Labour MPs have warned the government not to water down its manifesto pledge to cap ground rents for leaseholders, or it could face a backbench rebellion. Ahead of the 2024 general election, the party told voters it would limit ground rents – an annual fee paid by the leaseholder, which does not need to be attached to a service – to £250. This formed part of a wider pledge from the party to “end the feudal leasehold system”. However, ongoing discussions over the draft Leasehold and Commonhold Reform Bill – which was due to be published in December last year – have sparked concern among MPs that the government is planning to weaken this commitment. One backbench MP told the New Statesman that if the government breaks its promise to leaseholders, “I have no doubt there would be a rebellion”.
Earlier this week, Angela Rayner, the former housing secretary and deputy prime minister, urged Keir Starmer not to back down on leasehold reform in an article for the Guardian. Rayner said: “Labour made a promise to leaseholders that we would fix this injustice, but ministers are currently subjected to furious lobbying from wealthy investors trying to water this manifesto commitment down.”
When Labour was in opposition, the housing minister, Matthew Pennycook said his preference was for ground rents capped at a peppercorn rate, meaning zero financial value, a proposal being also pushed by then housing secretary Michael Gove.
Negotiations over the bill have been ongoing between the Ministry of Housing, Communities and Local Government and the Treasury. One source familiar with the situation, told the New Statesman that the bill was “basically done” at the end of December 2025. However, it has been delayed due to Treasury concern that capping ground rents could deter property investors. Some MPs have suggested that the delay may also be owing to pre-emptive concern that if the reforms the government proposes are too harsh, it could lead freeholders to take legal action against the government. (Last year, a group of freeholders brought a judicial review to challenge the government’s reform of the leasehold system).
Others suggested pension funds which own freeholds had been lobbying the government to soften the cap, arguing that ground rents are an important source of their income. But this has not gone down well on the Labour benches. One MP said, “the argument that pension funds are hard done by is weak. They have had years of warning that this was going to happen”.
One option reportedly being explored by the Treasury is linking the cap on ground rents to the value of the property, rather than setting it at £250. However, MPs have expressed scepticism at this as it would mean that as the value of the property increased, so too would the value of the cap. One Labour MP told the New Statesman that to opt for this proposal would “undermine the bill” and “continue the feudal system”. Leasehold properties make up around 10 per cent of the UK’s housing stock, meaning many MPs have leaseholders in their constituencies.
“A lot of MPs are angry about how leaseholders are being treated,” one MP said. Another MP pointed out the political cost of not following through with the manifesto commitment: breaking a promise to leaseholders would mean alienating potential Labour voters. “If we let them down on this it will be very difficult to [keep them onside],” one MP said. “Electorally it would be pretty damaging.”
Justin Madders, a co-chair of the All Party Parliamentary Group on Leasehold, told the New Statesman that discussions over the cap on ground rent are really “about whose side we’re on”. Before Christmas, Madders coordinated a letter, signed by 80 MPs, urging Starmer to cap ground rents. He was previously employment minister, and worked alongside Rayner on the Employment Rights Bill but was reshuffled after her resignation. Madders is also on the executive of the Tribune Group of soft-left MPs.
He told the New Statesman, “nobody is underestimating the immense technical challenges there are in getting this bill right but first we need the Prime Minister to take that decision in principle that we are going to side with the leaseholders.” Madders echoed a sentiment put forward by several of his colleagues: that capping ground rents would go some way to tackle the cost of living, and would be a Labour thing to do. “If [Starmer] is serious about tackling the cost of living then tackling extortionate ground rents would be a good place to start,” he said.
The Leasehold and Commonhold Reform Bill has yet to be introduced to parliament and a date is still forthcoming. But it is clear that if Labour MPs are presented with legislation they are not happy with, or which they feel damages their promise to voters, the Prime Minister is likely to have another rebellion on his hands.
[Further reading: Is this Andy Burnham’s moment?]
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