The leasehold system is being abused – but not by everyone

When the government announced reforms to leaseholds, many community-led housing groups were dismayed, as Catherine Harrington, director of the national CLT network, explains

The announcement on leasehold reforms in July came completely out of the blue. Met with hallelujahs by much of the public, this was definitely not the feeling of our members, who began contacting us in their droves within hours of the news.

Many co-housing groups also use leasehold houses, and charge ground rents. The government wants to cap these at peppercorn rates to clamp down on bad practice. But in Colchester a group called Cannock Mill Cohousing is building 23 leasehold homes with modest ground rents that underpin their collective model for managing shared facilities. Why should the government stop them?

We understand and support the government’s desire to tackle unfair and unreasonable abuses of leaseholds by developers and private investors. Unfortunately, these reforms would have a serious impact on the delivery of thousands of new-build houses that community-led housing groups are planning.

A leasehold mess has been created because bad practice has been allowed to continue for decades. The dreadful stories of houses becoming unsellable because of ground rents doubling over ten years, in some cases to nearly £10,000 per year after 50 years, are shocking. Developers selling houses as leasehold just to package the freeholds up and flog them to shady investors show how far they’ve moved from providing decent homes to people in need.

In March 2017, Theresa May could not understand why there was a need for new houses to be sold as leasehold:

‘Other than in certain exceptional circumstances, I do not see why new homes should not be built and sold with freehold interest at the point of sale.’

Is it that unbelievable that good leasehold practice exists?

Well, maybe it is. That’s why we’re highlighting to government that the community-led housing sector is an ‘exceptional circumstance’. And one that they have chosen to invest in, with a £300m community housing fund launched in December 2016 to aid its growth.

We’re calling out to housing associations and other public interest and socially responsible landowners to join us in a campaign for a code of conduct for public interest leases. It would act as a charter, a demonstration of organisations that have a real social purpose and people-centred ethos.

The idea of a code of conduct came up as a way of promoting all the good stuff that is happening in housing – because it does exist, it’s just easily over-shadowed.

Community-led housing is an emerging sector that includes Community Land Trusts (CLTs), co-housing and co-ops. CLTs have been recognised as one of the fastest growing housing models in the UK. By law, they must exist for a community’s benefit, be not-for-profit and democratic. The CLT, formed of community members – there are no business interests – then become the long-term stewards of the land and houses that have been built on it.

The main reason people are coming together to form CLTs is the overwhelming need for genuinely affordable housing. It is an approach that is being taken up in both rural and urban communities, up and down the country.

The houses that are built are genuinely affordable to rent or buy, based on what people actually earn in the area. In London, Rural Urban Synthesis Society are developing 33 new mixed tenure homes. The CLT will use leasehold to keep a stake of at least 20% in each property to ensure that the development will remain affordable in perpetuity.

There are currently 225 CLTs in England and Wales that have built 800 homes between them, many in the past three years. To show how fast the model is growing – 4,000 homes are in the pipeline for delivery by 2021.

A third of CLT housing has been developed using leasehold and this is a system that many of the planned houses will follow. In this instance, it’s very much a case of ‘if it ain’t broke…’

Let’s prove that positive housing providers and systems exist. That in amidst this crisis, there is hope.

• If your organisation would like to join the campaign, please contact: Stephen Hill, Trustee of National CLT Network and Chair of UK Cohousing on smdhill@gmail.com. More information on the consultation can be found here. The last date for responses is Tuesday 19 September.