Leasehold reform is an opportunity to set a better record on housing regulation

The government must avoid repeating past policy failures in leasehold reform

Anyone who works on housing policy can list infamous stories of regulation gone wrong. Whether it’s nutrient neutrality, building safety regulations or the future homes standard – housing regulations have come with delays, flaws and at times major disruption to new housing supply. These are symptoms of systemic policy making failures in housing policy, as our research has found.

Successive governments have struggled to reconcile competing objectives – on supply, environment, quality and building standards – into a coherent reform strategy, which has at times led to duplicative, impractical or even counterproductive regulations coming into force.

This is a pattern of policy failure that the government is keen to avoid repeating with its leasehold reforms – an area of policy that is already no stranger to regulatory errors. The housing minister told the IfG’s audience that – after the Leasehold and Freehold Reform Act 2024 was rushed through parliament during the wash-up before that summer’s election – officials told him on his first day in post that flaws in the legislation meant he could not enact some of its provisions, requiring primary legislation to resolve.

The minister’s clear and considered reform trajectory is welcome

Pennycook’s approach to leasehold reform is mindful of the risks. The primary message in his speech was that ending leasehold cannot, and should not, happen overnight. As he put it: “Rushing any legislation is a bad idea. Rushing legislation in this complex policy area, more than others, is a recipe for disaster.”

Pennycook shared plans to sequence legislation through this parliament for an “orderly” transition, and explained his rationale. His top priorities feature in the whopping 260-clause draft Leasehold and Commonhold Reform Bill, currently in pre-legislative scrutiny by the housing select committee, while lower priority and trickier reforms ⁷ Namely, taking forward the remaining recommendations from the Law Commission’s 2020 reports on enfranchisement and right to manage, which he outlined is likely to require repealing aspects of the 2024 Act to achieve.  will come in further primary legislation later this parliament. He is also proposing 24 statutory instruments to switch on measures in the 2024 Act.

He is clearly a detail-oriented minister, and time spent as shadow housing minister since 2021 has brought a deep understanding of the brief’s complexities and trade-offs. The Institute often calls for ministers to set out clearly, with evidence, the reasoning behind their policy vision, and it was welcome to see Pennycook do so in such a technical and complex area of property law.

Watch Matthew Pennycook's keynote speech

Success requires careful scrutiny and adjusting to delivery issues as they emerge

A carefully considered plan is a good start, but it does not guarantee success. The government must make the most of the ongoing pre-legislative scrutiny and consultation stage to refine the draft bill. This is bound to be needed, as it will need to properly account for a huge variety of existing arrangements and legal contexts.

The government must also remain live to delivery risks, addressing them as they emerge. Pennycook is consulting on how and when to switch on the ban on new leasehold flats and houses, ⁸ Provisions for a ban on new leasehold houses were in the 2024 Leasehold and Freehold Reform Act, while the government has included a ban on new leasehold flats in its forthcoming Leasehold and Commonhold Reform. The minister has indicated he is likely to switch these on at the same time.  which carries risks of disrupting new supply if managed poorly. Likewise, some – like Lord Best, who the May government commissioned in 2019 to recommend how to regulate property agents – have questioned whether the government’s approach to regulating these agents will be enough to prevent malpractice, as the government has opted for an alternative (and Lord Best would say less comprehensive) route than the standalone regulator he had called for.

In addition, the government’s vision is for most existing leaseholders to eventually choose to convert to commonhold, but it is unknown if its reforms will be enough to sufficiently improve commonhold’s appeal. Successive governments will need to monitor market behaviour to ensure that any emerging issues during the transition to widespread use of commonhold are identified and addressed.

The government must continue to take a considered approach to this legislation – both through current legislative scrutiny and consultation, and in monitoring and evaluating the reforms as they are implemented. If it does, perhaps the minister can show that new housing regulations can go right after all.