Government to cap ground rents at £250 a year

The government has announced plans to cap ground rents for leasehold properties in England and Wales at £250 per year, in a recent video from Kier Starmer on social media. 

For millions of flat owners, this could save them hundreds of pounds a year.

Ground rent is the annual fee paid to the freeholder by the person who owns the leasehold. In theory it’s small, but in reality many homeowners have seen these charges climb over time, sometimes doubling every few years. That’s made some properties harder to sell, tougher to mortgage, and more expensive to hold onto.

Under the new proposals, ground rents on existing homes will be capped at £250, with the longer-term aim of reducing them to a token “peppercorn” amount (essentially zero) within 40 years. 

Ground rent on most new residential properties was abolished in England and Wales in 2022, but it still applies to many existing leasehold homes. Reforming the leasehold system was a major part of Labour’s manifesto, with further plans aimed at making ownership fairer and more transparent.

Why this matters 

In England and Wales, there are more than five million leasehold properties. Some have clauses stating that ground rent can increase along with inflation, or even double every few years. Ground rents that rise over time can make budgeting harder and introduce questions for mortgage lenders and future buyers. 

Leasehold properties are most common in city centres, as apartments almost always operate on a leasehold basis due to shared land. Last year alone, leaseholders paid £600 million in ground rent, and under the new reforms they are expected to save £12.7 billion over the full lease term, according to the Government.

By capping ground rents, the government is bringing clarity and consistency to that side of ownership. Buyers know where they stand from day one, ongoing costs are easier to plan for, and properties remain more straightforward to finance and resell.

That kind of certainty is good for homeowners, good for landlords, and good for the wider market.

More changes on the way

The ground rent cap is part of a wider effort to modernise how apartment buildings are owned and managed.

Alongside leasehold, the government is encouraging the use of commonhold on new developments, giving buyers more choice in how their property is structured. At the same time, there are plans to improve transparency around service charges and strengthen protections for homeowners.

The focus is on making apartment ownership simpler, fairer and easier to understand – which helps build long-term confidence in the sector.

What this means for buyers & investors

For apartment-led markets like Manchester and London, this is largely a positive.

• Owners benefit from clearer, more predictable costs
• Investors get better visibility on long-term returns
• Buyers can secure lending easier and evaluate long-term costs

As big cities continue to grow and demand for well-located rental homes remains strong, improving the fundamentals of apartment ownership helps support both capital growth and rental performance.

Final Thoughts

This reform is a huge step towards making leasehold ownership fairer and more transparent for millions of homeowners.

For many people, leasehold properties are the better option – offering more availability in popular locations, well-maintained communal areas, and on-site amenities. However, changing costs can add uncertainty and frustration. With ground rents capped, costs become clearer, confidence is higher, and there are fewer obstacles when selling or refinancing.

In short, it’s a practical change that strengthens the market, and that’s good news for everyone involved.