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The government is expected to announce a cap on ground rents for leaseholders in England and Wales on Tuesday morning, according to sources at the BBC.
The Labour Party’s 2024 election manifesto included a commitment to “tackle unregulated and unaffordable ground rent charges.”
Speculation had arisen that the government might reconsider its pledge due to concerns about the potential repercussions for pension funds.
While the government has yet to confirm the specific level of the cap, campaigners suggest it is likely to be set at £250 per year.
Earlier this month, Angela Rayner, a former Housing Secretary, urged the government to adhere to its manifesto commitment regarding ground rents.
Approximately five million leasehold homes exist in England and Wales, where individuals possess the right to occupy a property for a fixed term under a lease from a freeholder.
Leasehold is the prevailing tenure for privately-owned flats, with the Land Registry estimating that 99% of flat sales in England in 2024 were leasehold properties.
Ground rents were abolished for the majority of new residential leasehold properties in England and Wales in 2022 but remain applicable to existing leasehold homes.
According to the English Housing Survey, in 2023/24, leasehold owner-occupiers reported paying a median annual ground rent of £120.
In 2024, while in opposition, the current Housing Minister Matthew Pennycook expressed his preference for capping ground rents at a nominal “peppercorn” level.
Recent reports indicate disagreements between the Treasury and the housing department over the issue, particularly concerning the potential impact of a cap on pension funds that own freeholds.
Last week, former 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 stated that while a peppercorn rent would be his ideal choice, he could accept a £250 cap due to the “risk of elongated legal challenge.”
A spokesperson for the Residential Freehold Association previously stated that capping ground rents “would be an unprecedented and unjustified interference with existing property rights, which would seriously damage investor confidence in the UK housing market.”
Harry Scoffin, founder of the Free Leaseholders campaign group, asserted: “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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