Sir Keir Starmer faces a showdown with over 100 of his backbenchers if he U-turns on a promise to cap ground rent for leaseholders, a senior Labour MP has warned.
Barry Gardiner told Sky News that it will be a “betrayal” of Labour’s manifesto “and of natural justice” if the government rows back on one of its flagship housing promises.
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It comes amid cabinet divisions over leasehold reform, which has sparked a major intervention from former deputy prime minister and housing secretary Angela Rayner.
Labour’s manifesto promised to cap ground rents – a charge leaseholders have to pay so they can have a home on land they do not own. It does not require a service in return and is regarded by critics as emblematic of the feudal nature of England’s centuries-old leasehold system, which Labour has ultimately pledged to abolish.
However, the draft Leasehold and Commonhold Reform Bill intended to include these measures was delayed last year. Chancellor Rachel Reeves is said to be concerned that capping ground rents would deter pension fund investors – putting her at odds with Housing Secretary Steve Reed.
Mr Gardiner, who has campaigned against leasehold for years, told Sky News: “It is absolute nonsense to say that pension funds investors are dependent on ground rent, which forms only a tiny percentage of the capital tied up in a property.”
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He said there are 5.5 million leaseholders in the country and “many of them were not regular Labour voters, but voted Labour last time because we promised to end this feudal system and to cap ground rent at a peppercorn [zero]”.
“It would be a total betrayal not only of those leaseholders, but of our manifesto and of natural justice, to go back on that now,” he said.
“Over 100 Labour MPs are involved in groups representing leaseholders. I am confident that they will stick to their promise to leaseholders and don’t want to see another government U-turn.
“Ultimately the government has to get this through MPs. Those MPs will not allow the government to go back on our commitment. I would almost guarantee it.”
The prime minister’s spokesperson would not be drawn on cabinet divisions at the daily briefing with journalists on Tuesday, saying “you’ve got our manifesto commitment” when asked about the ground rent pledge.
Reports had suggested Sir Keir would decide between his sparring team on Tuesday but it is understood no such deadline has been set.
Another major U-turn would be deeply damaging for the prime minister who is fighting to survive following a series of major policy changes.
Rayner intervenes
In her latest intervention since resigning, Ms Rayner – tipped by some to replace Sir Keir if he faces a leadership challenge – said the ground rent row was Labour’s “fresh opportunity to show whose side it is on”.
In an article for The Guardian she wrote: “If Labour cannot fix such an obvious injustice and show families whose living standards have been crushed that we will fight for them, then we shouldn’t be surprised if they lose faith that anything can change. This battle is a symbol of so much more.”
Homeowners have faced escalating ground rent fees over the past decade, having historically been at a low or nominal value. Often this is due to hidden clauses in lease agreements allowing ground rent to rise periodically or in line with inflation, which can also cause problems with selling.
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The Conservatives abolished ground rents on new leasehold properties, but plans to cap existing ones didn’t make it through before the 2024 general election, which they lost.
However, while trying to push through their plans, Tory ministers said government analysis showed less than 1% of pension fund assets were invested in residential property.
Labour’s manifesto said it would “finally bring the feudal leasehold system to an end” as well as “tackle unregulated and unaffordable ground rent charges”.
Abtisam Mohamed, the MP for Sheffield Central, urged the government to stick to its commitment.
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She told Sky News: “Leaseholders are trapped in a system that extracts thousands from them through escalating ground rents, and every delay to the Leasehold and Commonhold Reform Bill leaves my constituents paying charges that exist only to line the pockets of wealthy investors.
“It’s time to stop tiptoeing around them and publish the Bill, so we can deliver on our commitment to end this feudal system once and for all.”
