Keir Starmer warned of Labour rebellion if leasehold reforms watered down

The prime minister could face a “massive revolt” if the government waters down promised reforms to the tenancy system in England and Wales, a former minister has warned.

Justin Madders tells BBC Labor must honor its commitment to cap land rents; This is an annual fee that homeowners must pay to property owners.

Labour’s election manifesto promised to “tackle unregulated and unaffordable ground rent charges”, but there are concerns the government could backtrack on the cap due to the potential impact on pension funds.

The government has stressed that it will legislate to fulfill this commitment and will “announce further details in due course”.

He follows former Housing Minister Angela Rayner called on the government to stick to its manifesto commitment and impose caps on land rents.

Ministers have promised that a draft bill aimed at reforming the tenancy system in England and Wales and progressing towards its abolition will be published before the end of the year.

However, it was postponed because the reason for this delay was the land rent issue.

There are approximately five million rental homes where people have the right to use the property through a fixed-year lease from a property owner.

Ground rents (which can often be hundreds of pounds a year) have been abolished for most new residential rental properties in England and Wales, but remain the case for existing rental homes.

It is common for a lease to contain a clause stating that the ground rent increases by a specified percentage or RPI inflation at fixed intervals; This can make it difficult to sell a property or obtain a mortgage.

In 2024, when Labor was in opposition, current Housing Minister Matthew Pennycook said his preference was for ground rents to be capped at a peppercorn rate; This works out to a nominal amount of £1 per year.

But campaigners now believe a £250-a-year cap is more likely.

Some reports suggested there were divisions between the Treasury and the housing department on the issue, with officials concerned about the impact of the cap on pension funds that own property.

Treasury sources acknowledged that there were difficulties in deciding where to draw the line on annual fees.

However, they downplayed the idea of ​​tension between ministries and said ministers were trying to strike the right balance.

Madders, a close ally of Rayner who worked with the former housing secretary on the Employment Rights Bill, said Labor had a “clear manifesto commitment” and “many backbenchers feel very strongly about that”.

In December, he co-ordinated a letter from more than 80 Labor MPs urging the prime minister to cap land rents.

Madders, who served as employment minister until last September’s reshuffle, said peppering rents somewhat would be the ideal scenario but that “the risk of protracted legal battles is quite significant” and he could therefore agree to a £250-a-year cap.

If there is no ceiling, he said, there is “no way” the government will pass the bill in Parliament and “I think there will be a mass revolt.”

The Ellesmere Port and Bromborough MP added that he would be willing to personally rebel on the issue.

Labor MP Florence Eshalomi, who chairs the House of Commons Housing Committee, which will examine the bill, said the delay in the bill was disappointing and “the government needs to stop dragging its feet”.

He called on the government to “fulfill its promise to leaseholders” to “end the feudal lease system”.

Jon, from Harrogate, told the BBC he felt “trapped in a nightmare” over the ground rent on his rented house; this rent is currently £200 per year, but doubles every 10 years.

He said he bought the flat in 2017 but his lawyer had flagged no issues with the ground rent, which he said now made the property “unsellable and unmortgageable”.

When Jon and his wife wanted to start a family, they tried to sell the flat at auction for £50,000 less than they bought it for, but were unable to find a buyer.

Unable to sell, the couple had to rent for a few years to save money to buy a house big enough for their family.

The 45-year-old man said he was “appalled” that the government had not yet taken action to address the problem.

Katie Kendrick, co-founder of the National Rental Campaign, said mortgage lenders were becoming more conscious of rising ground rents and “we’re seeing sales drop every day”.

He said if the government did not impose limits on ground rents it would be “another broken promise and leaseholders will not forgive them”.

“If they step back, there will be reactions from many MPs,” he added.

Kendrick said the claim that capping ground rents would affect pension funds was “ridiculous” because only “a small portion of it was affected” and “they knew it was coming”.

Harry Scoffin, founder of campaign group Free Leaseholders, said: “At the election Labor promised to end the feudal tenancy system and if they back down from reducing ground prices to zero or zero financial value they will not end rent fraud.”

A spokesman for the Residential Property Association said capping ground rents would be “an unprecedented and unfair intrusion into existing property rights which would seriously undermine investor confidence in the UK housing market”.

A Department for Housing, Communities and Local Government spokesman said: “Too many leaseholders face irregular and unaffordable land rents.

“We will introduce legislation to address this issue and set out further details in due course so that we can end the feudal tenancy system.”