Britain's feudal leasehold system is killing the dream of homeownership

The Conservative Party has been adept at using housing policy to speak to voters’ aspirations for a better life, prompting a “virtuous cycle” which has led it to semi-permanent governance. From Harold Macmillan’s 300,000 new homes a year, to Margaret Thatcher’s right to buy, the world’s most successful political party has understood that owning a home makes families strong and people prouder. Property is earned. It gives people something to work towards and provides a sense of security when achieved.

But what if the Conservatives abandon their belief in the property-owning democracy? That’s what’s happening with the spread of detested leasehold tenure. Between July 2017 and 2018, new-build leasehold sales represented 44 per cent of all new-build by value and 38 per cent by number of properties.

With our growing population, combined with a puny 3 per cent foreign buyers’ levy showing government is too timid about demand-side intervention, developers are scaling up – and cashing in. Leasehold apartment blocks are taking over, especially in London and the southeast. The picture isn’t rosier elsewhere. The Centre for Policy Studies anticipates that by 2020 the ruling party will have presided over the lowest level of housebuilding of any decade since the Second World War.

Although Britain must boost supply, creating ever more tenancies is hardly the answer to the housing crisis. Young people should not scrimp, save, and sweat to be mortgaged tenants chained to a depreciating asset.

When you “buy” a flat in England and Wales, you’re still bound by a lease. “Owners” are allowed to live in their home only for a set period. Think of it as a long-term rental, but worse. You still pay an arbitrary, sometimes growing, (ground) rent. Uncapped and unregulated service charges are a constant worry.

Your money still flows to a landlord who nominally owns the building under this peculiar, feudal system of land tenure. With draconian forfeiture, the freehold landlord can take back your property and you lose all equity. Although a relatively rare phenomenon, the landlord can threaten it to get you (or your bank) to pay. What’s more, they can whack you with major works bills that can go into the tens of thousands. All these costs come on top of your mortgage.

Part of the appeal of owning a home is leaving the landlord. Unfortunately, flat living in this country means oppressive landlordism. The law may call the occupier a tenant, but they are expected to pay for the maintenance of someone else’s building. Technically, the occupier doesn’t even own their own flat. It’s the lease, not the property, which is your asset.

A landlord’s profit motive, however, will always clash with the occupier's need to protect their investment. High service charges do not affect the landlord. They can “sweat” the asset, let the building become rundown, while padding service charges. Of course, they’re not supposed to do this, but they know their tenants have to have ample stamina, time and funds to keep challenging them at the tribunal. People just shut up or sell up. It’s how leasehold survives.

While there are no easy answers to liberate those already trapped, the Conservatives must find the strength to take on the vested interests and legislate to stop the creation of new leaseholds. If they don’t, the political blowback will be considerable.

Precarious leaseholders are already uniting to bring down this archaic property system through the National Leasehold Campaign, which boasts 12,000 members. Having realised they have been conned out of home ownership by politicians and developers living in freehold property, they are looking to take revenge at the ballot box. Why make the problem worse?

Thatcher once said “there is no prouder word in our history than ‘freeholder’”. She sought to replace leasehold with commonhold, which the rest of the world uses, where commonhold unit-owners would be the freeholders. This was finally introduced in 2002, but leasehold refuses to die.

“It’s astonishing that the party of property-owning democracy has been blind to the systemic rip-offs in the massively expanded leasehold system. Do we want homes? Or do we want to create an investment asset class for murky international private equity investors hoovering up the freeholds to people’s homes? Enough, already,” says Sebastian O’Kelly, chief executive of the Leasehold Knowledge Partnership.

He has a point. The Conservatives must act fast and commit to the superior commonhold title, or Jeremy Corbyn might get there first. Bring England and Wales in line with the rest of the world. It’s really not a big ask.

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