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An Englishman’s home may well be his castle. But the leasehold system — which affects about a fifth of homes including the majority of flats in England and Wales — is a crack in the edifice. A new government plan to cap this feudal-era arrangement is welcome. But a second scourge, known as the “fleecehold”, deserves the same kind of attention.
Leaseholders, under a convention that stretches back to the 11th century, own a property for a set term. But the underlying land, and in the case of a flat the building too, belongs to a freeholder. That ultimate owner, which could be a landed estate, charity or pension fund, often has power over internal alterations as well as the ability to charge ground rents and management fees.
In the grand scheme of housing costs, ground rents are small — but their growing tendency to rise is a friction that is unhelpful for a government keen to liven up the housing market. Prime Minister Sir Keir Starmer’s announcement, via TikTok, of a cap on ground rent at £250 a year from 2028, then effectively zero after 40 years, is a logical step. While it creates losers — including the Church of England and fund manager M&G — the system is hard to defend.
So-called fleeceholds are a bigger source of friction, though, and one that affects both leaseholders and freeholders. Estate management companies charge sums often far exceeding ground rents, in return for which they maintain common areas such as hallways and building exteriors. Increasingly they also manage the roads, drainage and street lighting for new build houses, where councils have, for various reasons, declined to do so.
Unlike the leasehold system, which is guilty of being an anachronism with few fans, fleeceholds represent a market failure. A review in 2024 by the Competition and Markets Authority found many homeowners had no say over the company used, little recourse over substandard work and scant visibility on how much goes on unblocking the drains, say, versus administrative costs. Use of a manager is typically baked into ownership deeds; the CMA found cases where fees virtually doubled in a year.
The government is looking into solutions for potential fleecehold situations for leaseholders owning flats, as well as encouraging councils to take on new developments. It could also consider standards for manager transparency. Those doing a good job should have little to fear — and would at least be spared being labelled “fleeceholders” because of the poor service of less upstanding peers.
Ultimately, Starmer’s goal is to get more houses built and more people living in them. He’s not the first UK leader to struggle with that challenge — or even the first to identify the leasehold and fleecehold problems. But it will be hard to make progress, or make housing feel more affordable for would-be buyers, until the market is sheared of these unhelpful distortions.