Major Leasehold Reform: Ground Rents Capped at £250 Annually
In a significant move to address the cost of living crisis and overhaul the housing market, the government has announced that ground rents for leaseholds will be capped at £250 per year. This landmark decision, unveiled by Prime Minister Keir Starmer, is set to benefit millions of leaseholders across England and Wales, marking a pivotal shift in homeownership rights.
Ending Feudal Practices in Housing
The draft Commonhold and Leasehold Reform Bill, published today, represents a fundamental rewiring of the homeownership landscape. This groundbreaking legislation not only caps ground rents but also bans new leasehold flats, aiming to strengthen homeownership and give people greater control over their properties. The reforms call an end to what has been described as a feudal leasehold system, with roots tracing back to medieval times.
Prime Minister Keir Starmer emphasised the importance of this change, stating, "Good news for homeowners, we’re capping ground rent at £250. That means if you are a leaseholder, and your ground rent is more than £250, you’ll be paying less. And I’ve spoken to so many people who say this will make a difference to them of hundreds of pounds."
Financial Relief for Millions
The cap is designed to ensure that leaseholders keep more of their hard-earned money, with many expected to see savings exceeding £4,000 over the duration of their lease. This initiative directly targets the issue of residential leaseholders paying excessive bills for no clear service in return, a problem that has plagued the market for years.
Over five million leaseholders and future homeowners will benefit from enhanced control, powers, and protections under the new bill. The ground rent cap will initially be set at £250 annually, with plans to ultimately reduce it to a peppercorn rate after 40 years, further easing financial burdens.
Industry Response and Implementation
Industry experts have welcomed the move as a positive step forward. Omer Mehmet, Managing Director at Trinity Finance, commented to Newspage, "Capping ground rents at £250 is a sensible and long-overdue reform that will immediately improve affordability and confidence for millions of leaseholders."
He added, "Excessive ground rents have distorted values and blocked sales for years, so this move should free up parts of the market that have effectively been stuck. The success of these reforms will depend on clear implementation and lender alignment to ensure buyers can benefit without new uncertainty."
Prime Minister Starmer highlighted the broader context, noting, "That’s really important because the cost of living is the single most important thing across the country. So this is a promise that we said we’d deliver and I’m really pleased that we’re delivering on that promise."
This reform is poised to improve the cost of living for millions, offering tangible savings and greater security in homeownership. As the legislation moves forward, it signals a transformative period for the housing market in England and Wales.
