Barnet Developers Shift From Leasehold Flats Amid Market Collapse

Developers are abandoning leasehold flats in favour of alternative housing models due to a market collapse driven by high service charges and fears over cladding and maintenance issues. Luke Ward, director for housing, economy and placemaking at Barnet Council, informed the London Assembly that despite strong housing demand, leasehold properties are becoming unaffordable for first-time buyers.

Mr Ward explained that developers are now opting for build-to-rent, co-living, student accommodation, or sheltered housing for older people to meet market demand. He noted that a block of 50 flats that might have been leasehold three or four years ago is now more likely to be a build-to-rent or co-living development, or housing for older people or students.

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Service Charges and Affordability Concerns

More than a third of London's housing stock, 36.1%, is leasehold, requiring owners to pay service charges to freeholders. Londoners are more than twice as likely as those in the rest of the country to be leaseholders. A report to the Mayor of London found the median household in the capital paid £3,912 annually in service charges, prompting City Hall to launch an investigation into their impact on the housing crisis.

Potential buyers are deterred not only by the cost of new flats, with London's house price-to-earnings affordability ratio exceeding ten, but also by 'reputational challenges'. These include anxieties surrounding cladding remediation works and the level of service charges, which Mr Ward stated would make potential buyers reconsider their purchase.

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Government and Developer Responses

Ministers have committed to abolishing the leasehold system for new developments, though housing minister Matthew Pennycook indicated this reform would take years to implement. In the interim, developers are adapting by shifting their focus away from leasehold properties. Harry Scoffin, founder of campaign group Free Leaseholders, told the Local Democracy Reporting Service that developers and councils acknowledge the leasehold flat market has 'collapsed' and is altering building priorities. He expressed concern that this shift leads to more build-to-rent properties where residents do not own their homes.

Broader Housing Supply Issues

The move away from leasehold occurs against a backdrop of rising building costs, attributed to global factors like material price increases and interest rates, alongside domestic labour shortages, according to Neil Davis, development delivery director at L&Q. These supply and demand struggles mean London has consistently failed to build enough homes, including affordable properties. The Mayor of London, Sir Sadiq Khan, delivered 14,335 affordable housing starts under the Affordable Homes Programme 2021-26, against a target of 17,800, and is unlikely to meet this goal despite a six-month extension.

Analysis by the Centre for Cities think tank suggests the government's Social and Affordable Housing Programme will leave London lagging behind other regions in addressing housing waiting lists. By 2036, the programme is projected to deliver affordable homes equivalent to only 18% of London's priority waiting list, compared to 46% in rural areas and 26% in other mayoral areas. The think tank advocates for a greater share of funding to be directed towards cities like London, where housing need is most concentrated.