Leasehold reform is a step in the right direction

On Monday the House of Commons passed the first stage of the Leasehold Reform Bill unopposed. Now, a Bill passing the first stage of the Commons is not usually newsworthy. However, there are several important reasons why this Bill should not be overlooked.

It has already been passed by the House of Lords which means that provided that there are no amendments to the Bill, it is that much closer to being approved. Moreover, as the Bill has government support the chances of successful amendments are tiny and it should sail through the Commons smoothly.

Getting on the housing ladder is a huge challenge to many – especially the younger generations. Part of the problem is the seemingly permanent price rises of property – particularly in London. People have simply been priced out of the housing market. One of the clearest indications of how house price rises have far outstripped inflation and wages is that the average house price is 65 times higher than in 1970 but average wages are only 36 times higher. Is it any wonder that people are failing to buy into Conservative ideals about property, ownership and the State when they cannot take the first step onto the housing ladder? It is abundantly clear that we are still losing the fight for the centre ground on policy questions on housing policy.

The best and most obvious solution to the problem of house prices is to build more houses. The laws of supply and demand are never far away and often provide the simplest answer to price increases. If the UK had a suitable construction programme and our housing stock was replenished sensibly, we would not be in this mess. Part of this problem is the continued resistance to true reform of planning laws and an insistence on maintaining the current rules over development on greenfield sites and the fictitious “green belt”.

However, there has been another troubling development that is further exacerbating the problems in the housing market. Homes are still being built but many properties are being sold as leaseholds rather than freehold. This often causes long-term problems as the leaseholds can be exploited by unscrupulous leaseholders with ground rents swiftly becoming extortionately overpriced – far beyond a reasonable cost for the value of the property. This is further discouraging and diminishing first time buyers and movement within the housing market as many are understandably wary about entering into a purchase on a leasehold property.

This Bill will address this problem on all future leasehold sales of new builds. Once passed, the Leasehold Reform Bill will cap ground rents of leasehold houses at the annual rate of “one peppercorn”. Now, I do not normally advocate government intervention or State regulation but I think in this instance, when we have compromised the market so thoroughly through government failure, this step could provide relief and short-term benefit. What we must not do is assume that this will be enough – it is not and only addresses a relatively small problem compared to some of the other issues in the housing market.

This Bill will not magically resolve all the housing problems of the country. However, it is at the very least a small step in the right direction and could potentially lead to further good reforms in the future. I hope that this is the case as we are overdue a positive housing policy direction.

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