Leasehold reform has featured in plenty of conference speeches, manifestos and ministerial announcements. At this year’s Labour Party Conference, ALEP would like to hear more about how and when the Government intends to reach its intended destinations in this area.
Timing is everything. It is crucial for leaseholders and freeholders to know what the likely timeline for the final version of the Commonhold and Leasehold Reform Bill will be like and also, when and how the fixes to the Leasehold and Freehold Reform Act 2024 will be implemented.
We are currently unclear as to whether the new CLRB will have more of the Law Commission’s original recommendations (as suggested by the output from the Select Committee) or whether we will see other changes tabled as well.
Prolonging uncertainty will affect the decisions of buyers, sellers and lenders and appears to be risking the creation of a two-tier housing market.
FLATS AS AN ASSET CLASS
The evidence from the sales market should concern ministers. Zoopla’s analysis found that average house prices had risen by 43% since 2016 while flat prices had increased by only 10%. A house now costs 1.7 times as much as a flat on average – the widest gap recorded in 30 years.
Leasehold is not the only explanation. The pandemic encouraged demand for more space and gardens while building safety concerns, higher mortgage costs and the withdrawal of some buy-to-let investors have also affected flats.
This being said, lease lengths, service charges, ground rents and uncertainty over future legislation are plainly influencing buyers.
Negative press coverage around leasehold generally, risks ‘talking it down,’ and whilst suggestions of reform and the potential replacement of leasehold flats with commonhold has been hailed as a much promised ‘solution,’ the reality remains that any change to commonhold is likely to be several years away and the timing of the LAFRA reforms remains an uncertainty given the human rights act challenges to the legislation.
Those in charge of housing policy need to ensure that steps are taken to encourage realistic engagement with the market and that consumers are given the proper advice and assistance that they need to make informed decisions.
“The knock-on consequences on the market will be plain to see.”
The knock-on consequences on the market will be plain to see. A first-time buyer who avoids buying a flat may have to wait longer to become a homeowner. If existing flat owners have difficulty selling, then that will also frustrate their onward move and cause delay in the market leading to chains becoming delayed or collapsing.
Flats are an essential part of the housing market, particularly in London and other cities where houses are beyond many buyers’ means. Policy needs to ensure that they are fit for purpose, and it is important that any proposed changes in policy to improve home ownership should not be allowed to weaken confidence in one of its most important entry points.
If the newly announced Your First Home scheme is likely to target help to buy flats. With that in mind restoring confidence in the property sector generally and in flats more specifically is key to the implementation of a fit for purpose housing policy.
URGENCY MUST NOT MEAN HASTE
Calling for progress is not the same as calling for legislation to be rushed. Commonhold has real potential, but changing tenure does not remove the cost and complexity of maintaining an apartment building.
Questions remain about development finance, phased schemes, mixed-use buildings, reserve funds, lender confidence and the rights of owners who do not consent to conversion.
As the Housing Committee has recognised, the final legislation must be both more ambitious and technically workable. That requires structured consultation with the lawyers, valuers, lenders, developers and managing agents who will have to operate the new system.
ALEP’s members support meaningful reform. We also know from daily experience how apparently minor drafting decisions can affect valuations, mortgageability and transactions.
Our hope for the Labour Party Conference therefore is modest but urgent: publish the final Bill, provide a joined-up implementation timetable and use professional expertise to get the detail right.
Every further period of uncertainty risks more flat owners finding that the home they bought is becoming harder to sell. Labour now needs to show that leasehold reform is moving from political promise to practical delivery.
