Leasehold reform & the future of ownership - Boodle Hatfield

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19 Jan 2021

Leasehold reform & the future of ownership

Written by

Simon Kerrigan View profile
2 min read

There are plenty of aspects of the Government's proposed leasehold reforms which require further detail, and which will demand closer attention. 

However, this paper prepared by Dr Kristian Niemietz, Head of Political Economy at The Institute of Economic Affairs ('IEA') contains some very insightful analysis questioning the arguments for the ban on the sale of leasehold houses and the abolition of ground rents in the grant of new leases.

In short the paper highlights…

  • The ban on the sale of leasehold houses may be interpreted as the Government going beyond its usual remit, and steering the market in a particular, politically determined direction - in his words "second-guessing consumer preferences and pre-empting a market outcome"
  • The abolition of ground rents appears based purely on viewing the issue from the point of view of the tenant who can see no clear benefit from such payment, whilst failing to properly recognise the private property rights of the landlord.
  • The arbitrary nature of the exemptions from the abolition of ground rents, citing the example of Government statements recognising the merits of charging rent for retirement properties which enjoy shared facilities, whilst ignoring the fact that shared facilities are provided in other types of residential housing.
  • The apparent lack of logic in the Government having previously acknowledged: (a) the danger that an abolition of ground rents for retirement properties may increase the price payable for such properties, and yet now reversing that decision and extending the abolition to such properties (leading to the additional question of why the same principle (of a consequential increase in purchase price) will not equally apply to any other property (b) the benefits of protecting shared ownership leases on the premise that they offer home ownership to those who cannot afford the initial capital outlay for fuller ownership, and that abolishing ground rents should not apply to community-led projects, because it may impede their growth, and yet not extrapolating either idea to the rest of the residential property market
After a long-running process of public consultations and expert commission inquiries, the government is currently rolling out a far-reaching reform package. These reforms are an attempt to improve the functioning of the market by increasing transparency and strengthening leaseholders’ rights. But there are also grounds for concern.

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