Government Announces £250 Ground Rent Cap to Aid Millions of Leaseholders
Millions of leaseholders across England and Wales are poised to benefit from a significant overhaul of the leasehold system, with ground rents set to be capped at £250 per year. This landmark reform aims to end spiralling bills and provide stronger protections for homeowners.
Substantial Savings and Enhanced Protections
The government estimates that this shake-up will see many leaseholders save more than £4,000 over the course of their lease. More than five million leaseholders and future homeowners are expected to benefit from enhanced control, powers, and safeguards. This move effectively concludes the era of residential leaseholders paying excessive bills without receiving clear services in return.
Furthermore, the reform will facilitate easier house sales for individuals whose lives have been disrupted by ground rent terms that render their properties difficult to sell. The draft Commonhold and Leasehold Reform Bill stipulates that ground rent will be capped at £250 annually and will be reduced to virtually zero after 40 years.
Political Commitment and Public Impact
Prime Minister Sir Keir Starmer emphasised the importance of this policy in a video announcement. "I've spoken to so many people who say this will make a difference to them worth hundreds of pounds," he stated. "That's really important because the cost of living is the single most important thing across the country."
Housing Secretary Steve Reed reinforced this commitment, noting: "If you own a flat you can be forced to pay ground rents that can become completely unaffordable. We said we'd be on the side of leaseholders – which is why today we are capping ground rent – helping millions of leaseholders by saving them money and giving them control over their home."
Investor Concerns and Market Reactions
However, the announcement has also raised concerns regarding investor confidence in the housing market. Savings and investment firm M&G warned of a £230 million one-off hit from the plans, describing the changes as "disproportionate" and potentially detrimental to savers and companies invested in UK assets.
The Residential Freehold Association (RFA), representing professional freeholders, criticised the cap as "wholly unjustified," arguing it could damage investor confidence and undermine established property rights. A spokesperson stated: "Instead of focusing on those reforms which address the issues that leaseholders care most about, the Government's draft Bill will tear up long-established contracts and property rights, which are pillars of the UK's investment reputation."
Broader Leasehold Reforms and Industry Support
Beyond the ground rent cap, the draft bill introduces several key reforms. New leasehold flats will be prohibited, and existing leaseholders will gain the right to switch to commonhold, offering homeowners greater control over their properties. Homeowners will receive a stake in building ownership and increased influence over management and billing issues.
The abolition of forfeiture – where leaseholders could lose their home and equity over debts as low as £350 – marks another critical protection. Industry bodies have expressed support for aspects of the reform. Timothy Douglas of Propertymark noted: "Addressing ground rents for existing leaseholders is a key step towards a fairer leasehold system. It brings existing leaseholders on par with new leaseholders, and it tackles one of the largest barriers to selling leasehold properties."
Chris Norris of the National Residential Landlords Association added: "The cap on ground rents will enable landlords to plan more effectively for future expenditure and business costs." Meanwhile, Mark Chick of the Association of Leasehold Enfranchisement Practitioners described the draft bill as "a step towards modernising tenure structures in England and Wales."
Statistical Impact and Regulatory Context
Approximately 3.8 million leasehold properties in England and Wales carry ground rent obligations. The government estimates that between 770,000 and 900,000 leaseholders currently pay more than £250 annually, with 490,000 to 590,000 located in London and the South.
Last year alone, leaseholders paid over £600 million in ground rents. The cap is projected to save leaseholders up to a combined £12.7 billion over the entire lease term. This reform follows ongoing action by the Competition and Markets Authority (CMA) against mis-selling of leasehold homes. CMA chief executive Sarah Cardell remarked: "Our action has freed thousands of homeowners from doubling ground rents, and we have long supported a cap on ground rents to make sure all leaseholders get the fair deal they deserve."
Subject to parliamentary approval, the ground rent cap is anticipated to come into force in late 2028, marking a pivotal shift in UK housing policy aimed at fairness and affordability for homeowners.
