Javid's bid to end rent-seeking leaseholds is welcome, but little comfort to current homeowners

Simon Gerrard
Javid has laid on the guilt, saying: "builders and developers should be seeing what they can do to right some of the wrongs of the past" (Source: Getty)

It’s safe to say that over the past year we have seen a government who seem intent on undermining the property market at every turn.

Despite property being one of the cornerstones of our economy they have failed to deliver on any of their promises to improve what can only be described as a housing crisis in the UK.

Previous Conservative and coalition governments have all tried to focus on housing as a major public issue. However this government, as was made apparent at the recent elections, doesn’t appear to prioritise ensuring a strong and fair property market (as further evidenced by the downgrading of their appointment of housing minister, the sixth in the last seven years).

Read more: Javid to crack down on leasehold abuse with "radical" proposals

So the announcement from communities secretary (interestingly not our new housing minister!) Sajid Javid that the government is set to ban the sale of houses as leasehold properties is a somewhat unexpected but altogether welcome move. The recent growth of new-build residential houses being sold as leaseholds is completely unwarranted, and very few in the industry could argue otherwise.

At present, about 21 per cent of private housing in England is owned by leaseholders, with 30 per cent of those properties houses rather than flats – figures which seem altogether absurd when considering traditional rules of ownership.

It is this proliferation of houses under leasehold that is the real issue, given that there is little to no justification for developers to withhold ownership of land when selling a singular property built upon it. The government has rightly been encouraging developers to deliver new housing schemes (albeit at a much slower rate than we’d like), but should have shut down this practice earlier and focused on facilitating the availability of land so that more homes can be built. They have clearly dropped the ball in allowing it to continue.

It’s especially unjust within a market in which many are already struggling thanks to rising property prices, a shortage of suitable family homes, and a rental market being repeatedly squeezed by regulation. Simply getting on the property ladder, never mind advancing up it, is already difficult enough for families across the UK.

The fact that families have been left with unsellable homes, or are facing crippling and mounting costs over the years to come, simply to keep their home and a roof over their family’s heads, is outrageous. Those within the industry should be working to support home ownership, not threaten it. People have been taken advantage of, pure and simple.

But the developers are not the only ones to blame here; the government should also be pointing the finger firmly at solicitors. They are employed to investigate and assess each and every property purchase, and therefore have a responsibility to point out anything that could have a detrimental impact or unintended consequence that could affect the value of their purchase in the future. The fact that they haven’t been flagging the catastrophic potential of such agreements to homeowners is surely a cause for investigation and even recourse.

This also raises the question of what recourse will be available for those who already own homes on the basis of unrealistic ground-rent liabilities, and who have already fallen prey to spiralling costs. Javid has said that there are some 1.2m cases of houses on leasehold. Not all of these are detrimental, as for some houses ground rent rates are at a reasonable and justified level, however there will still be many homeowners currently wondering both how and if these new measures will affect them.

So far there is little hope offered for existing leaseholders, who have been directed to appeal either to their housebuilder or their solicitor, rather than the government. Javid has laid on the guilt, saying: "builders and developers should be seeing what they can do to right some of the wrongs of the past". However, in the absence of a solid government initiative, it is extremely doubtful whether this gentle push will have any effect whatsoever.

The Department for Communities and Local Government is expected to consult on what it can do to support existing leaseholders with onerous charges. This could include tackling unreasonable rises – such as rents doubling every 10 years – and giving more powers to householders to fight unfair charges, both of which would be welcome.

Javid’s announcement marks the beginning of an eight-week consultation and, as well as curtailing this practice once and for all, the hope is that this process could provide some aid or clarity for those homeowners already trapped in an unfair leasehold system. However positive the announcement, we must ensure that thousands of homeowners are not forgotten.

Read more: Here's what could solve the UK's housing crisis

City A.M.'s opinion pages are a place for thought-provoking views and debate. These views are not necessarily shared by City A.M.

Related articles