SBSL should be aligned with the scope of the CRP (in that the types of developments being levied should align with the types of developments remediated through the Programme).

Similar themes were also raised in meetings of the Expert Advisory Group, including the view that there is a lack of clarity around the scope and cost of the CRP and that this would impact developers’ ability to determine impacts and engage on the detail of the policy. Members of the Group also similarly raised points around cumulative burdens on the house building industry, and the importance of recognising that developers are already contributing towards cladding remediation either through remediation of their own buildings or through paying RPDT.

Scottish Government response

The Scottish Government recognises the general opposition to the introduction of the SBSL but notes that no immediate alternative solutions are being offered by respondents to address the funding challenge associated with cladding remediation.

If the SBSL were not introduced, this would mean a new tax would be applied to residential housing developers in England but not in Scotland. There would be no changes to the existing funding streams to support delivery of the Scottish Government’s CRP. While Barnett consequentials from UK Government spending related to revenues from the RPDT would still be available, it is estimated that the scale of the work required in Scotland will significantly exceed this amount and therefore additional revenue will be required.

On the basis that not fully funding the CRP is not an option, in lieu of the SBSL the Scottish Government would be required to fund the Programme through its existing capital budget envelope or through changes to other devolved taxes. In the context of the devolution settlement and the challenging fiscal context, funding the CRP exclusively from the existing capital budget envelope would require reprioritisation of spending commitments, or future decisions not to allocate capital expenditure to new projects or infrastructure. While the Scotland Act 1998 provides the Scottish Parliament with some powers over taxation, the incidence of these taxes falls largely onto the general taxpayer.

As such, neither of these options would meet Scottish Ministers’ objective of ensuring that there is parity in the funding arrangements between the Scottish and UK governments, and that the costs do not fall directly onto homeowners or disproportionately onto the general taxpayer. It is against these options that the SBSL has been appraised as the best option to deliver Scottish Ministers’ policy objectives.

We agree with the UK Government that it is right that residential property developers are asked to make a fair contribution to remediating unsafe buildings and that is why we too intend to introduce a Building Safety Levy in Scotland. Work on the SBSL has balanced the need to raise revenue for cladding remediation efforts with minimising any potential impact on the housebuilding sector. The Scottish Government is cognizant of the current pressures on housebuilding and the importance of building more homes and will continue to work with industry stakeholders to evaluate potential impacts of the Scottish Building Safety Levy on development viability. The design of the Levy seeks to minimise any impacts while also facilitating adequate funding for Scotland’s CRP, which will rehabilitate existing housing stock and improve the sector as a whole.

Considerations of scope

Question 2: Do you agree that homes delivered through the Scottish Government’s Affordable Housing Supply Programme should be removed from the Scottish Building Safety Levy?

Of those who answered this question quantitatively (40 respondents), the breakdown of views was as follows:

Response	Total	Percentage
Yes	30	75%
No	10	25%

There was strong support for an exemption for affordable housing from other housing/property stakeholders, local government organisations, and individuals. Views were more mixed from property developers and other organisations. A full breakdown of responses by respondent type is set out below:

Respondent type	Yes	No
Developer	5	6
Other housing/property stakeholder	10	0
Local government organisation	7	0
Other organisation	1	2
Individual	7	2
Total	30	10

Impacts

Several responses noted that if the SBSL were to be applied to affordable housing, it would impact the cost, viability, and delivery of these homes. It was also raised by several respondents that affordable housing delivery is already constrained, and that the SBSL would add an additional burden.

“If affordable homes are not excluded it would have the potential to severely restrain the numbers of affordable housing being delivered as they would not be viable.” - Bancon Homes

It was additionally emphasised by a few respondents (including local authorities) that affordable housing provision is particularly crucial and a key priority for rural areas.

However, several other respondents expressed the view that an exemption for affordable housing would substantially distort the tax base (noting the higher provision of affordable housing in Scotland compared to England) and create a higher tax burden on private housing. It was also noted by a few respondents that an exemption for affordable housing would give local authorities and registered social landlords (RSLs) an unfair advantage when competing with private developers for acquisition of land.

It was expressed by many respondents that there are strong interdependencies between the delivery of private and affordable housing, and that even with an exemption, the SBSL may generate knock-on impacts to affordable housing provision due to impacts on the delivery of private housing.

Fairness and responsibility

Some respondents expressed the view that it would be unfair to exempt affordable housing from the SBSL, with a few responses raising that this would allow developers responsible for the problem of unsafe cladding (including private developers delivering affordable housing, and Housing Associations), to avoid contributing to remediation costs.

“A significant number of developments that require remediation have been built by housing associations. By excluding them there is no accountability and is therefore not treating all involved parties fairly.” - Westpoint Homes

Circularity of public funding

Some responses raised that applying the tax to affordable housing would create an issue of circularity in public funding, in that these homes would be delivered via Scottish Government grant funding or local government funding, then taxed to raise revenue for the Scottish Government’s CRP, essentially moving public money from one programme to another.

Capturing all affordable housing delivery

Many responses emphasised the importance of adequately defining ‘affordable housing’ such that it reflects the different ways these homes are funded and delivered, to ensure all are captured under the definition for the purposes of exemption from the SBSL. This included the response from Homes for Scotland, which emphasised that affordable housing transactions can be “complex”, may not all attract Scottish Government grant funding, and may take place in different ways and at different times before, during, or after the processes of development construction and completion. These responses expressed the view that it was important for legislation to adequately reflect this complexity to ensure that developers do not become liable for the SBSL for affordable housing and are not required to take on additional administrative burdens to pursue refunds of the tax.

Alignment with other measures

It was noted that an exemption for affordable housing from the SBSL would align with other exemptions these developments are subject to, for example contributions towards education.

Other

Other specific points were raised by a singular response and so have not been considered in further detail, for example, that the exemption should apply to council-owned homes for social rent only.

Engagement on affordable housing exemption

Participants in engagement sessions raised similar themes on the proposal to exempt affordable housing from the SBSL. These included the importance of adequately defining ‘affordable housing’ to reflect the complexities of its delivery, the interconnectedness of the sector and recognition that affordable housing provision is dependent on the delivery of private housing, and the potential for unfair advantage for local authorities and RSLs in the competition for land.

It was raised in meetings of the Expert Advisory Group that Scotland has a much higher provision of affordable housing than England, and that considerations of the resulting tax burden on private housing should recognise this disparity. The point of complexity in affordable housing delivery and the different mechanisms through which these transactions occur was also noted by the group.

Scottish Government response

The Scottish Government is proceeding with an exemption from the SBSL for new social and affordable housing provided through the Affordable Housing Supply Programme (AHSP), in support of the commitment to deliver 110,000 affordable homes by 2032, of which at least 70% will be available for social rent and 10% will be in our rural and island communities. An exemption also mitigates concerns around local authorities acting as taxpayers for the SBSL and ensures that public funding provided for social and affordable housing is not then subsequently used to pay costs associated with the SBSL.

Furthermore, this exemption mirrors the UK Government proposals for exempting affordable housing from the Levy in England, ensuring there is equal treatment of these developments north and south of the border. The Scottish Government recognises the disparity between the affordable housing provision in Scotland and that in England and is aware of the subsequently greater impact of this exemption on the tax base for the SBSL. When setting rates, Scottish Ministers will consider the complete picture of exemptions for the SBSL.

Question 3: What are your views on the principle of removing smaller developers from charge of the Scottish Building Safety Levy?

This was not a quantitative question, and many comments analysed in relation to this question were from non-standard responses which did not directly answer the questions set out in the consultation. As such, it is not possible to provide a straightforward numerical breakdown of responses, however the analysis notes that the responses generally indicated strong support for removing smaller developers from charge of the SBSL.

Impacts

A significant number of responses emphasised that the cost of the SBSL would have a substantial impact on smaller developers. These responses noted that smaller developers often have lower profit margins, higher build costs, and challenges with cash flow as they are typically unable to access funding models available to larger companies.

“SMEs will self-fund their development without having the access to larger debt financing that larger home builders will have access to. Members report that further regulation will impact their cashflow and ability to deliver more homes...” - Homes for Scotland

Respondents expressed the view that smaller developers would be unable to afford the additional cost of the SBSL, with some raising that smaller developers are already struggling and that there has been a decline in the number of smaller developers and housing provided by these companies. Some respondents reflected on the impact of the SBSL on smaller developers in the context of wider cumulative impacts of multiple existing or proposed policies and regulatory burdens.

Additionally, many of these respondents emphasised that SMEs play a vital role in the provision of housing, particularly in rural areas and on brownfield land (i.e. land which has been previously developed),^[2] and should be supported.

It was also noted in responses however that further consideration of the impacts of an exemption for SMEs would be needed, to ensure there is not a disproportionately high tax burden placed on larger developers.

Fairness and responsibility

Several responses expressed the view that it would be unfair for smaller developers to be subject to the SBSL, as they have typically not been responsible for the issue of unsafe cladding and are often not involved in the construction of the types of buildings requiring remediation (i.e. multi-storey buildings).

“Given the nature of SME businesses it is also highly unlikely that they would have contributed to buildings on the Cladding Remediation Programe [sic] and as such they should not be penalised for the failings of others.” - Bancon Homes

Some respondents (mostly individuals), however, felt that all developers should be included within the scope of the tax to ensure fairness and proportional sharing of the cost. One respondent noted that if the tax is calculated proportionally (i.e. to reflect development value), that there would be no need for an exemption for smaller developers.

One respondent stated that they are in favour of exempting smaller developers from payment of the SBSL, unless they are responsible for the problem of unsafe cladding.

Complexity

A few responses noted the complexity of defining ‘SME’ for the purposes of an exemption, with a couple raising that larger developers may restructure their companies or their development sites to attempt to be covered by the exemption.

Other

Other comments raised by singular responses included the point that imposing the tax on smaller developers would not raise much revenue.

Question 4: If you agree that small developers should be removed from charge under a Scottish Building Safety Levy, what are your views on the method of determining who is a smaller developer?

Exemption by number of units built annually

Several respondents expressed the view that the exemption for small developers should be determined by the number of units built annually. Of those who suggested where the threshold should be set, most agreed with the Homes for Scotland definition of an SME as a home builder which delivers between three and 49 homes per year.

A few respondents expressed that this definition would not be broad enough, and the threshold should instead be set at fewer than 100 units per year, or 200 units per year.

One respondent raised that the extended timeframe of housebuilding and irregular flow of development might result in significant variability of number of developments between individual years, and therefore a longer-term measure (i.e. average completions over five years) may be more suitable than a per annum threshold.

Another respondent raised that larger developers could seek to be included under this exemption by restructuring their businesses to appear as multiple small developers.

Exemption by development size

Some responses stated that the exemption should cover small developments rather than small developers, by excluding developments based on size. Suggestions on where this threshold should be set varied, with a couple of respondents suggesting fewer than 10 units, and another couple suggesting fewer than 100 units. Other suggestions from singular respondents included:

• Fewer than five units
• Fewer than 50 units
• Less than two acres

It was noted that an exemption by development size would align with measures already considered during the planning process.

However, a few respondents expressed concern that an exemption by development size would not necessarily target those the exemption is intended to capture. It was raised that SMEs may take on larger development sites to reduce contact with the planning system, and that a larger site with permission for, for example, 80 homes, may only deliver 20 of those in one year. One respondent expressed the view that an exemption by development size may put larger developments needed in rural areas at risk, given that these developments are typically delivered by SMEs. It was also noted that larger developers may develop smaller sites (or attempt to restructure a larger site into smaller developments) and would then be covered by this exemption.

Exemption by annual profits

Some respondents suggested the exemption should be measured by a profit threshold, with a few (including Homes for Scotland) noting that this would align with the £10m profit threshold that will exclude home builders from the CRP Developer Contract, thus creating consistency across the programme.

A few responses expressed the view that a profit-based exemption may not work effectively, with one stating that figures could be manipulated in order to benefit from the exemption.

Exemption by development type

It was suggested that the exemption should be determined by the types of developments a developer builds. One respondent stated that it should be determined by the proportion of affordable housing a developer delivers, with another stating that SMEs should be exempt if they only build homes of two storeys or fewer.

Other

A few respondents raised the importance of simplicity and certainty for developers in understanding their eligibility for exemption and their liability for the tax. Homes for Scotland, in their response, emphasised the need for clarity on how eligibility will be determined in practice, for example which years would be considered when measuring profits or number of units built.

Other comments raised by singular responses included the point that medium sized developers are unlikely to be considered small enough for exemption but lack access to the funding of a larger developer.

Engagement on SMEs exemption

The position of SMEs and the need for an exemption from the SBSL was a strong focus of engagement sessions with stakeholders. Discussions raised similar themes to those found in the consultation responses, including issues of cash flow, increased pressures on development and business viability, and the question of fairness for SMEs who have typically not contributed to the problem of unsafe cladding. It was also noted in engagement that SMEs would benefit from an exemption rather than a relief, to avoid the administrative burden of filing tax returns for the SBSL. Some participants in engagement sessions expressed a preference for the Homes for Scotland definition of three to 49 units per annum, with a concern that a definition based on size of developments would favour larger developers building smaller sites. A profit-based exemption was also suggested, and it was noted that this would align with the approach taken with RPDT, though it was raised that measuring turnover and revenue could be challenging for SMEs.

It was noted in meetings of the Expert Advisory Group that there is a need for balance between protecting SMEs and ensuring there is not a disproportionate and significant tax burden placed on larger developers. It was raised by the group that the Scottish planning system has a limit of 50 units for a small development, so this may be an appropriate definition, though it was also noted that larger developers can build smaller sites.

Scottish Government response

The Scottish Government recognises that smaller developers may be disproportionately impacted by the introduction of the SBSL, due to the resource needed by businesses to understand, plan, and absorb any additional costs.

Having considered views on these impacts and the most appropriate approach to an exemption, the Bill provides for a levy-free allowance of a certain number of units developed per year, with the threshold to be set by Ministers in secondary legislation. Through provision of a levy-free allowance, the smallest developers who are building low numbers of residential buildings per annum will be protected from the costs associated with the SBSL. While the levy-free allowance would operate equally across all developers, its benefits will be more impactful for smaller developers, as a higher percentage of their developments will not be subject to the SBSL.

In addition, this allowance is intended to ensure that self-build homes are excluded from payment of the SBSL, and the Scottish Government has committed to further engagement with small developers and their representative bodies throughout the legislative process to consider an appropriate threshold level for the protection of small businesses.

Question 5: Are there any other exemptions from the Scottish Building Safety Levy that you think should be considered by the Scottish Government?

Accessible homes

Some respondents expressed that specialist housing designed for accessibility (for example, fully wheelchair accessible homes) should be exempt from the SBSL in order to incentivise the building of these homes and meet the need for their provision. It was noted by one respondent that these homes are currently predominantly delivered by RSLs, and an exemption from the SBSL may encourage private developers to also do so.

Affordable, not-for-profit, and community-led housing

A few responses stated that the exemption for affordable housing should include all forms of affordable housing, and that this should be broad enough to capture all schemes under the AHSP and all affordable homes delivered outside of the AHSP. Relatedly, other responses expressed that self-build, community-led, local authority-led, and not-for-profit developments should also be exempt from the SBSL.

Islands and rural developments

Some responses raised that developments in island communities and rural areas should be exempt to reflect the particular challenges and additional costs for housing in these areas. One respondent noted that due to the types of existing buildings in these areas, they are unlikely to benefit from the remediation enabled by the SBSL and should be exempt on that basis. Another raised that the definition of ‘rural’ would need to be sufficiently broad to capture areas which may be classified as urban or accessible but still have low development viability due to their isolation from construction markets.

Brownfield and re-use of existing buildings

Several respondents expressed that re-use of previously developed land or of existing buildings – including brownfield, refurbishment, and conversions - should be exempt from the SBSL.

“To meet our climate change commitments, and to maintain and enhance our historic environment, it is important to keep buildings in use.” - The National Trust for Scotland

Build to Rent and Purpose-Built Student Accommodation

Respondents proposed an exemption for Build to Rent developments on the basis that the SBSL would discourage investment in these types of properties and stifle the growth of the sector, having particular impacts on areas with housing shortages and a need for rented accommodation. One of these respondents expressed the view that an exemption should be applied to Purpose-Built Student Accommodation also, stating that both development types are unlike homes for onward sale, relying on different timing and financing models with a considerable number of units delivered at the same time for long-term rental income.

Smaller homes

It was noted that there could be consideration of an exemption for smaller homes, with Scottish Borders Council raising in their response that an exemption for single-bed properties would be consistent with their Development Contributions policy. Homes for Scotland noted in their response a suggestion from one member that a lower rate on smaller/starter homes would support the market for first-time buyers.

Transitional arrangements

Some respondents raised that transitional arrangements should be put in place to exempt homes already in the process of development before the introduction of the SBSL, with most of these respondents suggesting an exemption for homes in development in the three years prior. These responses expressed that land acquisition and development viability may be being considered now for developments that could become liable for the SBSL once it is introduced, and that developers should be able to take these financial decisions on current and upcoming projects without having to factor in a cost which is currently uncertain.

“Officials heard in engagement sessions that members report that land for future development and investment for 3+ years hence, are being considered now. Therefore, the land prices and viability of homes are being considered while this consultation is ongoing. Members lack the certainty of potential further regulation at this stage, and these additional costs cannot be accounted for in this pricing.” - Homes for Scotland

Flexibility

Some respondents suggested that the legislation should be flexible such that further exemptions could be introduced after commencement of the tax if appropriate.

Other

Several responses expressed the view that no further exemptions are required beyond those suggested in the consultation, with a few stating that there are too many exemptions proposed or that there should be no exemptions. Some other specific points were raised by a singular response and so have not been set out in further detail, for example, that buildings owned by the Scottish Fire and Rescue Service should be exempt. Other comments were raised which suggested exemptions already proposed in the consultation document.

Question 6: Are there any types of development listed in the exemptions above that you think should not be exempted from the Scottish Building Safety Levy?

Respondents most commonly did not object to the proposed exemptions listed in the consultation. Some, however, noted concerns or disagreements relating to some of these proposed exemptions. The comments raised by these respondents are listed below.

Hotels

Of the responses which disagreed with one or more of the proposed exemptions, the most common objection was to the exemption for hotels. One respondent noted that hotels are different to the other types of developments listed which are designed to support, for example, health and education. This respondent also expressed the view that an exemption for hotels may incentivise the building of hotels rather than housing, when the latter is much needed.

Conversions

A couple of responses disagreed with the proposed exemption for conversions and refurbishments, expressing the view that these conversions have contributed to the problem of unsafe cladding and so should be included in the SBSL to contribute to the cost of remediation.

Private care homes and hospitals

A few respondents disagreed with the proposed exemption for non-NHS hospitals and residential care homes, on the basis that these should be included within scope if they are private and for-profit developments. One respondent noted that residential developers would be at a disadvantage competing with these private providers for land if these developments were to be exempt from the SBSL.

Religious accommodation

A few responses from individuals disagreed with the proposal to exempt religious accommodation such as monasteries and nunneries.

Responsibility

A few responses expressed the view that inclusion or exclusion from the SBSL should not be based on developer or development type, but rather responsibility for the problem of unsafe cladding.

Other

Other comments raised by singular responses included the view that military establishments should not be exempt. Other comments disagreed with exemptions that were not proposed in the consultation document.

Question 7: Do you have any comments on exemptions not covered by this consultation that you wish to raise?

The most common response to this question was to offer no further comments on exemptions. Of those which did give further comments, many of these were repeating or reiterating the points set out in the analysis of the previous two questions and so those have not been set out again here.

Mechanism to protect development viability

It was raised that there should be a discretionary mechanism to exempt developments from the SBSL if evidence can be provided that the cost of the tax would make a site unviable.

Other

Other points raised by a singular response included the view that consideration of exemptions must take into account potential competitive advantages.

Engagement on other exemptions

It was raised in engagement sessions that there should be alignment between the scope of the tax and the scope of the CRP, in that the types of developments being levied should align with the types of developments being remediated with revenue raised from the SBSL.

It was noted in meetings of the Expert Advisory Group that there is a need for a balance between exemptions and the resulting tax burden on the rest of the industry. It was suggested by one member of the group that an exemption for bungalows should be explored on the basis that it would be positive to incentivise these developments and that these types of homes did not contribute to the problem of unsafe cladding.

Scottish Government response

The Scottish Government welcomes the input from respondents on exemptions from the SBSL and understands the need for balance between ensuring the Levy is effective as a revenue-raising measure while avoiding disproportionate impacts on particular types of residential developments.

The Scottish Government considers that all residential development on Scotland’s islands should be exempt from the SBSL, reflecting the housing challenges faced in these areas which may be exacerbated by including island developments within scope. Potential impacts on island communities of the SBSL Bill are considered in full in the Island Communities Impact Assessment prepared for the Bill, which is available on the gov.scot website. The Scottish Government recognises that many of the issues which affect islands may also apply to development in mainland rural areas. However, discussions with island stakeholders have identified an element of greater complexity in housebuilding on islands, where contractors are largely restricted to those available on the islands themselves and supply chains are reliant on shipping arrangements. As such, the risk of market failure is more acute on islands. In addition, unlike islands, there is not a clear statutory definition of what constitutes a rural area and rural stakeholders have raised concerns on the appropriateness of existing definitions in sufficiently capturing the challenges to rural housebuilding. The Scottish Government will continue to consider the merits of an exemption or relief for rural developments throughout the legislative process, in discussion with stakeholders.

The Bill also sets out those buildings that are considered outwith scope of the SBSL. These buildings are:

• Hotels, inns or similar establishments
• Residential accommodation for children
• Residential accommodation for persons in need of personal care, such as care homes, drug and alcohol treatment centres, and mental health facilities
• Hospitals and hospices
• Military barracks and other residential facilities provided to members of the armed forces and their families by or on behalf of the Secretary of State for Defence
• Prisons and similar establishments
• Residential accommodation for school pupils
• Residential accommodation for religious institutions where the work of a religious denomination is carried out, such as nunneries and convents
• Accommodation for asylum seekers and their dependents

It is the Scottish Government’s view that the types of buildings listed above are not within scope of the policy aim for the SBSL. Hotels, inns or similar establishments (such as hostels and aparthotels) are commercial entities which provide temporary accommodation – usually for business or leisure purposes – these buildings are distinctly different from the long-term accommodation types the SBSL seeks to charge. Additionally, the Scottish Government’s CRP is not intended to cover commercial entities such as hotels.

The remaining exempted building types are what the Scottish Government considers to be ‘residential institutions’, where the provision of accommodation is for a purpose that is additional to a residence. These community facilities provide accommodation to people in need of care or used as a residential education facility. The Scottish Government is not aware of instances where an existing residential facility requires remediation on cladding. The UK Government proposes to exempt residential institutions from its levy, and the list of exempted provisions in the Bill has been aligned to these proposals to ensure regulatory alignment between levies.

The Scottish Government recognises that Build to Rent and Purpose-Built Student Accommodation developments are a distinct part of the residential development sector. The Build to Rent market in particular remains in relative infancy, currently comprised of high-density developments in Scotland’s urban areas. While an exemption of Build to Rent from the SBSL could represent a removal of barriers for a relatively small proportion of overall construction at current market levels, the small-scale nature of the SBSL means it is not clear that an exemption for Build to Rent would provide a desired stimulus effect on the market. On this basis, the Scottish Government propose to include Build to Rent developments within scope of the SBSL but will continue to explore with industry stakeholders the merits and benefits of an exemption or relief for such developments as the Bill progresses.

The Bill will give Ministers the power to amend the list of buildings that are exempt from the levy, through secondary legislation, which will allow for further changes to be made if required to the scope of the levy. In addition, the Bill gives Ministers a power to introduce reliefs from the levy for certain types of residential development, by secondary legislation. The flexibility provided by these powers will allow the levy to respond promptly to changes in the housebuilding sector.

Considerations of calculation

Question 8: Do you agree that the rate of the Scottish Building Safety Levy should be calculated as a proportion of the market value of the property?

Of those who answered this question quantitatively (37 respondents), the breakdown of views was as follows:

Response	Total	Percentage
Yes	14	38%
No	23	62%

Those who opposed a market value calculation were predominantly developers, with several individual respondents also opposing (though for the latter, this mostly stemmed from a general opposition to the principle of the SBSL rather than to this specific calculation option). Those in favour of this approach were mostly other housing/property stakeholders and local government organisations. A full breakdown by respondent type is provided in the table below.

Respondent type	Yes	No
Developer	1	10
Other housing/property stakeholder	5	3
Local government organisation	4	2
Other organisation	2	1
Individual	2	7
Total	14	23

Fairness and proportionality

Responses varied on whether a market value approach to calculation would be fair and proportionate.

Several responses expressed that a calculation approach based on market value would be a sensible and fair approach which would avoid disproportionate impacts, for example on smaller units, and would reflect regional variations in property value. This was often referenced in comparison to the perceived unfairness of a flat rate calculation method, with a market value calculation better aligning with progressive taxation principles.

“We agree with the Scottish Government analysis that the market value approach...can allow for a progressive approach to taxation and that it will reflect house price disparities across the country.” - Scottish Federation of Housing Associations

This was expressed by some respondents as particularly relevant for rural areas, where a market value calculation would reflect lower market values for homes in these areas.

However, it was the view of some respondents that a higher market value is not necessarily indicative of higher profitability for the developer, for example due to build costs being higher in rural and remote areas.

“It is suggested that the levy should be calculated as a proportion of market value, or sale price where possible, because it has advantages which include the fact that it will be proportionate to any revenue generated through the sale of the property. We would suggest this may not always be the case, as it doesn’t necessarily reflect the differing costs faced by developers in different areas.” - Scottish Borders Council

Ease of calculation

Some respondents favoured a market value approach on the basis that this would be straightforward to calculate and administer, providing a tangible method of calculation that may be less complex than other options, given that data on sale price is already known.

“...this is the simplest approach... a square meter basis could be more onerous to calculate, verify and securely retain evidence for audit.” - The Royal Incorporation of Architects in Scotland

However, a greater number of respondents expressed the view that there are complexities in determining market value, particularly in cases where homes are not for onward sale (such as Build to Rent developments). In these cases, there would be no sale price, and an alternative valuation would be required, which some respondents noted may be difficult to determine and may be inconsistent.

“...if the intended scope of the tax is to encompass all forms of residential development such as PBSA [Purpose-Built Student Accommodation] and Build to Rent then this adds the complexity of at what point to charge because the building will be rented rather than sold to individuals/ households, and the actual point of sale of the investment is likely to have been when it was a development site before construction.” - Scottish Property Federation

One respondent expressed the view that this would constitute a fairness issue, with developers building homes not for onward sale potentially being able to manipulate valuation figures.

It was also noted by respondents that 'extras’ and ‘incentives’ offered by home builders to support sales (such as payment of Land and Buildings Transaction Tax (LBTT) or furnishing packages) would require further consideration with regards to determining the market value of a property.

Stability and certainty

Several responses emphasised the importance of stability and certainty in a tax calculation approach, expressing a view that a market value calculation does not provide this certainty. It was raised that the property market can be subject to volatility, with one respondent noting that market changes resulting from various external factors could significantly impact rates of the SBSL and the revenue generated. It was also raised that market values can fluctuate over the lifetime of a project, and therefore that a market value approach would make it difficult for developers to factor the cost of the SBSL into their financial planning and projections at the beginning of a development.

“A home can take three years to build from planning, and sale price may be uncertain throughout that period; instead, a developer would want to know any likely liability at an early stage...” - Homes for Scotland

One respondent (a developer) noted however that some level of uncertainty is inherent in the housebuilding process, and that the uncertainty from a market value approach would be similar to the assumptions around sale price developers already must make in their development appraisals.

Impact on building in certain areas

Some responses raised the view that a market value calculation approach would distort the delivery of homes in certain areas, disproportionately impacting the delivery and affordability of homes in higher market areas (perhaps with high pressures on housing availability) and incentivising building in others.

“A levy based on market value of a home will result in more marketable areas being penalised and could then result in affordability issues in those areas. This approach is not a fair one.” - Bancon Homes

Views on alternative calculation methods

A significant number of respondents focused their response to this question on alternative methods of calculation, and why these options would be preferable to a market value calculation approach. These responses which discuss alternative calculation methods which Question 11 specifically invites views on (flat rate per unit, size of property, number of bedrooms, and construction costs) have been analysed and considered alongside responses to that question.

Four respondents offered suggestions for alternative methods of calculation that were not included in the consultation paper. These were:

• A methodology aligned with that which is used to determine affordable housing contributions
• A calculation in proportion to developers’ level of responsibility for unsafe cladding
• Two suggestions which either misunderstand or disagree with the principle of applying the SBSL to new residential construction, and instead advocate a calculation approach related to remediation works:
• A calculation based on the cost of remediation a building requires
• A calculation based on the number of residents in an affected building

Other

Other points raised by singular responses included the view that the calculation approach should align with that of the England-only Levy to ensure parity between Scotland and England, particularly for administrative ease for developers operating north and south of the border.

Engagement sessions on market value calculation approach

Participants in engagement sessions noted that a market value approach would align with the approach taken for LBTT. However, participants raised similar concerns and complexities around a market value calculation, including the difficulty in establishing value of developments not for onward sale (and who should administer and cover the cost of these valuations), and the lack of certainty for developers in understanding their tax liability from the beginning of a development project.

Views from the Expert Advisory Group were more mixed, with certain members strongly preferring a market value calculation approach on the basis of fairness and proportionality, and the group noting that this would align with LBTT and other percentage-based costs for developers.

Question 9: In cases where a property is not sold on the open market, what alternative valuation could be used to calculate the Scottish Building Safety Levy to ensure proportionality with the market value of the property?

Independent valuations

Several responses to this question expressed that where a property is not sold on the open market, a valuation should be obtained from an independent valuation or assessment process. Some respondents offered more specific ideas on who should carry out this valuation or what measure should be used, including:

• Royal Institution of Chartered Surveyors, and/or their existing valuation measures and processes
• Scottish assessors
• Estate agents
• Land professionals

"We have produced a Professional Standard for the valuation of property purpose-built for renting: Valuing residential property purpose built for renting, 1st edition, which sets out the general approach to valuation that should be adopted for the build-to-rent part of the residential investment sector...” - Royal Institution of Chartered Surveyors

One respondent noted that if developers were to be required to undertake a valuation of their properties for the purposes of tax calculation, that this would constitute an additional cost.

Construction costs

A few respondents suggested that construction costs could be used as an approximation of market value, with one respondent suggesting that a combination of land price and construction value may be an equivalent to market value.

Other

Some other points were raised which either appeared to misunderstand the question (for example, considering calculation options for properties where the sale price is not yet known but will be known once sold), or did not relate to the specific question asked, including expressing opposition to the market value calculation approach.

Engagement sessions on alternative valuations

It was raised in engagement sessions that the requirement to carry out a valuation for a property not for onward sale would constitute an additional cost, with some stakeholders querying how this would be paid for and by whom.

It was discussed by the Expert Advisory Group that valuation reports by professional surveyors could be used, with another proposal to use the Building Costs Indexes System, though it was noted that this is more reflective of construction costs than market value. It was the view of the Expert Advisory Group that alternative valuations would be relatively easy to carry out for developments not for onward sale.

Question 10: In relation to Question 9, do you have any information on valuations undertaken during the building standards process that would be useful for the Scottish Government to consider?

Many respondents to this question stated that they did not have any information to offer on valuations undertaken during the building standards process.

Build costs

Several respondents noted that valuations of build costs are undertaken as part of the building warrant application process. However, it was noted that this valuation relates only to the costs of construction rather than constituting an approximation of sale or market value.

The response from the Scottish Property Federation noted that one consideration could be quantity surveyor estimates of construction costs which factor into the overall value of a development investment.

A few respondents noted that these valuations of build costs are not always accurate and do not always reflect the true construction value at the end of a development.

Other

Some other points were raised which did not relate to the specific question asked, including expressing opposition to the market value calculation approach.

Question 11: What are your views on using one of the following alternative methods of calculation for the Scottish Building Safety Levy: Flat rate per unit; Rate based on the size (per square metre) of the property); Rate based on the number of bedrooms of the property; Rate based on the cost of building works of the property. Please give us your views

As this was not a quantitative question, and many responses did not indicate a clear or sole preference for one of these options (with several discussing advantages and disadvantages of each approach), it is not possible to provide a numerical breakdown of straightforward support for these calculation methods. This reflects the recognition of complexity with all calculation methods and the mixed views from stakeholders.

This section will consider views on each of these alternative methods of calculation in turn, looking across responses given to this question and to Question 8 to summarise key themes on each approach.

Flat rate per unit

Simplicity and certainty

Several respondents favoured a flat rate per unit approach on the basis that this would provide simplicity and certainty for developers and allow them to understand their tax liability from the beginning of a development project and factor this cost into their financial planning.

“Members have expressed a general preference for a flat rate per home to have certainty about their liability for any levy at an early stage” - Homes for Scotland

A few respondents also noted that a flat rate per unit approach would be simpler for calculation and administration purposes.

Fairness and proportionality

Several other respondents, however, opposed a flat rate per unit calculation on the basis that this would be unfair and disproportionate, particularly for smaller homes and for homes in lower market-value areas, particularly remote and rural areas.

It was raised by some respondents that any calculation method should account for geographical context, with Homes for Scotland suggesting in their response that consideration be given to a tiered or regionalised flat rate approach.

Rate based on size (per square metre)

Impact on the size of new homes

Some respondents expressed the view that a rate based on size would incentivise developers to build smaller homes. Within this, it was noted by a couple of respondents that this potential impact would conflict with recent minimum space standards proposals on improving accessibility and useability of Scotland’s homes.

This point was noted in the response from Homes for Scotland, who also noted a view from some members that conversely, a flat rate per unit calculation may disincentivise the building of smaller, more affordable homes in favour of larger and higher-value properties.

Complexity

A few respondents noted that a rate based on size (per square metre) may generate complexity and costs for calculation and administration, in terms of determining the area to be measured and what evidence would be needed to support the calculation.

“A per square meter charge will need calculation and appropriate guidance on what is being measured and the evidence to be retained, e.g. architectural drawings. This will add cost and complexity.” - The Royal Incorporation of Architects in Scotland

Fairness and proportionality

While some respondents characterised a rate based on size as a fair and equitable approach (with a few stating that this would generally reflect the value of a property), a few others expressed that this approach does not account for regional variation and would require further consideration of differing impacts by geographic context.

Rate based on the number of bedrooms of a property

Alignment with existing measures

A few responses noted that a calculation approach based on the number of bedrooms of a property is used elsewhere in the building standards process to establish planning contributions, therefore this approach for the SBSL would create alignment between these measures and be understood by and give certainty to developers.

Definitions of bedroom

A few respondents noted there could be complexities in determining the definition of a ‘bedroom’ for the purposes of tax calculation, given that several rooms (such as a home office) may be easily repurposed as a bedroom by the occupier.

Fairness and proportionality

A few responses expressed the view that a calculation approach based on the number of bedrooms of a property would be a fair approach, with a couple stating that this would generally reflect the value of a property.

However, other respondents expressed the view that this approach would not account for variations in geographical context or reflect differences in the size of a property with the same number of bedrooms.

Rate based on the cost of building works of the property

Complexity

Several responses expressed the view that it would be difficult to accurately determine and evidence the cost of building works of a property, thus introducing variation in calculation and complexities in administration.

However, one respondent noted that a cost of building works calculation approach can be applied across all development types, thus avoiding the complexity with a market value approach and homes not for onward sale. Another respondent expressed the view that cost of building works is more quantifiable and a more empirical measure than other approaches.

Fairness and proportionality

While one respondent characterised cost of building works as a proportionate calculation method, others expressed the view that this method does not necessarily account for regional variation. These respondents noted in particular that higher build costs do not necessarily indicate higher margins and profits, as some developments may carry higher build costs (such as sites in remote and rural areas, or brownfield sites) while also having lower margins. One of these respondents suggested developments in rural areas where construction costs are higher should attract a low or zero tax rate.

Other themes

Advantages and disadvantages to all calculation methods

Several responses reflected on the benefits and disbenefits of all calculation methods, with a couple of responses noting that there are complexities with all methods, and that no one option will suit all developers. One respondent expressed the view that the calculation method should consider a combination of factors, with another characterising all options as reasonable.

Other

Some other points raised by a singular response included, for example, the view the calculation method should be linked to the number of residents affected by unsafe cladding.

Engagement sessions on alternative calculation approaches

Similar themes on alternative approaches to calculation were raised in engagement sessions, with several participants expressing a preference for a flat rate per unit calculation method in order to ensure simplicity and certainty for developers in calculating their tax liability from the beginning of a development project. However, others raised that this calculation method would be disproportionate compared to the cost and value of the property and could have significant impacts on development viability in areas where house prices are lower.

Views from the Expert Advisory Group were mixed and evolved over time as development of the policy became clearer. It was initially the view of the Expert Advisory Group that sale price was preferred as a calculation method where possible, or an alternative valuation method for developments not for onward sale. Later discussions reflected that a market value approach generates uncertainty for developers, while also noting that a floorspace calculation approach could have an effect on space standards of new homes. It was also noted by the Group that if there is to be geographical variation in rates there must be national consistency in preparation and timing for any rate changes.

Scottish Government response

We recognise the need for the housebuilding industry to have stability and certainty in understanding and calculating their tax liability, and we are responsive to concerns raised around the complexity of a market value approach for properties not for onward sale, such as Build to Rent developments.

Therefore, the SBSL will be charged as a proportion of the total floorspace of the relevant residential property, multiplied by the applicable levy rate. It is our assessment that a floorspace calculation approach strikes the correct balance between proportionality and ease of calculation, reflecting the difference in value between properties of different sizes while maintaining a tangible basis for calculation that is known for properties of all types.

To reflect regional differences in market values, the Scottish Government intends to set different tax rates based on average property prices in different geographical areas. This ensures the SBSL is responsive to the need for progressive taxation and to avoid disproportionate impacts on certain areas where house prices are lower.

This approach also aligns with the UK Government’s proposals for its Building Safety Levy in England.

Question 12: Do you think there should be a different rate applied on brownfield developments?

Although this question was not asked quantitatively, half of the 40 total responses given definitively agreed that there should be a different rate applied to brownfield developments (with 3 of these supporting an outright exemption) and 10 respondents definitively disagreed. Other responses were either unrelated to the question or offered more mixed views on the proposal for a different rate for brownfield developments. The key themes found from all responses are set out below.

Incentivising brownfield development

The most common theme in response to this question was that a reduced rate would incentivise development and re-use of brownfield land. Some responses stated that this would be in accordance with National Planning Framework 4, which encourages brownfield development.

“Yes. NPF4 sets out a policy intent to encourage, promote and facilitate the reuse of brownfield, vacant and derelict land and empty buildings, and to help reduce the need for greenfield development.” - Built Environment Forum Scotland

However, a few respondents expressed the view that attempting to introduce this additional policy aim into the SBSL would dilute the effectiveness of the SBSL, with one respondent stating that a reduced rate would over-restrict the tax base, and other respondents raising that more holistic work would be needed to encourage brownfield development.

Challenge and cost of brownfield development

Many responses also noted the additional challenges, complexities, and costs associated with brownfield development, expressing the view that a reduced rate of the SBSL would help to mitigate these costs and avoid challenging the viability of these sites. It was also noted by one respondent that SMEs undertake the majority of brownfield developments, therefore these costs and challenges may be more significant for these businesses.

“As noted above the cost of developing brownfield sites is significantly more than greenfield, and can run into millions on small developments, therefore the risk profile of the development is higher and margins in some cases will be lower.” - Westpoint Homes

Impacts

A few respondents expressed the view that a reduced rate for brownfield developments may introduce unintended impacts on the housebuilding market. It was stated that this could create distortion in the market.

Another respondent noted that due to very little brownfield being available in rural areas, and costs already being higher in these areas for greenfield development, an effectively higher rate for greenfield development could have a disproportionate impact on housebuilding in these areas.

Further consideration needed

Some responses indicated that they could possibly support a reduced rate for brownfield developments, but further information and consideration would be needed to properly assess this proposal, including:

• The cost of the SBSL
• The level of discount to be applied
• The impact on revenue collected from the SBSL
• The viability and margins of brownfield sites (with one respondent suggesting developments could be assessed on a case-by-case basis to evaluate the need for a reduced rate)

Other

Other points raised by a singular response included the view that if a reduced rate is to be applied, this should be implemented as simply as possible.

Engagement sessions on brownfield development

The Expert Advisory Group raised that consideration should be given to active incentivisation of brownfield development, in alignment with National Planning Framework 4.

Scottish Government response

The Scottish Government will consider the merits of a reduced rate for brownfield ("previously developed land") as part of its consideration on setting rates for the SBSL, and in discussions with stakeholders.