Keir Starmer’s Government has finally decided to promote and generate more resistance among individuals, companies, funds and institutions that own real estate assets in the United Kingdom. The prime minister announced this Tuesday that the annual rent paid by the owners of a home under a leasehold —halfway between ownership and a very long-term rental—may not exceed £250 (about 288 euros). The new apartments that are built, Starmer added in a video on Tik Tok (which the leader had never used for an advertisement of this type), cannot be sold under this regime. And the neighbors of blocks that currently have this peculiar purchase and sale contract will be able to organize to move to a joint property regime.
One of the most historically significant real estate reforms in the United Kingdom has thus encountered the fierce opposition of the Anglican Church, in addition to the companies and funds that wield the sacrosanct right to private property in front of Downing Street. For its critics, the Church of England has become the defender of a “feudal system” that harms many citizens. For its defenders, it is the last bulwark against changes that would withdraw resources destined for social work to end up further enriching large corporations.
We must begin by understanding what the system of leaseholdwhose literal translation would be leasing, but which entails very different legal consequences from the traditional rental of a home. With this system, the leaseholder (to some extent, the buyer) becomes the holder of the right to use and possess the property for a very long period of time with his payment for the house. But not the definitive owner.
More than 4.7 million homes in the United Kingdom, around 19% of the housing stock, are in this legal situation, according to data from the 2022-2023 fiscal period. The vast majority of them are apartments in blocks and only 8% correspond to single-family houses.
When a client purchases a home under this regime, they do so for a period of time. The land on which it is located still belongs to the seller. In Spain, for example, the normal thing is to buy a freehold property. The tenant becomes the owner of his home and the proportional part of the land that corresponds to him, if it is, for example, an apartment building.
In situation of leaseholdthe contract can be for 99 years, 125 years or more, and there is always the possibility of extending these terms. But the tenant, although for all intents and purposes he feels that the home belongs to him, must pay an annual rent for the land, and suffers important limitations when, for example, considering a renovation. For a couple of years, however, the annual rent for the land has been eliminated in the case of new acquisitions.
Great owners
A huge part of the United Kingdom is private property. The owners are diverse: the Government itself, through ministries such as the Defense or the Forestry Commission; ; great aristocratic families, such as the duchy of Westminster or Wellington; charitable organizations; and national or international pension funds.
The Labor Party Government included in its electoral program the reform of the system, with the intention of stopping its abuses and improving the conditions of buyers (although they continue to be legally leaseholdersthat is, tenants).
The legislative process of these changes, however, has been complicated because there are many private interests that risk their financial situation if a system that has lasted for centuries is modified. The Anglican Church of England, for example, owns more than 81,000 hectares of land across the country, about 810 square kilometers. Much of what he earns goes back into social work and charitable projects.
One of the measures proposed by the Government is the suppression of the so-called marriage valuewhich despite the word has nothing to do with the legal status of married or single of the tenants. This mechanism, which many of its critics consider abusive, distributes the increase in value in the housing market between the owner and the tenant when the second of them purchases an extension of their lease (which is usually 25 or 50 more years).
When buying a house under this regime, the normal thing is that as the time remaining until the contract expires is reduced, the house loses value in the market. You don’t pay the same for an apartment that has 30 years left on it. leasehold than for another who has 90 left. Because the first implies the loss of property or having to make a new payment to remain in the property, soon after.
On paper, the marriage value It is thus a way of distributing the capital gain derived from the extension of the rental between owner and tenant. But in practice the one who is forced to disburse that amount is only the second. And it means that many tenants cannot afford the possibility of extending their contract.
Church Complaint
The Anglican Church, however, believes that the renunciation of this extraordinary income would be detrimental to much of its social work. And he points out that, in many cases, the tenants of their buildings are large corporations or firms that end up obtaining great benefits from their real estate investment without paying anything in return.
“With the proposed law, money that was currently used, for example, to promote youth employment, will be transferred to already very rich organizations and individuals. It will give them an extraordinary and unexpected income. That is why I think this is like Robin Hood but in reverse,” argued in the House of Lords, of which the Archbishop of Manchester, David Walker, is a member.
London accumulates almost a quarter of all these apartments on a rental basis. leaseholdand its Labor mayor, Sadiq Khan, is one of the main defenders of the reform of a system that is abusive on most occasions. Recently, when many of the owners decided to excessively increase the management and service fees they charge to tenants, the city council itself issued a series of recommendations and guidelines so that they would refuse to pay the surcharge if very strict conditions were not met.
The Government of Keir Starmer to ensure that newly built and sold apartments mean that ownership of the land corresponds to the buyers, as in most of Europe. It also proposes that the new extensions of existing contracts be up to 990 years, which would be equivalent to practically definitively eliminating the sword of Damocles that hangs over many tenants. And finally, it seeks to improve the rights of tenants who have been able to do little until now in the face of contractual demands that on many occasions were clearly leonine.
