In June, a Government announcement confirmed plans to ban the sale of new-build houses on a leasehold basis in England. Labour followed suit in its ‘new deal for leaseholders’ (PDF 332 KB) report published in July.

Who will be affected by these changes? The practice of selling houses as leasehold is rare in most of the country, but more common in parts of the North of England. In this Insight we look at the issues surrounding leaseholds and where they are most likely to take place.

What is leasehold ownership?

If you own
a residential property in England and Wales, you will usually own it on either a
freehold or a leasehold basis. Freeholders own both the property and the land
it is built on, while leaseholders do not own the land. Leaseholders are
effectively in a landlord and tenant relationship with a freeholder – they own
the right to live in a property for a number of years, rather than the property
itself.

Leasehold ownership can come with problems such as high service charges and ground rents owed to the freeholder, as well as substantial costs associated with extending the lease or buying the freehold.

Leasehold is a very common tenure for flats, because it allows flat owners to own a unit within a building while the building is owned and maintained by someone else. However, some houses are also sold on a leasehold basis. This practice has been described as ‘inappropriate’ by the Housing, Communities and Local Government Select Committee.

Why are reforms happening?

The Government committed to reforming some of the issues with leasehold in its February 2017 Housing White Paper, and launched a consultation in July of that year. It first announced its intention to ban the practice of selling new-build houses as leasehold in December 2017, and in June 2019 confirmed it would bring forward legislation ‘as soon as parliamentary time allows’ to prohibit the creation of new leases on new-build or existing houses. Houses that are already owned as leasehold can continue to be sold on this basis under the Government’s plans.

Where are leasehold houses sold?

Using data
from the Land Registry, we can look at how leasehold sales vary geographically
and over time in England and Wales.

The map below shows the percentage of houses (not flats) that were sold on a leasehold basis in each constituency between the start of 2014 and the end of 2018. While leasehold houses are uncommon in most of the country, the majority of house sales were leasehold in parts of Greater Manchester and Sheffield. Sales are noticeably higher in the surrounding area, too.

A map showing the percentage of houses sold as leasehold by constituency from 2014 to 2018. They were most common in Greater Manchester, Sheffield and the surrounding area.

 If you’re interested in getting figures for your constituency, they’re available as part of our Leasehold and commonhold reform briefing paper. There’s an Excel file for download (108 KB) that has percentages for each constituency in England and Wales.

Zooming in on the North

The Land
Registry data has a record for each individual property sold. That means we can
look at trends within the ‘Northern hotspot’ shown above in fine geographical
detail, which is what we’ve done in the map below.

 It shows the outline of the ‘hotspot’
constituencies in red. It also does two things to make the trends in leasehold
sales clearer:

  • It
    shows the proportion of houses sold as leasehold in each MSOA (Middle Layer
    Super Output Area). An MSOA is a type of geographical boundary used by
    statisticians to define small areas.
  • Rather
    than showing the whole of the MSOA, it only shows the footprint of buildings in
    the area.

This helps us see more precisely where leasehold house sales have been happening. They were particularly common in Salford and central Manchester, nearby towns to the north (such as Oldham), Blackburn, Huddersfield, and Sheffield. By contrast, rates were lower in Liverpool, Blackpool and Preston. Areas outside of the ‘hotspot’, such as Leeds and the Wirral, also had lower rates.

A map zooming in on the North of England, showing leaseholds by neighbourhood from 2014-18. Areas where over 80% of house sales were leasehold are mainly around Greater Manchester and Blackburn.
Click on the map to view a more detailed version

How long has this been a leasehold hotspot and will it continue?

Leasehold sales have been more common in this group of constituencies than in the rest of England since at least 1995 (the earliest year for which the Land Registry publishes data). The chart below shows the proportion of new-build and resale homes sold on a leasehold basis in the area up to 2019.

A line graph showing the proportion of homes sold as leasehold in the 'northern hotspot' from 1995 to 2019. Resales have stayed steadily just under 40%, new builds have increased to just under 80% in 2018 which a sharp drop afterwards.

The
proportion of new-build homes sold as leasehold increased from about a third of
homes in the nineties to a peak of 74% in the first quarter of 2017, before
dropping off dramatically. Only 8% of new-build homes were sold as leasehold in
the second quarter of 2019.

This drop was
almost certainly caused by the shift in Government policy on leasehold
new-builds.

But what
about houses that aren’t new-build? A little over a third of house resales have
been leasehold in the ‘Northern hotspot’ between 1995 and 2019. When new-build
houses stop being sold as leasehold entirely, there will still be a substantial
stock of houses that are already subject to leasehold arrangements in the area.
It’s therefore likely that there will continue to be a relatively high
proportion of house resales on a leasehold basis.

What kinds of houses are sold as leasehold?

Buyers may
find that the type of house they buy affects their chances of owning a
leasehold home. The chart below shows trends in the proportion of terraced,
semi-detached and detached houses sold as leasehold in the north.

Leasehold has historically been more common for terraced houses than other types. Detached houses have followed a similar pattern to new-build homes, peaking in 2016-17 before declining. This is perhaps because detached houses are more likely to be new-builds: since 1995, 20% of detached houses sold in the area have been new-build compared with 4% of terraces.

A linegraph showing the proportion of homes sold as leasehold in the northern hotspot by type of house. The majority have been terraced houses, followed by semi-detached and the detached, although detached houses slightly overtook semi-detached in around 2016-17 and were at the same level around 2017-18.

What do these findings tell us?

While
leasehold house sales do happen across England, the Government’s plan to ban leasehold
for new build houses will most likely benefit buyers in certain parts of the
country, including Greater Manchester, Sheffield and Lancashire. Even within
those areas, some neighbourhoods (or MSOAs) are much more likely to have
leasehold housing for sale than others.

New-build
house sales have already dropped considerably ahead of the planned legislation.
However, there is an existing stock of leasehold housing – much of it terraced
– which will probably continue to be resold as leasehold in future.

Further reading

Sources and copyright

  • Leasehold transactions data: HM Land Registry, Price Paid Data Single File [Accessed 1 July 2019]. Data produced by HM Land Registry © Crown Copyright 2019.
  • Maps contain OS Data © Crown Copyright 2019. All rights reserved. House of Commons Library 100040654 (2019).

About the author: Cassie Barton is a Senior Library Clerk at the House of Commons Library, specialising in housing and planning. 

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