Buy-to-let  

Government funding for new leasehold houses to end

Government funding for new leasehold houses to end

Government schemes will no longer be able to fund “unjustified” new leasehold houses, it was announced yesterday (2 July). 

Communities secretary James Brokenshire MP pledged to tackle "unfair and abusive" practices within the current leasehold system in an address at the Policy Exchange. 

Mr Brokenshire outlined the government’s plan to deliver new homes and a "fairer, more transparent" system for homebuyers.

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He said: “We have seen leaseholders in new-build homes facing unexpected costs rising every year that bear no relation to services and that’s not fair.

“So from now on any new government funding scheme will contain the condition that the money cannot support the unjustified use of leasehold for new homes.”

The measures will only apply in England, where there are 1.4 million leasehold houses.

Measures announced included proposals for three-year minimum tenancy terms with a six-month break clause, the release of £450m to accelerate delivery of homes on surplus private sector sites and the launch of a £100m Community Housing Fund intended to put "communities in the driving seat". 

Mr Brokenshire confirmed almost 1,000 new affordable homes will be built on an undeveloped site at Burgess Hill, Sussex, in a development the government said demonstrates how a “strategic and assertive” approach to building homes and large scale projects delivers results. 

Mr Brokenshire said: “We need to get everyone on board to build at scale and pace to build the homes this country needs. 

“But this isn’t just about getting the numbers up. We don’t have to make a false choice between quality and quantity.”

Ishaan Malhi, chief executive and founder of Trussle, thinks the announcement is a step in the right direction but more is needed to tackle the home ownership problem.

He said: “The speech is a welcome focus on the many reasons why the housing market has stalled and a reminder that overcoming the housing crisis must be an absolute priority.

"The measures the government has outlined are sensible, including tackling leasehold issues, which in turn will offer greater security, and open up land to much needed development.

“My concern, however, is that it still ignores one of the greatest barriers to home ownership: mortgages. The current application process, complexity of the products and opaque structure can mean home owners pay more than they need to particularly due to hidden charges, such as mortgage arrangement fees, conveyancing and higher-lending charges.

“Fixing the UK's housing crisis is not an easy task but reforming the mortgage sector is an area that would have a huge, long-lasting impact.”

rachel.addison@ft.com