Ground Rent to Be Capped at £250 in Major Overhaul for London's Leaseholders
The Government has unveiled sweeping changes to the leasehold system in England and Wales, with ground rents set to be limited to £250 per year. This landmark reform aims to provide homeowners with greater control over their properties, marking a significant shift in the housing landscape.
Key Reforms Announced by the Government
Under the new measures, fresh leasehold flats will be prohibited, and existing leaseholders will gain the ability to convert to commonhold. This move is designed to enhance homeowner authority and address long-standing concerns about the leasehold system. The reforms were announced by Prime Minister Sir Keir Starmer via a TikTok video, where he emphasised the impact on the cost of living.
Sir Keir Starmer stated: "I've spoken to so many people who say this will make a difference to them worth hundreds of pounds. That's really important because the cost of living is the single most important thing across the country."
Political Pressure and Manifesto Pledges
The announcement follows pressure from backbench MPs, including former deputy prime minister Angela Rayner, who urged the Government to honour Labour's manifesto commitment to tackle unregulated and unaffordable ground rent charges. In a recent Guardian article, Rayner highlighted concerns about lobbying from wealthy investors and warned that public trust could erode if the issue was not addressed.
Housing Secretary Steve Reed confirmed the Government's dedication to comprehensive leasehold reform, with the ultimate goal of abolishing the system. When questioned about the timeline, he indicated that further details would follow the consultation process.
Impact on Leaseholders and Investors
Government figures reveal that between 770,000 and 900,000 leaseholders currently pay over £250 annually in ground rents, with 490,000 to 590,000 of these located in London and the South. The cap is expected to save leaseholders a collective £12.7 billion over their lease periods, with over £600 million paid in ground rents last year alone.
However, the Residential Freehold Association (RFA) has criticised the ground rent cap as "wholly unjustified," warning that it could damage investor confidence in the UK housing market. An RFA spokesperson expressed concerns about the impact on building safety projects and the disruption to residents' daily lives.
Regulatory Support and Future Steps
The Competition and Markets Authority (CMA) has long advocated for ground rent restrictions, leading a crackdown on mis-selling since 2019. Sarah Cardell, chief executive of the CMA, welcomed the reforms, stating that they would ensure leaseholders receive a fair deal.
The draft legislation, released on January 27, outlines a 40-year transitional phase to gradually reduce ground rents to practically nothing. This phased approach aims to balance the needs of leaseholders with the broader economic implications, including potential compensation costs estimated to exceed £27 billion.
