Eddie Hughes is the MP for Walsall North.
The leadership election and the focus on resolving the Brexit impasse are rightly at the forefront of everyone’s mind at the moment, but beneath the Brexit surface life is going on for people and there are many pressing issues that can’t wait. Housing is one of them.
Before entering Parliament, I worked as Deputy Chief Executive of a specialist housing provider in the West Midlands, and Chairman of whg, a large housing association in the West Midlands. I have seen first-hand the importance of getting housing policy right – such as the government’s announcement in October 2017 that the Local Housing Allowance cap would not apply to supported housing or the social housing sector
Conservatives nationally and locally are beginning to clean up old, contaminated industrial sites which is unlocking land for housing development. This takes time, but is the right thing to do, and protects valuable green spaces from being concreted over.
However, it’s not just about building more houses, there are many problems in the housing market that need resolving now. Leasehold is just one example.
Imagine for a moment, you own a lovely one or two-bed apartment or perhaps even a recently built house. You’ve lived there quite happily for a few years, but you decide it’s time to move – maybe because of schools, for work – or perhaps to move up the housing ladder. You’re primed and ready to go. But the estate agent asks for a copy of your leasehold agreement. And there, in the small print, you get hit with the fact that you cannot sell your property. You’re trapped. Thousands of people across the country are in this position and it cannot be right.
This feudal ‘leasehold ground rent scandal’ needs attention right now. In many cases, developers have created leases with ground rent clauses that have since fallen out of favour with lenders, leaving owners stuck with an unsaleable property because buyers can’t get a mortgage. This isn’t the fault of the leaseholder who couldn’t possibly have foreseen the problem when buying.
In some cases the ground rent doubles every ten years, in other cases it doubles just once, and there are reports of lenders refusing to lend on what they deem as unreasonable or onerous ground rent clauses. Some won’t lend if the ground rent exceeds 0.1 per cent of the property value at any point during the lease. Leasehold campaigners argue that there are close to 100,000 people affected by terms that leave them with ground rent in excess of 0.1 per cent of the property value. I would argue that such circumstances are onerous.
The result is an unsaleable property and in many cases, the developer is long gone having sold the freehold on to a distant investment company. They have, of course, made their money twice – not only from the sale of the leaseholds in the first place but by selling on the freehold.
Now there’s nothing wrong with a freeholder taking a reasonable ground rent, in my view, but when that ground rent becomes onerous and stops someone from being able to sell their home – that’s when it becomes a problem. The rights between freeholder and leaseholder need to be redressed. That’s why I’m proposing a Private Members Bill in the Commons this week.
The result of developers selling on the freehold to investors is that some freeholders are remote, uninterested in helping out their leaseholders, or those that do are charging unfair fees and legal costs for what should be a very simple solution. I know one such scenario where there is a £180 charge just to discuss terms with the freeholder.
My Bill simply proposes the creation of a legal obligation for freeholders to grant a quick and simple lease variation to leaseholders where ground rent prohibits resale. Secondly, it’s important that ground rents are capped at 0.1 per cent of the property value. If the Bill progresses, there will be an opportunity to shape the clauses, especially in light of the excellent MHCLG Select Committee report on problems in the leasehold market.
Systems and institutions are supposed to serve the public and I hope we can all agree, as Conservatives, that we can’t have people unable to sell their properties. Drastic and immediate action is required – and it is required now. It’s time to show people we are on their side.