The politics of housing: Changes to UK residential property law - beware the law of unintended consequences

Key Legislative Reforms 2025 

Renters’ Rights Bill

The Renters’ Rights Bill has been in the pipeline for a long time – we set out in this article the key reforms heralded by new legislation. The Bill has passed through the House of Commons and is now going through the House of Lords with the government aiming for it to come into force in the Spring.

The Bill makes significant changes to the short-term tenancy regime, by converting all Assured Shorthold Tenancies (ASTs) to periodic tenancies, and ending so-called “no fault” evictions, replacing them with a range of termination grounds.

It also seeks to give tenants greater rights including the introduction of a new decent homes standard, the right to request permission to keep a pet, anti-discrimination provisions, limits on bidding wars and a ban on collection of over one month’s rent up-front. It also imposes greater regulation on landlords, and introduces sanctions for failure to comply.

The intention behind the Bill is to shift the balance between landlords and tenants and give tenants greater security, recognizing that a property may be the landlord’s house, but it is also the tenant’s home.

However, there are some concerns that the effects on the rental market may lead to unintended consequences. This might include small scale “buy-to-let” landlords leaving the market for fear of the time, uncertainty and increased cost involved in evicting tenants who fail to pay their rent. This could mean the buy to rent and build to rent markets consolidate in the hands of fewer investors with deeper reserves, who are better placed to weather these processes. Some have speculated this (particularly when it comes to individual houses or flats rather than large developments) could potentially reduce leasehold housing stock and driving up residential rents.

The Bill has not received the support of the Conservative Party, because they say it will distort the PRS market.

Changes to the Leasehold and Freehold Reform Act 2024 (LAFRA) 

LAFRA introduced sweeping changes for the long-leasehold regime, including a ban on new leasehold houses, removal of the 2 year restriction on tenants’ ability to extend their leases or buy the freehold, and changes in the calculation of the premiums for doing so.

However, the Minister of State for Housing and Planning issued a written ministerial statement on 21 November setting out his ambitions to go much further, with a long agenda for further leasehold reform.

Much of this will involve implementing the changes already set out in LAFRA, but the government has also indicated it might revive the plan to curb existing ground rents (bearing in mind that ground rents in new leases are already banned under the Leasehold Reform (Ground Rent) Act 2022).

Many of the changes envisaged under LAFRA – such as changes in valuation methodology – will also be subject to consultation before they can be introduced through secondary legislation.

Alongside its aim of resetting the balance between landlords and tenants, another of the government’s key aims is to encourage house-building, with a target of 1.5 million new homes during this Parliament.

With ground rents already banned for new developments, there is a risk that developers may be less willing to invest in building new leasehold properties, reducing the build to rent market.  The government’s homebuilding ambitions will therefore rest on the development of houses for sale on a freehold basis, or flats sold for high premiums and a “peppercorn” rent, and (theoretically) for commonhold ownership. Again, there is speculation that any new ban on - or even a curb on - existing ground rents risks may force further exits from the market, reducing housing stock and driving up prices and short-term rents.

Leasehold and Commonhold Reform Bill

The government has indicated it will go even further, and publish a new draft Leasehold and Commonhold Reform Bill later this year, which will ban new leasehold flats altogether, change the law on forfeiture and – perhaps most fundamentally - make commonhold the default tenure with the conversion of all existing leases to commonhold.  

Commonhold is a way of managing the relationship between separate, individually owned, properties – such as a block of flats. The key benefits are that flat owners can own their property freehold rather than leasehold, with no ground rents or forfeiture.

Commonhold was the subject of a Law Commission Consultation back in 2020 and despite being available for around 20 years, fewer than 20 commonhold developments have been established in that period.

The Law Commission made over 120 recommendations for changes to commonhold, so the government has its work cut out for it to overhaul commonhold and change the entire basis of property ownership during this Parliament. Whether that will genuinely lead to a revolution in home ownership, without squeezing the pipeline of new housing stock, time will tell.

Authored by Tim Reid and Lucy Redman.