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Leasehold reform delays are a victory for lobbyists against Michael Gove

Yet another example of how Britain’s housing market is weighted in favour of those who have wealth at the expense of those who do not

This is Home Front with Vicky Spratt, a subscriber-only newsletter from i. If you’d like to get this direct to your inbox, every single week, you can sign up here.

Good afternoon and welcome to this week’s Home Front. The Government is on the verge of breaking a housing manifesto commitment. But, this time, it has nothing to do with the renters’ reform.

According to multiple reports – as well as several Whitehall sources I’ve spoken to – Housing Secretary Michael Gove is being forced, once again, to go into battle to defend one of his flagship reform commitments – scrapping onerous ground rents for leasehold homeowners.

This comes off the back of what is reportedly lobbying from freeholders, pension fund and investment managers and members of Mr Gove’s own party.

And, if those reports are true, this will be yet another example of how Britain’s housing market is weighted in favour of those who have wealth at the expense of those who do not.

In 2019, in their manifesto the Conservatives pledged to restrict ground rents for leasehold homes to a “peppercorn” in England and Wales. This move would have seen ground rents – which can run to thousands of pounds a year for individual leaseholders while making millions in profit for freehold companies – be reduced to £0.

Though leasehold has now been restricted for new homes, there are still about 10 million leaseholders in England and Wales who are impacted by this charge.

If you bought a leasehold home, you only own it for a specified period and are usually charged ground rent as well as a service charge and are, in effect, still a tenant because your freeholder is your landlord.

Legislation to reform leasehold homeownership will therefore make a meaningful and material difference to millions of people’s lives.

The Leasehold Reform Bill was (re)announced last November in the King’s Speech. It was meant to deliver this change.

A key proposal included in it was to consult – and perhaps include in the bill – a “cap” on ground rents.

That consultation has now happened. And the options for ground rents include freezing them at current levels, linking them to property values, setting a fixed maximum or moving to Mr Gove’s preferred peppercorn low nominal payment.

During a consultation process, it is very normal for those with vested interests to lobby the Government.

Freeholders are represented by the Residential Freehold Association (RFA). The RFA is represented by Pagefield – a major London-based PR and communications agency.

i understands that both Number 10 and the Treasury have met representatives of freeholders but not leaseholders.

The Treasury did not respond to a request for comment about this specific issue. Number 10 declined to comment on it.

When asked about their role in lobbying government, Pagefield did not deny meetings with officials and said: “Pagefield is proud to support the RFA with external communications as it advocates for sensible reform of the leasehold sector.”

A spokesperson for the Residential Freehold Association who provided their statement via Pagefield said that the RFA “welcomes” recognition from the Government that proposals to cut ground rent “would be unjustified”.

“Investors and pension holders need to have complete certainty that their investments would not be retrospectively interfered with,” the spokesperson added.

“Throughout our engagement with Government, we have highlighted that capping ground rents would be an unjustified interference with property rights, which would require billions of pounds worth of compensation at the expense of the taxpayer. We must focus on meaningful reform and improving standards across the market.”

However, when approached for comment, Number 10 did not say that cutting ground rent “would be unjustified”.

Instead, when asked if leasehold reform had been scrapped, the Prime Minister’s official spokesperson said: “This was not the case, and the Government is committed to strengthening protection for leaseholders and is bringing forward reforms through the Leasehold and Freehold Reform Bill.”

He added: “The bill is continuing to progress through the House of Lords and will have its second reading later this week” and noted that the Government has “put an end to ground rents for most new residential properties in England and Wales.”

Pushed on the reports that ground rents might not be cut down to a peppercorn rate, the Prime Minister’s official spokesperson reiterated that “it is not fair that many leaseholders face unregulated ground rents for no guaranteed service in return” and said this was why the Government had “consulted on a range of options to cap ground rents for existing leases”.

The Government has made it clear that the consultation is still under consideration.

Ground rent is lucrative for freeholders. Indeed, the entire leasehold system is so remunerative that investors, including pension funds, have bought freeholds or shares in freehold companies because they have historically guaranteed such good returns.

Mr Gove had initially wanted to completely abolish leasehold homeownership, which he has described as “feudal”. However, last May the Housing Secretary was forced to rein in his ambitions.

i understands that the Secretary of State for Business and Trade, Kemi Badenoch, is among MPs who were unsure about Mr Gove’s leasehold plans. Badenoch was concerned that removing ground rents would have a chilling effect on investment in UK property, particularly among pension funds.

Historically, ground rent and lease renewal have been seen as a safe bet – a guaranteed win for investors because rents must be paid, and leases must be renewed.

However, leasehold homeowners feel like they are being used as “cash cows”.

Harry Scoffin, founder of the campaign group Free Leaseholders, told me that ground rent is “the ultimate get-rich-quick scheme because unlike service charges the owner of the ground rent income is under no legal obligation to provide a service or benefit to consumer or leaseholder.”

“It’s a travesty that the Conservatives are potentially reneging on a 2019 manifesto commitment that millions of people voted for,” Scoffin added.

“The freeholder lobby has all the cash to splash, and the best lobbyists money can buy and they’re being heard by Number 10 and the Treasury. We’ve only been invited for meetings with the Department for Levelling Up, Housing and Communities (DLUHC).”

While Government officials play policy ping pong over leasehold reform, the delays are costing leaseholders money.

A spokesperson for DLUHC echoed Number 10 and said: “We are committed to strengthening protection for leaseholders and are bringing forward reforms through the Leasehold and Freehold Reform Bill.”

“We are pleased to note that the Competition and Markets Authority recently found that ground rents are ‘neither legally nor commercially necessary’,” they continued, once again drawing attention to the consultation on leasehold reform which is currently being considered.

Like Renter’s Reform, it seems that the leasehold reforms Housing Secretary Michael Gove wanted are being held up by those with vested interests. This time, it’s not private landlords but freeholders who are using arguments about “property rights” to argue against changes which would benefit millions of tenants.

Key housing

According to the Resolution Foundation spending on housing across the UK is higher than any other OECD country except Finland (Photo: Getty)

Two things worth noting this week.

First, a new report from the Resolution Foundation – an independent think-tank which works on improving living standards for people on low and middle incomes – has found that housing in the UK is worse value for money than any other advanced economy.

This is because, in Britain, we have a combination of high prices and old, cramped, poorly insulated housing. The think-tank also pointed out that many people’s homes are not close to their work, meaning that Brits have long commutes to boot.

England’s homes, according to the think-tank’s numbers, are also crowded. They have less floorspace per person than New York, Japan, France and Germany.

Small, but expensive.

According to the Resolution Foundation spending on housing across the UK is higher than any other OECD country except Finland.

Second, according to new data from the Office for National Statistics housing has become more affordable.

This is because the housing affordability ratio for England – the relationship between median house prices and median salaries – was 8.26 in 2023, down from 8.47 in 2022 and well below the pandemic peak of 9.06 in 2021. In Wales it was 6.07 last year, down from 6.37 in 2022.

However, look a little closer and you’ll realise this doesn’t actually mean that buying a home has become more affordable. This is because house prices remain high, mortgage rates are still hovering at around 5 per cent and, while wages have risen, they are not set to keep pace with house prices.

Ask me anything

‘Retirement may well look very different for millennials and Gen Z,’ Vicky Spratt investigates (Image: inews)

In recent weeks, I’ve received a fair few messages from people – mostly private renters – expressing their concern about saving. Or, rather, their inability to. What, several of them wondered, would this mean for them in retirement?

There’s no short answer to this so I’ve written a Big Read for i‘s features section which looks at the problems facing the under-45s in older age. Do have a read and see what you think about some of the things being discussed.

Thank you to everyone who has submitted a question. Please keep them coming there @Victoria_Spratt, on X, formerly Twitter, @vicky.spratt on Instagram or via email vicky.spratt@inews.co.uk.

Vicky’s pick

Mist crosses Loch Eil looking towards Ben Nevis and Fort William (Photo: Chris Gorman/Big Ladder)

Over the weekend I walked to the top of Ben Nevis in Scotland. It’s the UK’s highest mountain. It took me eight hours to get up to the summit and down again and, while I was there, I met lots of people who had moved to the Scottish Highlands from England in search of cheaper housing and a better quality of life.

While cruising around Loch Linnie in Fort William, looking at seals and learning how the mussels I would go on to eat that evening were farmed, I have to say, I started to wonder if they were on to something.

So, I looked up “house prices in Fort William” and, of course, they have been rising and pricing local people out.

That, as Gen Z say, is why we can’t have nice things. That being said, my weekend was very nice. Thank you.

This is Home Front with Vicky Spratt, a subscriber-only newsletter from i. If you’d like to get this direct to your inbox, every single week, you can sign up here.

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