Cap for ground rent in England and Wales announced

Ground rents for leaseholders in England and Wales will be capped at £250 per year, the government has announced.

Prime Minister Sir Keir Starmer, who announced the limit in a TikTok video, said: “I’ve spoken to so many people who say this will make a difference worth hundreds of pounds to them.”

The reforms will be published in the Draft Tenancy and Tenure Reform Bill, which will be introduced on Tuesday.

Ground rents are abolished for most new residential rental properties in England and Wales in 2022, but remain for existing rental homes.

Labour’s 2024 election manifesto promised to “tackle unregulated and unaffordable ground rent charges”.

There are around five million tenements in England and Wales, where people have the right to occupy a property through a limited number of years’ lease from a landlord.

For privately owned flats, the rental fee is the default tenure, and the Land Registry estimates that 99% of flat sales in England by 2024 will be let.

The British Housing Survey estimates that in 2023/24, owner-occupiers reported paying an average of £120 per year in ground rent.

In 2024, when Labor is in opposition, current Housing Minister Matthew Pennycook has said his preference is for ground rents to be capped at effectively zero.

Recent reports suggest the Treasury and housing ministry are at odds over the issue, with concerns about how the cap would affect pension funds that own property.

Last week former Labor Minister Justin Madders told the BBC the prime minister could face a “massive revolt” if the government breaks its promise on the ground rent cap.

He said it would be his preference to set the limit at the rate of black pepper but could accept a £250 cap due to the “risk of long-term legal challenge”.