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The government is expected to announce a limit on ground rents that leaseholders in England and Wales must pay, with details set to be revealed on Tuesday morning, according to the BBC. During the last election cycle, Labour committed to addressing the issue by promising to “tackle unregulated and unaffordable ground rent charges.” Despite this commitment, there have been rumors that the government might reconsider the cap due to worries over the potential consequences for pension funds.
While the exact figure for the ground rent cap has yet to be officially disclosed, activists and campaigners anticipate that the government will set an annual limit around £250. This figure contrasts with calls from some quarters for a much more stringent restriction. Former Housing Secretary Angela Rayner recently urged the government to honor its manifesto commitment and follow through with meaningful action.
Leasehold arrangements affect approximately five million homes in England and Wales, where residents own the right to live in a property for a defined term, granted by a freeholder. This system is particularly prevalent in flats, with data from the Land Registry showing that 99% of flat sales so far in 2024 have been leasehold. Although ground rents were eliminated for most new residential leasehold properties in 2022, they still apply to existing homes under leasehold agreements. According to the English Housing Survey, leasehold owners reported paying a median ground rent of £120 annually in 2023/24.
The issue has sparked internal government debate. Back in 2024, when Labour was in opposition, the current Housing Minister Matthew Pennycook expressed a preference for ground rent caps that would effectively reduce charges to zero. However, reports indicate disagreements between the Treasury and the housing department, mainly concerned about how capping ground rents might impact pension funds that hold freeholds. Former minister Justin Madders warned the BBC that the prime minister could face a “mass rebellion” if the government were to backtrack on the promised cap. Madders said his ideal scenario would be a peppercorn rent but admitted that a £250 cap might be a compromise to avoid prolonged legal disputes.
Representatives from the Residential Freehold Association have voiced strong opposition, warning that capping ground rents would represent “an unprecedented and unjustified interference with existing property rights,” which could undermine investor confidence in the UK housing market. Harry Scoffin, founder of the Free Leaseholders campaign, condemned any softening of the promised reforms, stating, “At the election, Labour promised to end the feudal leasehold system and if they backtrack on reducing ground rates to a peppercorn or zero financial value they’re not ending the leasehold scam.
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