EXCLUSIVE: Officials are concerned that high service charges may leave leaseholders struggling to afford homes, including those intended to be affordable
City Hall will launch a probe into how high service charges are impacting London’s housing crisis, the Local Democracy Reporting Service (LDRS) can reveal.
The Greater London Authority (GLA) has reached out to members of the London Housing Panel to start work on a research document looking at service charges in relation to the affordability of new homes across London.
Last year the Mayor of London was told to take action to cap service charges after a London Assembly Housing Committee report found the average household in the capital was paying out £3,912 every year.
More than a third of housing stock in London – 36.1 per cent – is leasehold, meaning property owners are liable to pay service charges imposed by freeholders. Londoners are more than twice as likely as the rest of the country to be leaseholders.
Now the 15 members of the London Housing Panel, which is funded by the GLA and Trust for London, have been asked for their initial feedback on the “cost and implications of service charges across all housing tenures”, according to an email seen by the LDRS.
Reporting to Deborah Halling, Senior Policy Officer from Housing & Land at the GLA, the engagement session was billed as an “early stage conversation” ahead of a wider research piece, which has the potential to inform policy decisions in future.
Members were told that the “GLA is aware that high service charges may leave existing and prospective tenants and leaseholders struggling to afford homes, including affordable homes, and that, where it is expensive to provide services, developers and providers may be wary of building homes, because they’re concerned high service charges will dampen demand for the homes”.
The email added: “Given this, the GLA plans to do some work to better understand service charges for homes in London, including how they vary by tenure and type of home, the extent to which they’ve increased in recent years, and the main factors that determine service charges.
“At this meeting, officers would welcome Working Group members’ insights on service charges, including advice on data that GLA could use for this work.”
City Hall sources confirmed they are starting to look at the impact of service charges on both affordability and delivery of homes “as part of routine, ongoing work to get homes delivered, in particular genuinely affordable homes”.
They stressed that the investigation is still at a very early stage.
The Mayor of London has set up a Service Charges Charter, a voluntary agreement which sets out commitments that housing providers are expected to comply with in order to improve the experience of leaseholders with service charges.
Green Party London Assembly Member Zoe Garbett, who was the Housing Committee Chair until last month, said: “Unaffordable housing is a core driver of poverty, social need and displacement in London.
“I’ve heard horror stories from people living in housing associations unable to pay increasing service charges as well as shared owners and leaseholders.
“People shouldn’t have to worry about skyrocketing service charges, which does nothing but line the pockets of landlords and developers. I welcome City Hall’s probe into service charges and I really hope that action is taken quickly so people don’t have to suffer.”
Hina Bokhari, who leads the Liberal Democrat group on the London Assembly, added: “Millions of tenants and leaseholders across London have been hit with sky-rocketing, opaque service charges in the years following the pandemic.
“While the cost of living has risen, and some increase in costs can be expected, the lack of transparency surrounding these charges has left many Londoners feeling helpless. That’s why the Mayor should name and shame freeholders and management companies who fail to fully disclose and justify these costs.
“It is also time for us to finally do away with the unfair fleecehold system in favour of commonhold; the Mayor should write to the Government urging them to finally put an end to this feudal rental system.”
Assembly Members have previously raised concerns that Shared Ownership homes – which are considered affordable housing – are no longer in reach for many due to uncapped service charges.
Lord Bailey, the City Hall Conservatives Housing spokesman, said: “I welcome a long-overdue investigation into service charges, and I hope desperately that this investigation actually has some teeth. This isn’t about being harsh on landlords or freeholders, but rather is about ensuring a fair market for leaseholders and freeholders alike.
“As someone who has lived in a shared ownership property, who has paid these exorbitant charges and who knows how the service charges so often make a property impossible to afford or indeed sell, I know what this investigation will mean to those trapped in a similar predicament. But it is for that reason that the investigation must have tangible outcomes, and must not be another vague promise to those struggling to afford their housing costs in London which later turns out to just be political mist.”
Sue Philips, founder of Shared Ownership Resources, said: “Problems with shared ownership service charges are widely acknowledged. The Housing Ombudsman reports that service charges comprise the third most common source of complaints from shared owners.
“And a survey carried out by the Shared Ownership Council found that nearly half of their respondents are unlikely to recommend shared ownership, with service charges being a significant factor. Consequently, Shared Ownership Resources welcomes the City Hall probe into ballooning service charges paid by Londoners, and calls upon the Mayor to ensure that words lead to meaningful action.”
The issue of leasehold reform – which Londoners are uniquely exposed to compared to other UK regions – ultimately lies with the Government.
The Leasehold and Freehold Reform Act became law in 2024, but many provisions are yet to be enforced.
The Government has announced, through the Draft Leasehold and Commonhold Reform Bill, that service charges will be made more transparent for leaseholders, while ground rent will be capped at £250 a year and all new leasehold flats will be banned.
Housing Minister Matthew Pennycook MP said on Wednesday (April 29): “I am determined in particular to quickly switch on measures in the 2024 Act to standardise and drive up the transparency of service charges; to introduce permitted buildings insurance fees that are fair; and to rebalance the legal costs regime and remove barriers that may deter leaseholders from challenging their landlord.”
Harry Scoffin, housing campaigner and founder of Free Leaseholders, added: “Londoners are being looted over leasehold service charges, as reflected in collapsing resale values of flats for those able to sell at all.
“City Hall must not listen to the disinformation campaign of the vested interests who want to ignore systemic service charge abuse and stand up to central government after the housing minister announced that the ban on new leasehold flats will not come into force until the next Parliament.”
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