Cap for ground rent in England and Wales due to be announced

The government will announce a cap on ground rents paid by leaseholders in England and Wales on Tuesday morning, the BBC understands.

Labour's 2024 election manifesto promised to "tackle unregulated and unaffordable ground rent charges".

However, there had been suggestions the government could retreat from its claim due to concern about the potential impact on pension funds.

The government has not yet confirmed where it will set the cap, but campaigners have said they believe £250 a year is likely.

Earlier this month, former Housing Secretary Angela Rayner had urged the government to stick to its manifesto pledge on ground rents.

There are around five million leasehold homes in England and Wales, where people own the right to occupy a property via lease for a limited number of years from a freeholder.

Leaseholds is the default tenure for privately-owned flats, and the Land Registry estimates that 99% of flat sales in 2024 in England were leasehold.

Ground rents were abolished for most new residential leasehold properties in England and Wales in 2022, but remain for existing leasehold homes.

The English Housing Survey has reported that in 2023/24, leasehold owner-occupiers reported paying a median annual ground rent of £120 a year.

In 2024, when Labour were in opposition, the current Housing Minister Matthew Pennycook said his preference was for ground rents to be capped at effectively zero.

Recent reports have suggested that the Treasury and the housing department have been at loggerheads over the issue, with concerns over how a cap would impact pension funds which own freeholds.

Last week, former minister Justin Madders told the BBC that the prime minister could face a "mass rebellion" if the government abandoned its pledge on a ground rent cap.

He said setting the limit at a peppercorn scenario would be his preferred choice but that he could accept a £250 cap due to the "risk of elongated legal challenge".

A spokesperson for the Residential Freehold Association has previously said that capping ground rents "would be an unprecedented and unjustified interference with existing property rights, which would seriously damage investor confidence in the UK housing market".

Harry Scoffin, founder of the Free Leaseholders campaign group, said: "At the election, Labour promised to end the feudal leasehold system and if they backtrack on reducing ground rates to a peppercorn or zero financial value they're not ending the leasehold scam."