Ground Rent Cap Set to Transform Leasehold Market in England and Wales

The government of England and Wales is poised to announce a major policy to cap ground rents on existing leasehold properties, with far-reaching implications for millions of homeowners trapped in one of the most criticised aspects of the UK housing market. �

Financial Times

In a move that has dominated housing discussions in Westminster and beyond, Prime Minister Sir Keir Starmer is preparing to unveil plans to limit the annual ground rent payable by leaseholders, ending centuries-old practices that critics have described as “unaffordable” and “feudal.” This announcement follows mounting pressure from lawmakers, housing campaigners and voters frustrated with the financial burdens imposed by unregulated charges on their homes. �

Leasehold Knowledge Partnership

What Is Ground Rent and Why Does It Matter?

Ground rent is a payment made by leaseholders to freeholders — basically a form of “rent” that homeowners must pay on top of their mortgage and other costs when they own a leasehold property, particularly flats. These charges are written into lease agreements and can vary from relatively modest amounts to figures that escalate sharply over time.

Although legislation in 2022 banned ground rents on most new long residential leases, many existing leases still require homeowners to pay significant annual sums. � This means that hundreds of thousands of leaseholders are still subject to fees that can rise, sometimes doubling every few years, making it difficult to sell or remortgage properties and worsening the financial strain on owners.

Michelmores

Critics of the system say the practice is outdated and unfair, describing it as a vestige of the “feudal” property system where homeowners do not truly own their homes but must continue to pay charges just to retain rights over their property.

The Upcoming Cap: What We Know So Far

According to reports from major UK media, the government will announce that ground rents on existing leasehold homes will be capped at £250 per year. � This policy is intended to deliver immediate financial relief to leaseholders who have long struggled with unpredictable and sometimes high charges.

Financial Times

The cap is part of a broader housing and leasehold reform package promised by the Labour Party in its 2024 general election manifesto, which pledged to “tackle unregulated and unaffordable ground rent charges” and overhaul the leasehold system. �

Reddit

The policy represents a partial shift from earlier ideas — such as reducing ground rents to a nominal or “peppercorn” level (effectively zero) — which were considered in previous consultations and reform discussions but raised concerns around compensation and legal challenges. �

Pinney Talfourd Solicitors

Political Tensions Surrounding the Reform

The announcement has not been without controversy within the government itself. Angela Rayner, Deputy Prime Minister and former Housing Secretary, has publicly urged Sir Keir Starmer to uphold the party’s manifesto promise, warning that any dilution of the reform could spark a rebellion among Labour MPs. �

The Guardian

At the same time, Chancellor of the Exchequer Rachel Reeves was reported to have reservations, arguing that imposing a cap could deter investors — particularly institutional ones like pension funds that hold large portfolios of freehold properties. �

Financial Times

Internally, government ministers have had to balance their commitment to ending exploitative charges with the potential economic impact on investment and stakeholder confidence. Nonetheless, it appears the Prime Minister has backed the case for a substantial cap, reflecting the weight of political and public pressure.

Impact on Leaseholders Across England and Wales

If implemented, the cap would be one of the biggest housing policy changes in decades for leaseholders — providing relief to those who have seen ground rent climb to levels that can make homes difficult to sell or remortgage.

Many leaseholders say they are “trapped” by unfavourable lease terms, with rising ground rents representing a financial chokehold that makes homeownership more expensive and complex. Some mortgage brokers and lenders have already refused mortgage offers on properties where ground rents exceed certain thresholds, further illustrating how these charges affect market liquidity and household finances. �

Reddit

Housing campaigners argue that a cap will help restore balance and fairness in the system, particularly for people who bought homes expecting stability but were instead saddled with escalating fees.

Arguments For and Against Capping Ground Rent

The proposed ground rent cap has drawn both applause and criticism:

Supporters say:

It will protect homeowners from excessive annual charges that can rise unpredictably.

It will make homes more attractive and accessible to buyers and lenders.

It reflects a modernisation of property law, fixing a long-standing structural issue.

Supporters argue that ground rent was never essential, and many leaseholders receive no direct benefit in exchange for these payments. Some legal and consumer groups have suggested that ground rent is neither “legally nor commercially necessary” and that intervention is justified to protect consumers. �

The Guardian

Critics warn:

Capping ground rents may impact investors who bought freehold assets and expect returns.

There could be legal and financial repercussions if freeholders seek compensation.

Some argue that sweeping changes to property rights could have knock-on effects for the wider housing-investment market.

Organisations representing freeholders have warned that capping ground rents retrospectively could lead to compensation claims worth billions. �

Mortgage Solutions

Looking Ahead: What Comes Next?

The ground rent cap is expected to be part of a forthcoming legislative package, including the long-awaited Leasehold and Freehold Reform Bill, which has been delayed pending detailed government review and negotiation. �

The Guardian

Once announced, the cap will need to be translated into law, debated and agreed in Parliament, which will provide opportunities for MPs on all sides to scrutinise and potentially refine the policy.

For millions of leaseholders across England and Wales, however, this announcement could mark a turning point in the long campaign to render homeownership fairer and more secure.

Conclusion: Reform at Last?

The forthcoming cap on ground rents in England and Wales is more than just a policy tweak — it represents a significant intervention in a housing system criticised for its complexity and inequity. In the context of rising living costs and housing affordability challenges, this reform offers hope to many homeowners who feel burdened by archaic charges.

Whether the announced cap delivers meaningful change will depend on its final form, implementation and the political will to see it through — but for now, the ground rent cap stands as a landmark step in redefining the relationship between leaseholders, freeholders, and the state. �

Financial Times