Grounds for Concern: Leasehold Reform and the Future of Home Ownership
Home ownership in the UK comes in two varieties: freehold and leasehold. Freehold is undivided, unconditional, and permanent home ownership. Leasehold is a more limited form, which is not permanent and shared with the freeholder who retains residual property rights. While leasehold has its benefits, various studies have documented a number of common problems and shown high levels of dissatisfaction among leaseholders. Service and administrative charges are often perceived as excessive and opaque. The statutory processes for enfranchisement, leasehold extension, and collective self management have been described as costly, time consuming, and overly complex. Freehold ownership accounts for more than 80% of housing units in the UK, but the leasehold sector has been growing over the past two and a half decades. The government is rolling out a far reaching reform package to increase transparency and strengthen leaseholders' rights. But there are also grounds for concern. The new system envisages a blanket ban on ground rents for new leaseholds and a controversial ban on new leasehold sales for houses. Ultimately, the rise in leasehold sales cannot be viewed in isolation from the UK's wider housing crisis. Since 1995, UK house prices have increased by a factor of 2.8, compared with an OECD average of 1.5 and a Eurozone average of 1.4. If the government wants to solve that problem, it has to think more holistically and address the causes of the overall housing crisis not try to regulate every detail in any one specific subsector.