Leasehold is a symbol of our broken housing system, with millions of England’s homeowners feeling like they’ve bought their home but still don’t own it. Yesterday, Labour announced our plans to end this scandal and drag a feudal property system into the 21st century.
We have seen horrific cases of people trapped in homes they can’t sell, people being ripped off with extortionate service charges or contract terms and people being threatened with eviction for absolutely no good reason. No other major economy has this feudal-style system – they have all moved away from leasehold towards fairer and more transparent systems of ownership.
The government has paid lip-service to this problem. They know that the system is broken and have acknowledged the problem – but failed to act. They have made over 60 announcements since 2010, and yet not passed a single piece of legislation. None of their proposals have been put into practice and none of them will help up to six million people trapped in leasehold homes right now.
It’s easy to forget the human cost of this failure to act. To wave it away as slow government decision-making. But the leasehold scandal is blighting lives up and down the country. Yesterday I went to meet Jay and Nina, leaseholders in south London. Over a few short years, they were charged £50,000 each in service charges and bills for ‘major works’ on their block – with absolutely no transparency about the true cost of the work.
Jay later discovered invoices showing they were charged over £70,000 for work that cost just £21,000. These scams are being repeated across countless leasehold properties every day. One estimate suggested leaseholders are being overcharged on service charges by £1.4bn per year.
Perhaps the biggest scandal in leasehold is the sale of leasehold houses. There is absolutely no reason a house should be sold as leasehold, yet unscrupulous developers spotted the money to be made and tens of thousands of people are now suffering the consequences. And the government has funded this practice to the tune of £1 billion through Help to Buy.
I recently met Jo who bought her leasehold house with promises that she could buy the freehold shortly after for just a few thousand pounds. The freehold was then sold on, without her knowledge, to a shady offshore company that demanded £50,000 for the freehold. On top of that, Jo later found out that there was a ground rent on her property that doubled periodically, rising to £10,000 per year by the middle of this century.
There is strong evidence that owners of leasehold houses, in particular, were systematically missold. Labour has consistently called for a full inquiry into misselling and it’s good that the Competition and Markets Authority (CMA) has at last launched an investigation into the sector. Up to 100,000 people are currently trapped in homes they cannot sell because of extortionate ground rents and other lease conditions that were never explained during the sale. Research from the Conveyancing Association suggests 98% of these sales were in breach of consumer trading laws.
Not only have leaseholders suffered huge financial damage, but the toll on their mental health is huge. A recent survey by the National Leasehold Campaign found nearly one in five leaseholders have had suicidal thoughts because of their leasehold problems, and nearly three quarters are very anxious and worried about the future. In a damning indictment of the government’s failure to act, just 7% of leaseholders are optimistic that the current system will protect them.
The latest set of empty government promises had an additional bitter irony of not putting forward a single measure to help existing leaseholders. They were rightly slammed by campaigners for creating a “two-tier market” by proposing solutions for future leaseholders while ignoring those in existing leasehold contracts who have borne the full brunt of the leasehold scandal.
By contrast, Labour’s plans – set out for consultation in ‘Labour’s new deal for leaseholders’ – will prioritise current and future leaseholders equally. In the short-term, that means: an immediate ban on leasehold houses; caps on ground rents for existing leaseholders; a new, cheaper formula to buy the freehold of your property; and new rights to challenge unfair fees and poor service.
In the longer term, our ambition is to move away from leasehold for good, so in government Labour would legislate within the course of our first parliament to ban the building of new private leasehold flats as well as houses. We would accompany this with reforms to commonhold – a fairer system of ownership for flats where every resident owns a share of the block – to make that work better for today’s housing system.
This is a bold plan designed to help break the stranglehold that a small group of developers and freeholders have on millions of families in leasehold homes. While the Conservatives have shown they won’t take the action needed, Labour is fully prepared to dismantling this broken system as soon as we get into government. England is one of the only places in the world that has failed to move away from the feudal leasehold system. Across the globe, modern alternatives like commonhold have flourished. It’s time we caught up.