Leasehold System Abolition Not Immediately Possible, Says Housing Minister
The immediate and complete abolition of the leasehold system in England and Wales is "almost certainly impossible," according to the housing minister.
Labour's 2024 general election manifesto included a pledge to "finally bring the feudal leasehold system to an end."
In a recent speech, Matthew Pennycook clarified that this commitment involves the government "dismantling" the system before the next election by facilitating leaseholders' ability to gain control of their buildings. However, he emphasized that leasehold would not vanish overnight.
Some critics have accused the government of delaying leasehold reform and retreating from Labour's election promises. Pennycook rejected these claims during his address at the Institute for Government think tank.
"In making that manifesto commitment to bring the leasehold system to an end, we were not promising to immediately abolish leasehold outright," he stated.
"Anyone with even the most rudimentary knowledge of leasehold knows that outright and immediate abolition of circa five million English and Welsh leases is almost certainly impossible."
Pennycook raised questions about the legality of such an approach, its effects on the mortgage market, and the feasibility of immediately establishing millions of commonhold associations to manage buildings.
During a question session following his speech, Pennycook criticized the Green Party, which has pledged "the total abolition of leasehold."
"It's very easy to put out glib soundbites - end leasehold - we've got a serious policy programme here," he remarked.
Green Party leader Zack Polanski responded by accusing Labour of prioritizing property developers over freeing five million people from the financial burden of service charges.
Understanding Leasehold and Proposed Reforms
Under the leasehold system, individuals own the right to occupy a property for a limited number of years via a lease from a freeholder.
Many leaseholders have expressed concerns over escalating service charges, which they cannot control but must pay to cover the management and maintenance of their buildings.
The government's draft leasehold bill, currently under parliamentary scrutiny, aims to simplify the process of converting properties to commonhold.
Commonhold allows residents to jointly own and manage their buildings without an expiring lease.
The bill also proposes banning the sale of new leasehold flats and capping ground rents—annual fees paid by leaseholders to freeholders—at £250 per year.
Pennycook stated that collectively, these measures would empower leaseholders to take control of their buildings and associated costs, enabling them to convert to commonhold "when they judge it is the right time for them."
"This is how leasehold ends - not through an abrupt and chaotic single moment of destruction...but by taking a methodical approach, firmly shutting the door on leasehold's future use, and opening easy and effective escape routes for those living under it today so that we rapidly reduce the prevalence of existing leasehold," he explained.
While acknowledging that some reforms will require more time, Pennycook expressed his expectation that a new commonhold framework would be operational "well before the end of the Parliament," which is scheduled to run until 2029.
However, Harry Scoffin, founder of the campaign group Free Leaseholders, criticized the government’s approach.
"The government appears to think that desperate leaseholders who need the change Labour promised at the last election, namely an end to this feudal system, are naysayers acting in bad faith," he said.
He described Pennycook's speech as "a wasted opportunity for the government to show urgency in freeing millions of leaseholders."
No 'Exodus' of Landlords Amid Renters' Rights Act
Pennycook was also questioned about the potential effects of the Renters' Rights Act and concerns that increased regulation might prompt landlords to exit the market, thereby reducing housing supply.
Key provisions of the legislation, including a ban on evicting tenants in England without a valid reason, are set to take effect on Friday.
The minister maintained that the "nominal costs" imposed on landlords by the legislation are "low."
He dismissed claims of a landlord "exodus" from the rental sector ahead of the act’s implementation.
"I think we are seeing, perhaps at the margins, exit of some landlords...but we haven't seen an exodus," Pennycook said.
He attributed most buy-to-let landlords' decisions to sell properties to tax changes introduced by Conservative governments, rather than increased regulation.
The minister added that the act would provide tenants with greater "security and stability."
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