As the UK government prepares to introduce legislation to reform the leasehold system in England and Wales, a former Labour minister has warned of a potential “mass rebellion” if the promised changes are not robust enough.
Justin Madders, a close ally of former Housing Secretary Angela Rayner, has expressed concerns that the government may row back on its pledge to cap ground rents – the annual fees that leaseholders must pay to freeholders. This follows reports of tensions between the Treasury and the housing department over the impact such a cap could have on pension funds, which own a significant number of freehold properties.
Labour’s 2019 election manifesto promised “to tackle unregulated and unaffordable ground rent charges,” and Madders has stated that the party has a “clear manifesto commitment” on the issue. He has coordinated a letter from over 80 Labour MPs urging the Prime Minister to implement a cap on ground rents, with the ideal scenario being a “peppercorn” rate of around £1 per year.
However, campaigners now believe a cap of £250 annually is more likely, a compromise that Madders says he could accept to avoid “elongated legal challenges.” If the government fails to introduce a meaningful cap, Madders has warned that there will be “no way” the legislation can pass through Parliament without a “mass rebellion” from Labour backbenchers.
The delay in publishing a draft bill, which ministers had promised before the end of 2022, has been attributed to the issue of ground rents. This has disappointed Florence Eshalomi, the chair of the Commons Housing Committee, who has urged the government to “honour the commitment it made to leaseholders” and “end the feudal leasehold system.”
The leasehold system, which accounts for around a fifth of homes in England and Wales, has long been a source of frustration for homeowners. Many have found themselves trapped in properties with escalating ground rents, making their homes effectively unsellable and unmortgageable.
One such homeowner, Jon from Harrogate, told the BBC that he felt “trapped in a nightmare” due to the ground rent on his leasehold property, which doubles every 10 years. He was forced to sell the flat at a significant loss and rent for several years before being able to purchase a larger home for his growing family.
Campaigners argue that the impact of unaffordable ground rents on the housing market and individual homeowners far outweighs any concerns about the effect of a cap on pension funds. Katie Kendrick, co-founder of the National Leasehold Campaign, has dismissed the pension fund argument as “rubbish,” stating that only a “small proportion” of funds are affected and that they “knew this was coming.”
As the government prepares to unveil its plans for leasehold reform, the pressure is on to deliver meaningful change that addresses the concerns of millions of leaseholders across England and Wales. Failure to do so could result in a significant political backlash, with Labour MPs ready to rebel against what they see as a betrayal of their party’s manifesto commitments.
