Scottish government faces backlash over housebuilding tax

The Scottish government has come under fire for proposals to introduce a tax on housebuilding to help fund the repair of unsafe cladding.

Under the plans, developers would pay a levy when building new homes, student accommodation and build-to-rent properties.

The Scottish government says the Building Safety Levy (BSL) Bill will force developers to help pay for cladding remediation, contributing about £30 million a year.

Levy will do more than good

If approved, the Scottish government plans to introduce the levy from April 2028. The bill has already passed its first stage at Holyrood, with MSPs voting 65 to 54 in favour.

However, critics warn the levy will do more harm than good.

Scottish Conservative MSP for Mid Scotland and Fife, Liz Smith, said: “Moves to slap an additional tax on the sector is the last thing they need during a housing emergency in Scotland.

“Creating new taxes seems to be the only answer the SNP have as they attempt to cover-up their own failings.

“They were handed almost £100 million by the UK Conservative government to tackle dangerous cladding following the Grenfell tragedy but have shamefully failed to act and families remain at risk.

“Rather than tackling Scotland’s housing emergency, the SNP are hiking takes which will only deter investment and denying families the affordable homes that are desperately required.”

Worsening the supply shortage

Robin Blacklock, interim director of the Scottish Property Federation, has urged the Scottish government to grant an exemption to certain properties.

He said :“While we naturally support measures to improve building safety, and tackle some of the legacy issues associated with cladding remediation, the blanket application of this proposed levy during a declared housing emergency, at a time when development viability is already under severe strain, risks seeing many new homes being delayed or cancelled, thus worsening the supply shortage across all tenures.

“Given the disproportionate impact, we are urging the Scottish government to exempt SME housebuilders, the Built to Rent sector, and all forms of affordable housing, including mid-market and discounted rent model (provided by the private sector) from the BSL to avoid disincentivising critical parts of the housing market.”

He adds: “With construction and financing costs continuing to be high, the cumulative impact of the levy on top of the range of existing contributions will undermine the ability of the sector to bring forward critically needed new homes and could lead investors to choose locations outside Scotland where development is deemed to be more viable.”