The government is set to announce a cap on ground rents for leaseholders in England and Wales, with expectations running high for a limit of around £250 annually. This move comes as part of Labour’s 2024 election manifesto commitment to address the burden of exorbitant ground rent charges. However, internal discussions within the government suggest that financial implications, particularly for pension funds holding freehold interests, might complicate the implementation of this cap.
Labour’s Pledge and Government Dilemma
The anticipated cap has emerged from Labour’s promise to tackle “unregulated and unaffordable ground rent charges.” Former Housing Secretary Angela Rayner has been vocal in urging the government to uphold this commitment. There are approximately five million leasehold properties in England and Wales, with leaseholds being the standard tenure for privately-owned flats. The Land Registry indicates that a staggering 99% of flat sales in 2024 were leasehold.
In 2022, the government abolished ground rents for new residential leasehold properties, but many existing leaseholders still face ongoing charges. According to the English Housing Survey, leasehold owner-occupiers reported median annual ground rents of £120 in 2023/24. The current Housing Minister, Matthew Pennycook, expressed a desire for ground rents to be capped at effectively zero when Labour was in opposition.
Internal Conflicts and Stakeholder Concerns
Recent reports reveal tensions between the Treasury and the housing department regarding the cap’s potential repercussions on pension funds, which own many freehold interests. Former minister Justin Madders has warned that a failure to deliver on the ground rent cap could lead to significant backlash, describing it as a “mass rebellion” against the government.
Madders has indicated a preference for a cap that would effectively amount to zero, but acknowledges that a £250 limit could be a pragmatic compromise given the threat of prolonged legal challenges. In contrast, the Residential Freehold Association has cautioned that capping ground rents could severely undermine property rights and damage investor confidence in the UK housing market.
Campaigners Call for Action
Harry Scoffin, founder of the Free Leaseholders campaign group, has emphasised the importance of adhering to Labour’s electoral promises. He argues that any retreat from reducing ground rents to a nominal fee would signify a continuation of the “leasehold scam,” rather than a genuine reform of the often criticized system.
The discourse surrounding ground rents is not merely a financial issue; it resonates with broader concerns about housing justice and tenant rights. The promise of reform has highlighted the enduring legacy of a feudal system that still affects a substantial proportion of the housing market, with calls for an outright ban on new leasehold flats gaining momentum.
Why it Matters
The forthcoming cap on ground rents could represent a pivotal shift in the housing landscape for millions of leaseholders across England and Wales. As the government navigates complex stakeholder interests and public expectations, the outcome will be closely scrutinised. The decision not only affects current leaseholders but also shapes the future of property rights and investment confidence in the UK housing market. The stakes are high, and the potential for reform could either alleviate the financial pressures faced by leaseholders or entrench existing inequalities within the property system.
