Ground rents will be capped at £250 a year for leaseholders in England and Wales, the government has announced.
Announcing the cap in a TikTok video, Prime Minister Sir Keir Starmer said: “I’ve spoken to so many people who say this will make a difference to them worth hundreds of pounds.”
The reforms will be published in the draft Leasehold and Commonhold Reform Bill, which will be introduced on Tuesday.
Ground rents were abolished for most new residential leasehold properties in England and Wales in 2022, but remained for existing leasehold homes.
Labour’s 2024 election manifesto promised to “tackle unregulated and unaffordable ground rent charges”.
There are around five million leasehold homes in England and Wales, where people own the right to occupy a property via a lease for a limited number of years from a freeholder.
Leaseholds is the default tenure for privately-owned flats, and the Land Registry estimates that 99% of flat sales in 2024 in England were leasehold.
The English Housing Survey has estimated that in 2023/24, leasehold owner-occupiers reported paying a median annual ground rent of £120 a year.
In 2024, when Labour were in opposition, the current Housing Minister Matthew Pennycook said his preference was for ground rents to be capped at effectively zero.
Recent reports have suggested that the Treasury and the housing department have been at loggerheads over the issue, with concerns over how a cap would impact pension funds which own freeholds.
Last week, former Labour minister Justin Madders told the BBC that the prime minister could face a “mass rebellion” if the government abandoned its pledge on a ground rent cap.
He said setting the limit at a peppercorn rate would be his preferred choice but that he could accept a £250 cap due to the “risk of elongated legal challenge”.
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