Natalie Chambers: Questions remain for Labour’s commonhold masterplan

Natalie Chambers is Director of the Residential Freehold Association.

Britain’s housing crisis is reaching breaking point – with a backlog of 4.3 million homes and demand growing each year. Yet, instead of focusing on practical solutions, Labour is opting to gamble with the foundations of homeownership itself.

In March Matthew Pennycook MP, the Housing Minister, unveiled the Commonhold White Paper, suggesting that commonhold should replace leasehold as the default tenure for new homes in England and Wales.

Presented as a progressive shake-up, the reality is far murkier: the proposal is high on rhetoric, light on detail, and loaded with risks.

Here are four critical questions Labour must answer before it embarks on a radical transformation of the residential property market.

How will residents navigate the building safety regime?

Under the current leasehold system, professional freeholders take on the responsibility of ensuring that buildings comply with fire safety laws and other regulations. But what happens when this responsibility is handed to residents under the commonhold model?

Unlike the leasehold system, where freeholders have the knowledge and oversight to progress essential safety work, commonhold associations may struggle to navigate the increasingly complex building safety regime and agree on remediation costs, particularly buy-to-let landlords who make up the majority of leaseholders.

By putting the responsibility on residents, we risk not only a bureaucratic nightmare but, more importantly, the safety of those living in buildings that need urgent remediation.

Will maintenance and management be a priority?

In the leasehold system, residents benefit from the commercial, legal, and building management expertise of professional freeholders.

Most residents are understandably not trained building managers, and they certainly don’t have the time or experience to manage complex issues like maintenance and repairs. So, how will necessary repairs get done on time, within budget, and to a high standard?

Making commonhold the default tenure in England and Wales would not only make residents responsible for significant and complicated work but would likely lead to a decline in the quality of high-density housing, as seen under Scotland’s commonhold system where 50 per cent of the country’s housing stock has been found to be in critical disrepair.

Will services charges be reduced?

A widespread assumption is that under commonhold, resident’s service charges will be reduced. This is simply not true.

Yes, a commonhold system does allow residents to have direct say in the management of a building. But buildings age no matter what type of ownership structure is in place – how is removing the leasehold system going to stop lifts breaking down or banisters breaking?

The Property Institute used data from 250,000 leaseholders in blocks of ten or more flats with either a third-party landlord or a form of owner/occupier management. Research found that there was little difference in cost between the two structures. In fact, the third-party landlord cost was marginally lower at £2,140 per year versus the occupier management cost of £2,190 per year.

Put simply, the removal of leasehold won’t lead to reduced service charges, it will only give residents a greater say over the appointment of service providers – and with that a greater level of personal liability.

Do the public want change?

The Government’s own research suggests that most people view the current leasehold system positively or neutrally. In fact, the research suggests that a majority of people do not support removing leasehold as a choice of tenure and would prefer to maintain consumer choice in the market.

Independent polling shows that just 18 per cent of people would feel comfortable taking on the legal and financial liabilities of managing their own building under commonhold, highlighting that Labour’s policy is not only riddled with practical risks, but also deeply out of step with public sentiment.

In short, it is vital the Gvernment preserves consumer choice and does not force homeowners to adopt one tenure over another.

Meaningful reform should instead come through stronger regulation to drive up standards and increase awareness among homeowners about their rights, responsibilities and costs of ownership. Of course, like any system, leasehold isn’t perfect, but the Government must not create the impression that commonhold is a silver bullet.