Millions of leaseholders across England and Wales are set to benefit from a significant government intervention, as Housing Secretary Steve Reed announces a cap on what he describes as "scam" ground rents. The reforms, which implement a key manifesto commitment, will see ground rents limited to £250 per year before eventually reducing to a nominal peppercorn amount.
Historic Moment for Leasehold Reform
In a landmark announcement on Tuesday morning, Steve Reed confirmed that ground rents will be capped from 2028 onwards. This measure represents a decisive step toward what Mr Reed told Sky News will "lead to abolition" of ground rents altogether. The housing secretary did not mince words, characterising the current system as "a bit of a scam", "a racket", and "paying money for nothing".
Ground rents are charges that leaseholders must pay to occupy land they do not own, without receiving any service in return. Critics have long argued this practice epitomises the feudal nature of England's centuries-old leasehold system, which affects approximately five million households.
Comprehensive Reform Package
The government's comprehensive reform package includes several key measures beyond the ground rent cap. New leasehold flats will be banned entirely, while existing leaseholders will gain the right to switch to the commonhold system. This alternative approach gives homeowners a stake in their building's ownership and greater control over management decisions and associated costs.
Additional reforms include the abolition of forfeiture, a controversial practice where leaseholders could lose their homes and accumulated equity for defaulting on debts. The government will also introduce a new enforcement regime designed to be fairer and more transparent for all parties involved.
Political Dimensions and Reactions
The announcement represents a significant victory for former deputy prime minister Angela Rayner, who championed ground rent caps during her time in government. Prime Minister Sir Keir Starmer, who first revealed the move in a TikTok video, has pleased backbench Labour MPs by delivering on this manifesto promise despite reported cabinet divisions.
However, Chancellor Rachel Reeves has expressed reservations about the reforms, concerned that capping ground rents might deter pension fund investments in residential property. This tension highlights the delicate balance between protecting leaseholders and maintaining investment confidence in the housing market.
Conservative shadow business secretary Andrew Griffith acknowledged his party's previous efforts to improve conditions for leaseholders while recognising that "more that needs to be looked at". He emphasised the importance of balancing leaseholder protection with pension fund security, noting that "it's actually people's pensions themselves as well".
Industry and Opposition Responses
The Residents Freehold Association has voiced strong opposition to the rent cap, describing it as "a wholly unjustified interference with existing property rights" that will "seriously damage investor confidence in the UK housing market". The group warns that professional freeholders' forced exit from the sector could hinder building safety projects and disrupt residents' daily lives.
Meanwhile, opposition parties have called for more radical action. The Liberal Democrats demand "an end to the absurd, feudal system of leasehold for good", while Green Party leader Zack Polanski urges the government to "stop tinkering around the edges and scrap leasehold altogether".
As the Commonhold and Leasehold Reform Bill progresses through Parliament, with junior minister Matthew Pennycook set to formally unveil the legislation, the government faces the complex task of balancing leaseholder relief with maintaining a stable property investment environment. The coming weeks will see further announcements following last summer's consultation on service charges, addressing what many leaseholders call "fleecehold" practices.
