UK Government Moves to Cap Ground Rents in Major Housing Reform

The government has announced plans to cap ground rents as part of a sweeping overhaul of the UK’s leasehold system, a move aimed at easing financial pressure on millions of households. Under the proposals, annual ground rents will be capped at £250 before being gradually reduced to a nominal charge over the lifetime of a lease. Ministers say the reform will bring long awaited relief to homeowners who face rising and unpredictable fees simply for occupying their own properties. The changes form part of a broader effort to modernise a system that has left leaseholders owning their homes but not the land beneath them, often subject to restrictive terms set by freeholders. The policy follows an election pledge to tackle what the government has described as unfair and outdated practices, and is intended to help families manage housing costs while restoring confidence in the residential property market.

Leasehold arrangements remain common across England and Wales, particularly for flats, and affect more than five million households. Critics have long argued that the structure allows landlords to impose escalating charges that can make properties difficult to sell or remortgage. By introducing a cap and eventually reducing ground rents to a token level, ministers say the reforms will save some households thousands of pounds over the course of their leases. The government has also said the changes could unlock stalled home sales by removing clauses that have deterred buyers. Alongside the cap, plans are in place to ban the creation of new leasehold flats, signalling a shift toward greater use of commonhold or freehold ownership models in the future.

The proposals have drawn criticism from parts of the property and investment industry, with some freeholder groups warning that retrospectively altering contracts could damage confidence in the UK as a stable place to invest. Major asset managers have argued the reforms may have unintended consequences for pension funds and long term investors exposed to property assets. Ministers, however, insist the changes strike a fair balance between protecting homeowners and maintaining a healthy investment environment. The overhaul represents one of the most significant changes to housing law in decades and is expected to reshape how homes are owned and sold, particularly in cities like London where leasehold properties are widespread.