Keir Starmer Has Announced A New £250 Cap On Ground Rent For Leaseholders

Keir Starmer posted a video to TikTok on Monday morning. By lunchtime, millions of leaseholders knew their ground rents would never climb above £250 ($310) a year again.

The Prime Minister called it a promise delivered. Ministers called it the end of a 'feudal' system that has trapped homeowners in escalating fees for decades. Housing Secretary Steve Reed went further. He called it 'frankly, a scam', the BBC reported.

The cap forms the centrepiece of the draft Leasehold and Commonhold Reform Bill, which Housing Minister Matthew Pennycook introduced in the Commons on Tuesday. It fulfils a Labour manifesto commitment that backbenchers had warned the government not to water down. From 2028, no leaseholder will pay more than £250 in annual ground rent. After 40 years at that rate, the charge drops to a peppercorn.

'A Racket' And 'Paying Money For Nothing'

Reed did not hold back when he spoke to Times Radio on Tuesday. He branded ground rent 'a racket' where leaseholders hand over cash to freeholders who provide nothing in return. No service. No maintenance. Just a bill that, until now, could spiral year after year without any upper limit, according to Sky News.

Government estimates put the number of leaseholders currently paying more than £250 at between 770,000 and 900,000, with the heaviest concentrations in London and the South East. Many stand to save over £4,000 ($4,960) across the lifetime of their lease once the cap kicks in.

Five Million Get Certainty

There are roughly five million leaseholders across England and Wales. Close to a million will see their ground rent cut immediately once the law takes effect. The rest get something almost as valuable: certainty that their charges can never exceed £250, the Guardian reported.

The reforms go well beyond ground rent. New leasehold flats will be banned outright, pushing developers toward commonhold, an ownership model that hands homeowners a direct stake in their building and more control over how it is run. Existing leaseholders will gain the right to convert. And forfeiture, the practice that lets freeholders seize homes over relatively small unpaid debts, gets scrapped entirely.

Freeholders Call It 'Wholly Unjustified'

The Residential Freehold Association was not impressed. The trade body called the cap 'wholly unjustified interference with existing property rights' and warned it would 'seriously damage investor confidence in the UK housing market'. Previous impact assessments, it noted, suggested compensation for freeholders could top £27 billion ($33.5 billion), LBC reported.

Officials reportedly pitched the cap at £250 to balance competing interests and dodge protracted legal fights. The decision marks a win for Angela Rayner, who championed ground rent caps during her time as housing secretary before resigning as deputy prime minister.

80 MPs Had Warned: Don't Back Down

Labour backbenchers had drawn a line. In the weeks before the announcement, Justin Madders, co-chair of the All Party Parliamentary Group on Leasehold, gathered 80 signatures on a letter urging Starmer to deliver the full cap. He told the New Statesman the issue boiled down to 'whose side we're on'. Other MPs warned privately that backing down would be seen as betrayal.

Propertymark, the industry body for estate agents, welcomed the move. Timothy Douglas, its head of policy, said tackling ground rents would remove one of the biggest barriers to selling leasehold properties.

Leases signed since 30 June 2022 are already capped at peppercorn rents under the Leasehold Reform (Ground Rent) Act. The new rules bring older leases into line. For leaseholders stuck with properties they cannot sell or mortgage because of runaway ground rent clauses, that change cannot come soon enough.