Exclusive: Housing scheme ‘has delivered £1bn subsidy to leasehold sales’, says Labour

A government housing scheme has been subsidising the sale of controversial leasehold properties to the tune of almost £1bn since 2013 – despite an official ban.

Wednesday, 24th April 2019, 12:04 pm
Updated Wednesday, 24th April 2019, 12:09 pm
A government housing scheme has been subsidising the sale of controversial leasehold properties to the tune of almost 1bn since 2013 despite an official ban. Pic: PA

New analysis, conducted by Labour and revealed by The Yorkshire Post, shows that the Conservatives’ Help to Buy programme has enabled the sale of almost 18,000 new leasehold houses over the past six years.

Back in December 2017, Ministers announced “a ban on leaseholds for almost all new build houses” and pledged to write to developers “to strongly discourage the use of Help to Buy Equity loans for the purchase of leasehold houses”.

However, more than a year later, official statistics show leasehold houses are still being sold to buyers using Help to Buy loans.

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According to official figures released earlier this week, 17,975 controversial leasehold houses have been bought through the Government’s Help to Buy scheme since 2013.

With average Help to Buy per-property funding of £54,630, this equates to an estimated £982m of Help to Buy cash going to leasehold houses.

In Yorkshire and the Humber, government money has funded the sale of 1,448 leasehold homes – the second highest figure in the country after the North-West where a huge 10,976 properties are affected.

Selling houses as leasehold means developers keep freehold ownership of the property and can charge home-owners hundreds of pounds in so-called ‘‘ground rents’’.

Homeowners are also often legally bound to ask and pay for the freeholder’s permission to make minor alterations to their own house.

Labour’s Shadow Housing Secretary John Healey, who is the MP for Wentworth and Dearne, said: “This billion pound bung to developers selling rip-off leasehold houses makes a mockery of Ministers’ promises to ban these homes.

“The Government is not only giving developers the nod to sell these leasehold houses, they’re helping them do it with Help to Buy.

“The leasehold rip-off means people buy their home but find they don’t really own it. Ministers should put a stop to it, starting with an immediate block on Help to Buy cash for new leasehold houses.”

Responding to the findings, a spokesman for the housing department said: “Exploitative and unfair leasehold arrangements have no place in a modern housing market.

“We have made it clear to developers that Help to Buy funding should not be used for leasehold houses, and recent statistics show this practice is already reducing.”

Housing and Communities Secretary James Brokenshire last month vowed to crack down on unfair leasehold deals, with 40 leading property developers and freeholders backing the Government’s calls to reduce fees.

Speaking at the time, Mr Brokenshire claimed that the new pledge by leading figures in the housing industry would help to support existing and future leaseholders from having “onerous fees” imposed on them.

Labour has said that it will scrap a “get-out clause” which allows developers to avoid their obligations to provide decent social housing, putting up new “slums” instead.

Shadow Housing Secretary John Healey said the “permitted development” rule – intended to boost housebuilding – was being used to get round requirements to provide decent quality affordable housing.

Developers can bypass planning rules by converting commercial spaces into housing without council consent. Mr Healey said poor quality, “rabbit hutch” flats were being created, with 42,000 new housing units converted from offices since 2015.