Life
    Money

    Will the Conservatives deliver a ban on leaseholds?

    14 November 2019

    One of the main factors in Jeremy Corbyn’s surprisingly strong showing in the 2017 general election was housing.  Young voters are pretty fed up with being unable to afford a decent home, even when they are working hard and are earning a good income.    They have had enough of bad landlords who rip them off and provide shoddy accommodation.     They resent how their parents’ generation could afford to buy property in their 20s but they cannot.

    What have the Conservatives done to address the generational problem in their voter base?     They have banned letting agents charging tenants spurious fees.   They have slightly increased house-building, but not by enough to reflect the increase in population.    They have jacked up stamp duty on investment properties but lowered it for some owner-occupiers, as well as changing tax rules to prevent landlords counting mortgage repayments against rental incomes.  That has made buy-to-let less attractive and to some extent redressed the balance between investors and owner-occupiers.

    But one reform hangs in the balance.    Until Boris Johnson became Prime Minister, the government seemed committed to reforming the leasehold system.      New leasehold houses were going to be banned (they would have to be freehold instead, as almost all were until a decade or so ago when developers realised they could cash in by selling the freeholds separately), ground rents on all new leasehold houses were going to be set to zero, and action was promised on existing leaseholds, some of which have ground rents which double every decade.    This latter provision, in particular, has caused huge pain for first-time buyers, some of whom have struggled to go on to sell properties subject to the leases.      The government also has the Law Commission looking into how to reduce the costs for leaseholders wanting to buy the freehold of their properties – though its report has been delayed for the election.

    Yet it all seems to have gone a bit quiet.   There was no mention of leasehold reform in the Queen’s speech.    True, what was in the Queen’s speech doesn’t much matter any more because a general election was called a few days later.    But what does matter is whether the reforms will appear in the Conservative manifesto.      The Chancellor, Sajid Javid, is certainly pressing for the reforms – he championed the cause as communities secretary and he has pointedly repeated his call for zero ground rents from the dispatch box before the election.

    But Boris is believed to be less keen.    According to Sebastian ‘O Kelly, who runs the Leasehold Knowledge Partnership, which has campaigned for leasehold reform and advises the all-party group ion leasehold reform, which had the support of 177 MPs in the last Parliament, “Boris will almost certainly shaft us.”      He points out that Sir Lynton Crosby, who ran Boris’ campaign for Mayor of London and is involved in this general election campaign too, also has among his commercial clients Long Harbour, a £1.7 billion fund which invests in ground rents – and which would be one of the big losers from ground rent reform.

    Leasehold reform is one of those perennial issues which never quite seems to get sorted out.    The last big reform was carried out by the Blair government in 2002 and introduced the concept of ‘commonhold’ where all apartment-owners would jointly own the freehold of the building in which their flats were situated.   But hardly any commonhold apartment blocks have been built.   Indeed, the rules of George Osborne’s Help to Buy bizarrely excluded commonhold properties.

    It is hard for anyone to claim that leasehold is essential for the management of residential buildings – Scotland manages quite happily without it, as do most countries.    If the Conservatives want to regain support among aspirant young people – and thereby prevent Corbyn getting into Number 10 – it will go all-out in its manifesto to make life better for people who are renting homes and who are buying their first home.   Leasehold reform is a vital part of that.