Labour Government Introducing Changes to Property Law in an Attempt to Address The Housing Crisis

There is an ongoing housing crisis in the UK– there are at least 8.5 million people in Britain with some form of unmet housing need and house prices have greatly increased relative to incomes[1]. In response to this crisis, the Labour Government has introduced a series of reforms to property law, including giving leaseholders and renters more protections and making changes to planning law.

Legal analysis

In order to give leaseholders greater protections and transition the UK out of the leasehold system, the government will be implementing measures under the Leasehold and Freehold Reform Act to allow leaseholders to buy their freehold or extend their lease without having to wait two years from the point they purchased their property[2]. There will also be reforms to address unregulated and unaffordable ground rents[3]. A leasehold is a form of property ownership where rather than owning the land the property stands on there is an agreement between you and the landowner, also known as the freeholder, where you can occupy the property for a fixed term (typically 99 years)[4]. Leaseholders typically pay ground rent to the freeholder, which is subject to the freeholder’s discretion. This has resulted in ground rent becoming increasingly unaffordable, with some freeholders setting escalating rents that rise quickly after the purchase of the leasehold[5]. 

Similarly, Labour is introducing measures to strengthen the rights of renters with the Renter’s Reform Bill. The Bill introduces a number of reforms, including abolishing no-fault evictions, providing protections against excessive above-market rent increases and introducing a new Private Rented Sector Landlord Ombudsman to address tenant’s complaints about their landlord[6]. The increased level of obligations for landlords means legal teams must ensure their clients are aware of the changes brought by the new legislation, particularly those representing landlords. 

Labour is also introducing changes to planning law, arguing that it is the only way for the government to reach its goal of 1.5 million new houses by the end of Parliament[7]. Planning law governs the use and development of land and buildings, ensuring developments align with the vision and framework set out by local planning authorities (LPAs) which are usually the local council[8]. With the National Planning Policy Framework (NPPF) report, the government has outlined its new policies. These include reintroducing mandatory targets for councils with all regions being required to deliver an annual housing approval uplift above 20%, with a vow to take over local plans if councils fail to comply with their new targets. Additionally, 50% of new houses must be affordable[9].  The proposed NPPF reforms are likely to result in increasing amounts of litigation, as the courts begin to interpret the new policies. 

Commercial analysis

In addition to strengthening the rights of leaseholders, Labour’s reform will also amend the Right to Manage regime in the Commonhold and Leasehold Reform Act 2002 (CLRA); the scope of the right has been increased as leaseholders of mixed-use buildings can exercise the right to manage unless the non-residential internal floor area exceeds 50%, rather than 25% as it was previously[10]. Many buildings developed specifically with the CLRA in mind will now be liable for acquisition of the right to manage, leading to an increasing amount of litigation in that regard. Furthermore, this can result in reduced revenue for freeholders, as leaseholders would no longer have to pay management fees.[11] Additionally, the new act failed to address key areas of uncertainty such as what constitutes as a ‘house,’ leading to a continued high level of litigation particularly in mixed-use buildings. 

The Renter’s Reform Bill has led to many landlords pre-emptively evicting tenants to prepare to sell their property as they do not want to deal with the increased level of obligations[12]. The increased level of risk for landlords as a result of the legislation has led to many questioning whether buy-to-let is still worthwhile, which reflects the ongoing slowdown in rental growth[13]. This has the potential to have an adverse effect to the housing crisis, lowering the supply of rental properties on the market. The increased level of obligations also increases the scope of claims available to tenants, leading to a higher level of litigation.

Labour’s reforms for planning law also includes redefining areas of green belt land as ‘grey belt land’ where building developments can take place. This is likely to result in disputes between developers and LPAs as to what truly constitutes grey belt land, leading to more planning applications going to appeal, particularly in the short term. While strategic use of green belt land would likely support economic growth and provide houses, the requirement that 50% of developments be affordable housing means that the potential impact of this is unlikely to be realised; the affordability requirement increases the risk of development. An increased level or risk means fewer projects will be deemed viable, resulting in fewer houses being built overall.

Conclusion

As new policies continue to be enacted by the Labour Government, lawyers must prepare for increased levels of litigation as the courts begin to establish the scope of application for new legislation, regardless of whether they are representing landlords, tenants, freeholders or leaseholders. While it is evident that the impact of the new policies will have a great short-term impact, whether this will positively address the housing crisis will have to be observed in the long-term. 

Bibliography

[1] ---. “The Foundations of the Housing Crisis.” New Economics Foundation, 20 Feb. 2025, neweconomics.org/2024/06/the-foundations-of-the-housing-crisis.

[2] Ministry of Housing, Communities and Local Government. “Sweeping reforms to give leaseholders more powers and protections.” GOV.UK, 21 Nov. 2024, www.gov.uk/government/news/sweeping-reforms-to-give-leaseholders-more-powers-and-protections.

[3] ibid

[4] Buying and Owning a Leasehold Home. www.lawsociety.org.uk/public/for-public-visitors/common-legal-issues/buying-and-owning-a-leasehold-home#:~:text=Leasehold%20is%20a%20form%20of,the%20land%20it%20stands%20on.

[5] ibid

[6] “Guide to the Renters’ Rights Bill.” GOV.UK, 16 Jan. 2025, www.gov.uk/government/publications/guide-to-the-renters-rights-bill/guide-to-the-renters-rights-bill.

[7] Reporter, Guardian Staff. “UK Housing Crisis: What Does Labour’s Shake-up of Planning Rules Involve?” The Guardian, 12 Jan. 2025, www.theguardian.com/politics/2024/dec/12/uk-housing-crisis-what-does-labours-shake-up-of-planning-rules-involve.

[8] “Overview of the planning system (England).” House of Commons Library, 31 Aug. 2023, commonslibrary.parliament.uk/planning-in-england. Accessed 17 Mar. 2025.

[9] Reporter, Guardian Staff. “UK Housing Crisis: What Does Labour’s Shake-up of Planning Rules Involve?” The Guardian, 12 Jan. 2025, www.theguardian.com/politics/2024/dec/12/uk-housing-crisis-what-does-labours-shake-up-of-planning-rules-involve.

[10] “Navigating new horizons: The impact of the Leasehold and Freehold Reform Act 2024 on mixed-use premises and the right to manage.” CMS Law-Now, 11 Feb. 2025, cms-lawnow.com/en/ealerts/2025/02/navigating-new-horizons-the-impact-of-the-leasehold-and-freehold-reform-act-2024-on-mixed-use-premises-and-the-right-to-manage. Accessed 17 Mar. 2025.

[11] Murray, Alex. “The Right to Manage: Pros and Cons | Red Brick Management.” Red Brick Management, 28 Feb. 2025, www.redbrickpm.co.uk/blog/right-to-manage-pros-and-cons.

[12] Bharadia, Rohan. “What Does a Labour Government Mean for the Residential Property Market?” Bowling & Co Solicitors, 25 Sept. 2024, www.bowlinglaw.co.uk/what-does-a-labour-government-mean-for-the-residential-property-market.

[13] ibid