Consultation response: Tackling unfair practices in the leasehold market

By: Catharine Banks  Published: September 2017


Shelter's response to the government's consultation on the leasehold system.

Summary

Shelter welcomes the opportunity to respond to this consultation. We believe that abuse of the leasehold system, as outlined in the consultation document, has its roots in our broken housebuilding system. There is nothing inherently wrong with leasehold: it is a well-established form of tenure , that can give homeowners a very high degree of security in their ownership. Leasehold can particularly suit apartment blocks with shared areas that need to be maintained. It can also be a useful tool for tackling issues around affordability of homes and the funding of local services. 

Leasehold underpins restricted resale models to maintain affordability, such as those used by Community Land Trusts. It can also help to ensure the long term stewardship of new places and enshrine leaseholders’ obligations to public benefits, such as the obligation to contribute to communal upkeep costs, preserve design features, or abide by the principles of the project.

The critical issue in question is not the leasehold system per se, but its abuse in recent years. This abuse is most acutely demonstrated through the use of onerous ground rent terms in order to generate additional development value for the housebuilder, and an ever-increasing income stream for the eventual freeholder. As Shelter set out on our blog in February 2017, this has left leaseholders trapped, facing ever growing charges to live in their own homes, and unable to sell them. We believe that fundamentally, rather than being a question of greed on the part of housebuilders, this practice has its origins in our dysfunctional land market.

Shelter strongly believes that abuse of the leasehold system through the imposition of onerous ground rent conditions needs to be stopped. However, this will only tackle the symptoms of the problem, not its underlying cause. We need clear and decisive intervention in order to rebalance the land market, and ensure that more of the value generated by development goes towards providing the infrastructure and amenities needed to support it – rather than to ever increasing rewards for landowners.

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