Under new legislation that signals an end to the feudal leasehold system, which dates to medieval times, new leasehold flats will also be banned and homeownership strengthened.

Over 5 million leaseholders and future homeowners will benefit from stronger control, powers and protections, through the draft Commonhold and Leasehold Reform Bill published today, which will fundamentally rewire homeownership across England and Wales.

It will cap ground rent at £250 a year before ultimately reducing it to a peppercorn after 40 years - marking the end of residential leaseholders paying over the top bills for no clear service in return.

This move will ensure leaseholders keep more of their hard-earned cash, with many seeing savings of over £4,000 over the course of their lease, improving cost of living for millions. This will also unlock house sales for leaseholders whose lives have been put on hold because of ground rent terms that make their homes hard to sell.

Prime minister Keir Starmer said: “Good news for homeowners, we’re capping ground rent at £250. That means if you are a leaseholder, and your ground rent is more than £250, you’ll be paying less.

“And I’ve spoken to so many people who say this will make a difference to them of hundreds of pounds.

“That’s really important because the cost of living is the single most important thing across the country.

“So this is a promise that we said we’d deliver and I’m really pleased that we’re delivering on that promise.”

Secretary of state for housing Steve Reed said: “If you own a flat you can be forced to pay ground rents that can become completely unaffordable. We said we’d be on the side of leaseholders – which is why today we are capping ground rent – helping millions of leaseholders by saving them money and giving them control over their home.

“The leasehold system has tainted the dream of home ownership for so many. We are taking action where others have failed –strengthening home ownership and calling time on leasehold for good.”

Timothy Douglas, head of policy andcampaigns at Propertymark, welcomed the announcement.

“We know from our research with Propertymark member agents that leasehold properties with escalating ground rent will struggle to sell, even if priced correctly,” he said.

“Addressing ground rents for existing leaseholders is a key step towards a fairer leasehold system. It brings existing leaseholders on par with new leaseholders, and it tackles one of the largest barriers to selling leasehold properties.

“We also welcome steps to make it easier and cheaper to buy leasehold property and the ambition to transition towards commonhold, but agents and consumers will need clear guidance, education, and practical support to understand and navigate this change. 

“A draft Bill provides a vital opportunity for policymakers to work with the sector to get the reforms right before legislation is passed into law. It is vital that the changes come in as soon as possible to support property transactions and that the costs are reduced for consumers.”