The government has taken a big step to protect leaseholders – but we cannot stop here
Protesters in Parliament Square call on the government to address issues affecting leaseholders, September 2021 (Credit: Vuk Valcic / Alamy Live News)
5 min read
How much would you expect to pay to have a lightbulb changed? £2? £20? What about £200? That’s what one of my constituents forked out as part of a service charge for routine maintenance.
For over a decade, leaseholders have been battered by skyrocketing fees from unaccountable management companies. Many are trapped in homes they can’t afford to maintain – yet can’t sell – because inflated charges stick with the property, pushing unaffordable costs onto the next buyer.
This isn’t just unfair. It’s symptomatic of a broken housing system.
Everyone deserves a stable roof over their head – a place they can call home. But over the last two decades, average house prices across the UK have more than doubled to nearly £300,000. Homeownership is now out of reach for many working people and, for those who have managed to buy, an increasing number have ended up trapped in feudal leasehold arrangements.
Labour has consistently worked to provide housing stability. Out of the ruins of war, Clement Attlee built over a million homes and made housing a central pillar of the welfare state. Harold Wilson and James Callaghan built on that legacy with mortgage interest relief and home improvement grants to support working families. Today, it falls to Labour to provide a fair deal on housing once more.
We’ve made a bold commitment to build 1.5m homes. But that ambition must be matched by reform to our ownership models, or we risk building the next generation of housing injustice into our system.
Today’s reforms are an important step toward fixing a broken system. Leaseholders will be better protected from large, unexpected bills through standardised service charge documentation clearly showing how charges are calculated and spent. They’ll now have the power to veto a landlord’s choice of managing agent, tipping the power balance back in their favour. And where leaseholders have had to fight through the courts to challenge service charges, it will no longer be standard for them to pay the landlord’s legal fees – even when they win.
But we can’t stop with leaseholders, as recent housing developments have left millions of freeholders vulnerable too.
Fleecehold is an arrangement homeowners are stuck with when councils fail to adopt new estates – leaving residents to pay private management companies for services the council would usually. These residents pay twice for their public amenities: once through their council tax, and again through service fees – the fleecehold stealth tax.
In the past, new housing estates were routinely adopted by local authorities, who took on responsibility for managing public areas just like any other part of the borough. But pressure on local authority budgets, combined with developers taking shortcuts and delivering roads and community spaces that fail to meet acceptable public infrastructure standards, this is often no longer the case.
It’s estimated that 80 per cent of new freehold properties, representing 45 per cent of all new homes, are now likely to go unadopted and be subject to charges for the maintenance of public roads, parks and even sewers. Households face average annual charges of £358, though serious works can have much steeper costs. This means that if the government meets its housing targets, UK homeowners will pay an extra £240m to unaccountable management companies every year.
Today’s announcements mean managing agents for both leasehold and freehold properties will now be required to qualify as professional practitioners, bringing an end to the wild west landscape that my residents currently experience. In the coming months, I look forward to the government’s consultation on freehold estates, which will set out clearly further rights to be afforded to freeholders trapped in the fleecehold stealth tax.
It is incumbent upon developers and government to make sure these new residents do not fall into these exploitative arrangements in the first place and have the opportunities they need to escape them.
The Housing Estates Bill I introduced this year put forward practical steps we can make to end the fleecehold stealth tax. This would give freeholders on unadopted private or mixed-use estates the right to take over the management of their communal spaces. It also calls for minimum standards for public amenities on new estates and clear timelines for adoption by local authorities, cutting the problem off at the root.
Along with 50 of my Labour colleagues, I’ve written to the biggest housebuilders, calling on them to work with local authorities to end fleecehold for those estates that have already been built. With some still unadopted by their local councils a decade after being built, our residents can’t afford to wait.
Tackling unaccountable management companies is a matter of fairness. We must ensure no homeowners are at the mercy of unaccountable private companies. The government’s plans today begin to reverse the insecurity that has pervaded all parts of the housing sector, by providing much-needed protections for leaseholders.
But we cannot stop there. The government is rightly ambitious in making secure housing part of our wider plan for change: building more social housing, delivering our Renters’ Rights Bill, and making sure everyone – whether a leaseholder, freeholder, or tenant – can live with security and dignity in the place they call home.
Alistair Strathern is Labour MP for Hitchin
