Millions of homeowners across England and Wales will see their UK ground rent bills sharply reduced after the Government confirmed plans to cap charges at £250 a year.
Prime Minister Sir Keir Starmer announced the move on Tuesday, saying rising housing costs have become the “single most important issue” for people across the country.
The reform, expected to come into force in late 2028, aims to ease pressure on leaseholders struggling with unaffordable and often unexplained fees.
The changes form part of Labour’s draft Commonhold and Leasehold Reform Bill, which ministers say will overhaul a system many homeowners view as unfair and outdated.
What is changing with UK ground rent rules?
The Government plans to cap UK ground rent at £250 per year for existing leaseholders. After 40 years, that charge will effectively reduce to zero.
Ground rent is a fee paid to a freeholder simply for owning a leasehold property, even though no service is provided in return.
Many flat owners in Salford and beyond face ground rents that can jump sharply, often without warning until the bill lands. Ground rent is paid to the landowner your flat is built on.
I’m pleased the Government is acting: ground rents will be capped at £250 a year. pic.twitter.com/cexUnaiPsL
— Rebecca Long-Bailey (@RLong_Bailey) January 27, 2026
Ministers say the reform will:
- Save many leaseholders more than £4,000 over the life of their lease
- Benefit more than five million current and future homeowners
- Make leasehold homes easier to sell and mortgage
According to official figures, leaseholders paid over £600 million in ground rents last year alone, and the cap could save households up to £12.7 billion over time.
Who will benefit most from the ground rent cap?
Government estimates suggest around 770,000 to 900,000 leaseholders currently pay more than £250 a year. Of those, roughly half a million live in London and the South East, where high housing costs already stretch household budgets.
Many flat owners have struggled to sell because lenders refuse mortgages on properties with high or escalating ground rent clauses. Property professionals say the cap removes one of the biggest barriers in the leasehold market.
Timothy Douglas, Head of Policy at Propertymark, said: “Leasehold properties with escalating ground rent will struggle to sell, even if priced correctly. Addressing this brings fairness and confidence back into the market.”
Why is the Government reforming the leasehold system now?
Labour ministers argue the current system leaves homeowners paying for nothing while investors collect guaranteed income.
Housing Secretary Steve Reed said some ground rents “become completely unaffordable” and trap people in homes they cannot sell.
The bill also goes further than a simple cap by:
- Banning new leasehold flats
- Giving existing leaseholders the right to switch to commonhold
- Abolishing forfeiture, which can currently see people lose their homes over debts as low as £350
Commonhold would allow homeowners to jointly own and manage their building, giving them more control over service charges and management decisions.
What are investors and pension funds worried about?
Not everyone supports the reforms. Investment firm M&G warned the policy could lead to a £230 million one-off financial hit, with an expected £15 million annual impact on operating profits.
The Residential Freehold Association (RFA) called the cap “wholly unjustified”, arguing it damages investor confidence and undermines long-standing property contracts.
An RFA spokesperson said the bill would “send a dangerous and unprecedented signal” to institutional investors in UK housing.
The Association of British Insurers also raised concerns, warning that retrospective changes could weaken the UK’s reputation for stable property rights.
How does this link to wider consumer protection efforts?
The Competition and Markets Authority (CMA) has been investigating leasehold mis-selling since 2019. Its action forced developers and freeholders to remove unfair doubling ground rent clauses.
Sarah Cardell, CMA Chief Executive, said: “We have long supported a cap on ground rents to make sure all leaseholders get the fair deal they deserve.”
The Government says the new law builds on this work by applying protections across the entire market, not just to new-build homes.
