The leasehold system of property ownership in England and Wales is a feudal relic, a hangover from the middle ages when powerful families wanted to retain ownership of their land while maximising their earnings from it. In recent years it had seen homes created merely to provide an income for whoever owns the freehold. These archaic laws ought to be reformed out of existence. It was heartening that Michael Gove, the cabinet minister with responsibility for housing, agreed. But Downing Street has blocked his proposal, wary of picking a fight with wealthy donors ahead of a general election.
This is a shortsighted move that confirms the Conservatives as being out of touch with ordinary people’s concerns. About a fifth of homes in England are leasehold properties, many of them flats in cities. Under such contracts, homeowners enter into long-term leases in which they must pay a yearly ground rent to freeholders. The scandal is that ground rents and service charges for maintenance can rise quickly to ridiculously high levels. Renters are exploited too, as landlords pass on the costs of such profiteering by increasing rent.
Last year a ban on ground rents being sold on future leasehold homes came into force. But almost 5m homes are still vulnerable to acquisitive freeholders. These voters are unlikely to think much of broken promises, especially when the big winners from this status quo will be offshore companies, investment funds and aristocratic landowners, including the royal family.
The issue has been rising up the political agenda, partly because of the cost of living crisis but also because the Grenfell Tower fire focused attention on the issues with cladding that leaseholders of flats had long endured. Mr Gove does plan stronger protections for tenants from exorbitant ground rents and will strengthen their hand in negotiations with freeholders. These are small steps forward in the right direction, but won’t go far enough for many people hit with the double whammy of rising mortgages and service charges.
The cabinet minister has called for a “sustainable housing settlement”, but often found himself on the losing side of the argument. In this case, the Treasury balked at the cost of buying out freeholders. He was also forced by rebellious Tory MPs to water down housing targets for local councils. Failing to build enough homes in Conservative areas placates today’s voters at the expense of future ones.
The British empire spread leasehold to every corner of the globe, but it disappeared along with the pith helmets. It is virtually gone from Scotland, where flat owners take stakes in the building. England and Wales did introduce an alternative – commonhold tenure, where homeowners appoint managing agents – in 2002. But this has failed to take off, unsurprising perhaps given that it is less attractive to developers than leasehold, which can secure ongoing income streams.
The Labour party has made the right noises but it has yet to say it would do what the Conservatives could not. Yet the Tories are in desperate need of the sort of popularity that ending leaseholding would earn. Instead, Mr Gove’s party appears unable to bite the hand that feeds it. The property sector was responsible for 20% of all donations taken by the Conservatives in the 10 years from 2010. By breaking a pledge to abolish the leasehold system, the Tories look more troubled by the needs of their backers than those of the country.
• This article was amended on 13 May 2023. The ban that came into force last year was on ground rents being sold on future leasehold homes, not on new-build homes being sold as leasehold properties as stated in an earlier version.
