Only two days ago, the Housing Minister, Matthew Pennycook MP, has given a speech where he announced that leasehold abolition is unlikely to happen before the next general election, with the Commonhold and Leasehold Bill still remaining in the draft stage at the time of writing.

Centre Write reached out to one of the UK’s best housing experts, Samuel Hughes, to discuss whether the government has the right idea with our Deputy Editor, William Prescott.

Would scrapping leasehold be a mistake?

Samuel Hughes: There is nothing intrinsically unjust about leasehold as a tenure type. When one purchases a traditional leasehold, one buys a time-limited right to live somewhere, paying partly upfront and partly in instalments. The upfront cost is lower than that of a freehold, because it factors in the future instalment payments and the fact that the leasehold is time-limited. There is no more injustice in this than there is in paying in instalments for a sofa or in renting a hotel room.

To add to that, the leasehold system was, and to some extent still is, extremely useful. Many neighbourhoods had single bodies who owned the freeholds of all the properties within them, the so-called ‘Great Estates.’ The Great Estates had an interest in maximising the long-term value of the neighbourhood, because this affected the reversionary value of the leaseholds when they fell in. As a result, they frequently provided public services and development management. Most of urban England was once owned this way. Such neighbourhoods clearly tended to outperform neighbourhoods where the freehold ownership was fragmented and where the freeholders were thus incentivised to maximise the value of their individual properties at the expense of the neighbourhood as a whole. In the handful of locations in which Great Estates survived, this still happens today.

With that said, the leasehold system has been ruined by reforms, and a transition to commonhold is probably inevitable. If commonhold is reformed in line with the Law Commission’s recommendations, it will be a perfectly acceptable tenure type, so this need not be a disaster. What is more problematic, however, is that, as it stands, leasehold has been wrecked without commonhold being ready to replace it, creating a crisis in which there is no safe way to develop buildings in multiple ownership. On top of this, existing freeholders are having their assets pillaged through compulsory purchase at submarket rates, undermining the trust of property-owners that their assets will not be arbitrarily expropriated by the state. This trust is precious, and it has been part of England’s success for more than three hundred years. It should not have been abused so lightly.

William Prescott: Leasehold may sound intrinsically fair in theory, but it is not in practice. Rightly or wrongly, most purchasers of leaseholds see themselves as owners, and are often encouraged to do so. No one feels the same way about sofas or hotel rooms. Especially in cities like London, where apartments are the only way most first-time buyers can expect to purchase a home, it is surely preferable for leaseholders to enjoy the benefits of true ownership than be lumped with a depreciating asset — though I acknowledge that commercial properties may be a different story.

As regards to the Great Estates, whatever historical role leasehold may have played in their development, more recent experience has shown that the leasehold system is ripe for abuse. Because freeholders typically control how buildings are managed, they have every incentive to maximise revenue at the leaseholders’ expense. Some leaseholders have become stuck in unsaleable properties due to onerous ground rent clauses. Even non-profit housing associations have been found to have made excessive service charges. However well they still operate, the Great Estates are sadly the exception rather than the rule.

Besides, as any trip to most cities outside England and Wales will quickly reveal, leasehold is not necessary to ensure quality apartments.

While fragmented ownership can, at worst, lead to paralysis, this can be mitigated by ensuring that body corporates do not require excessive majorities to approve property maintenance. I should add that flat owners also do have an incentive to maintain their own properties regardless.

Going forward, I agree with you that the system we have is a mess and that we should adopt the Law Commission’s recommendations to fix commonhold. However, I am slightly less sympathetic about the plight of freeholders.

There is nothing inherently unjust about compulsory acquisitions, which happen all the time. While I think some compensation is fair, it need not be excessively generous. The direction of travel has been clear for decades — some leaseholders won the right to buy their freeholds back in the sixties. At this point, anyone over-reliant on freehold income must take some personal responsibility for their own lack of basic due diligence. Nor am I convinced that abolishing leasehold undermines trust in private property rights. In addition to having been on the cards for years, it is too small and niche an asset class for its demise to have much, if any, impact on the UK’s reputational standing.

SH: Will and I basically agree on the main step forward at this stage: implementation of the Law Commission’s report. At present, commonhold requires extremely high thresholds for a wide range of decisions, which are often impossible to reach in large buildings with hundreds of households. The Law Commission correctly argued that this needs to be reduced to more workable thresholds and that this would make commonhold into a viable tenure time like the condominium systems that operate elsewhere.

We disagree on how to treat freeholders. Will says that compulsory acquisition happens all the time and that there is nothing unjust about it. We should pause on this. It is true that all modern societies use compulsory purchase for building infrastructure, like railways and airports. Modern civilisation would effectively be impossible without this. But, first, infrastructure creates large public benefits, and second, owners are compensated at market rates: the rate they would have to pay themselves.

Neither of these things are true of the proposed reforms to freehold. First, nobody seriously claims that public goods are created by expropriating freeholds. The seizure of freeholds is instead justified on ‘Robin Hood’ grounds, that freeholders are rich and leaseholders are poor. But this is not necessarily true: some freeholders are charities, like the Dulwich Estate; some are religious bodies, like the Church Commissioners; some are quasi-public bodies, like the Crown Estate whose profits subsidise public services and welfare transfers. And many leaseholders are rich, up to billionaires who own pieds-à-terre in Mayfair.

Moreover, law-governed societies do not usually redistribute assets like Robin Hood. They create predictable rules that operate across everyone, like Income and Capital Gains Tax, rather than arbitrarily plundering certain asset classes.

Second, under normal conditions, property-owners receive compensation at least at market rates, and usually above-market rates. But the leasehold reforms propose to let leaseholders expropriate assets for less than this, for instance through the so-called ‘abolition of marriage value.’ This is completely aberrant in a free society.

Will this destroy the institution of private property in Britain by itself? Of course not. But people will notice and adjust their expectations about the safety of their assets. Not so long ago, a hugely popular new neighbourhood was developed north of King’s Cross Station on a Great Estate model. Investors made a vast and extremely long-term investment in London because they had confidence that their assets would be respected by future governments. They were wrong, and their assets will probably now be pillaged. Nobody will build another neighbourhood on the model of King’s Cross in Britain for a long time.

Trust is precious, and a society that breaks its promises — which is what we are doing by retroactively overriding lawful contracts — will pay a heavy price.

WP: At the root of our disagreement is, I think, how we conceive freeholders and the role they play. Samuel regards them as fully-fledged property owners whose assets face unjustified expropriation. Historically, when leaseholds were little more than multi-decade leases, and possession was expected to revert to the freeholder upon expiry, this argument carried much more weight. In 2026, when leaseholders are in substance, if not in form, seen as the real owners of their properties, I consider their role has effectively been reduced to that of extractive middleman, and so attach much less weight to it. Abolition, in this light, is merely the logical conclusion to a gradual evolutionary process rather than a sudden asset seizure.

Seen in this light, the remaining freeholder rights are difficult to justify. Why should legislation arbitrarily impose vastly higher costs to extend a lease with 79 years remaining, for example, than one with 80 years, especially when no modern freeholder would realistically expect to take back full possession?

Indeed, these rights are increasingly being abused. Ground rents, which are charges for nothing that were traditionally charged at a peppercorn rate, have soared in recent decades. As with any right, abuse is a reasonable ground for abolition or at least curtailment.

I once again fully acknowledge that not all freeholders are either malicious or wealthy. But just being a charity should not entitle you, for example, to award expensive maintenance contracts to your friends without giving leaseholders a say.

In these circumstances, while I accept that some compensation is justified, the amount owing should be limited. The Government’s proposal to cap ground rents for a time before reducing them to a peppercorn seems a reasonable compromise.

I remain sceptical that a leasehold system is necessary to make building quality apartments financially viable — most of the world manages to do this. However, even if abolishing leasehold precludes any new Great Estate-type apartments, I would still trade that in favour of more security of tenure for flat owners.

Abolishing leasehold will not solve all leaseholders’ problems. Maintenance will still need to be paid for, and disputes between residents are inevitable. But it will give leaseholders control over the buildings they call home and, for the first time, a proper sense of true ownership.

SH: Imagine I buy a dishwasher on a special payment plan. I pay a heavily discounted upfront sum, and then I pay a small annual fee to the dishwasher company. There is no injustice here, and many arrangements like this do in fact exist.

Taking Will’s logic to its natural conclusion, however, the resulting situation is unjust and ripe for expropriation. The dishwasher company is an “extractive middleman,” and the annual fee is “charging for nothing.” But this is wrong! The fee is not charging for nothing. It is charging for the dishwasher, just on a different payment plan. The dishwasher company is no more extractive than any other business.

The matter is not materially changed if the dishwasher company sells the right to collect the fee to a specialised payment plan company. The payment plan company does not actually make dishwashers itself, but its right to collect annual fees is inherited from the company that does. Europe’s economy has depended on such buying and selling of debt since the Middle Ages.

Will’s mistake, in my view, is treating property rights at a single point in time in isolation, ignoring the past in which they arose, and the future in which those rights play a role in sustaining and creating incentives. He sees freeholders extracting income from leaseholders and seemingly providing nothing in return and thinks there would be no loss in seizing their assets and redistributing them.

In fact, however, the freeholders are just like the dishwasher manufacturer, or like the payment plan company. They or their predecessors did provide something in return for their rental rights — the homes themselves! The continued existence of those ground rents is part of the incentive that other builders have today to create new homes, on the expectation that they can take future payment for them on a range of payment plans.

All this is fundamental to a conservative, or indeed a liberal, understanding of property rights. Society extends across time: only by respecting past commitments do we preserve confidence that our own commitments will be respected in the future. A society that does not honour its promises loses the power to make them. And the loss of that power will prove very costly indeed.

WP: There is a key difference between buying dishwashers on instalments and buying leasehold flats: once I have paid off the instalments, the dishwasher is fully mine. Whether I treasure it for 40 years, sell it on the next day, or paint it bright green is none of the retailer’s business. Sure, in the meantime, the retailer is allowed to charge me in exchange for not requiring the full payment up front and has the right to reclaim the machine if I stop paying, but that relationship has a fixed endpoint.

Leasehold abolition is about giving the owners of flats the same control over the homes that they have paid for as the purchaser of the washing machine has over the white goods they have paid for. Once the home is built, the keys have changed hands, and the builders have received their due, there is no need for a third or fourth party to stay involved.

Nor am I backing down on my claim that ground rents are money for nothing. Freeholders do not maintain the properties — professional management companies do that. They do not pay to maintain the properties — the leaseholders are typically left with the bill for any major works. In many cases, the freeholders did not build the homes either — many builders have on-sold the freeholds to investors, often with disastrous consequences for the leaseholders, whose expenses suddenly go through the roof.  And even where they did build the homes, most of the profit is made on the difference between the cost of construction and the sale price — or at least that is how it works in pretty much every city outside England and Wales. In other words, builders will be just fine in a post-leasehold world.

The best way to guard against radicalism is to give as many people as possible a stake in society. For many Englishmen and women, their most important asset is their flat. They have paid to buy it, they pay to maintain it, and they have every right to control it. Just as there is no place for feudal-era rights over agricultural land, so too is there no place for feudal-type rights over England’s apartment blocks.

Leasehold abolition is not about confiscation but about giving people control over their own lives and their own assets. What could be more conservative than that?

The exchange took place recently over the space of one month.