Keir Starmer made an announcement today regarding the imposition of a cap on ground rents, providing significant relief to leaseholders. The Prime Minister revealed this change on TikTok, anticipating savings for nearly a million families. This initiative aims to modernize the outdated leasehold system, which Housing Secretary Steve Reed described as fraudulent.
Starmer emphasized the positive impact on homeowners, stating that ground rents will now be capped at £250 annually. This means leaseholders paying more than £250 in ground rent will see a reduction in their expenses. The government confirmed the £250 yearly cap on ground rents, transitioning to a nominal peppercorn cap after 40 years.
In addition to the cap on ground rents, new leasehold flats will be prohibited, marking the end of the archaic leasehold system rooted in medieval times. The Ministry of Housing, Communities and Local Government emphasized the need for this change.
This announcement on TikTok by a British Prime Minister is unprecedented and aligns with Labour’s manifesto promise to address excessive ground rent charges. Former Housing Secretary Angela Rayner urged the government to honor this commitment.
Housing Secretary Steve Reed highlighted the long-standing issue of uncapped ground rents burdening leaseholders and applauded the government for taking action. The proposed cap at £250 per year is expected to benefit nearly a million individuals, providing financial relief and stability.
The government anticipates the legislation to be enacted by next year, ensuring protection for leaseholders without compensating freehold owners. The forthcoming Leasehold Reform Act will offer additional safeguards to leaseholders, preventing freeholders from offsetting losses through increased service charges.
While ground rents were abolished for most new residential leasehold properties in England and Wales in 2022, existing leasehold homes still face this issue. Data from the English Housing Survey reveals that in 2023/24, leasehold owner-occupiers paid a median annual ground rent of £120.
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