How will the new homes market be impacted by leasehold reform?

The government has two potentially conflicting objectives: to deliver 1.5 million homes this Parliament and to move away from a leasehold model that has lost public trust. Those are not incompatible and in principle should reinforce each other.

But there is a potential issue with higher-density, apartment-led developments – which are a high priority given density requirements and the challenge will be managing the transition to commonhold while keeping supply moving .

The Draft Commonhold and Leasehold Reform Bill seeks to overcome the reasons commonhold previously failed, especially around mixed-use development, governance, reserve funds and the practical running of larger schemes. Yet fewer than 20 commonhold developments have been built in England and Wales to date.

From my perspective, the risk is not that developers will simply refuse to build apartments, but that uncertainty affects appraisals, phasing, lending terms, sales rates and the appetite to start. If the market cannot judge how buyers and lenders will respond, the result is likely to be slower decisions and a more selective pipeline.

And government’s ambition for growth relies heavily on building at higher densities. In London, the gap between housing need and delivery is already stark. For commonhold to work at scale, confidence is needed throughout the market.

Developers need confidence that the structure is workable for phased schemes, mixed-use assets and the sort of design changes that often arise over the life of a project. Lenders need confidence that the security is robust, the governance is clear and the product can be explained consistently. And buyers need confidence that they are purchasing something understandable, mortgageable and saleable.

The flats market is not entering this transition from a position of strength and even good reform can unsettle the market if it arrives before the market knows how it will work in practice.

But this is not to argue against commonhold – there are real advantages in a better commonhold model. If owners have clearer control and a more direct stake in how their building is run, that should create a healthier long-term proposition. The draft bill also makes a serious effort to deal with mixed-use schemes through sections and separate cost allocation, which is essential if commonhold is to work in modern urban development rather than just in simple residential blocks. Government has also recognised that shared ownership and certain lease-based finance products must be able to operate within the new framework.

But recognition is not the same as market readiness. It will be important for the government not to force the pace to tick off a manifesto commitment, but to sequence the change properly.

That means a clear transition period rather than a cliff edge; standard documents, guidance and consumer messaging that can be used across the market; lenders being brought in early enough that mortgage availability does not lag behind legislation and stress-testing the model on large, mixed-use and phased schemes before ministers assume that what works on paper will work on every site.

Finally, it means being realistic about exemptions or permitted structures where they are necessary to protect supply during the shift. The government’s own consultation is explicitly asking for views on scope, exemptions, timing and transitional arrangements, which suggests ministers know the move has to be managed carefully.

I suspect the government can deliver both housing growth and leasehold reform, but only if it accepts that commonhold is not just a new legal wrapper for flats. It is a market transition with consequences for land buying, scheme design, development finance, sales and long-term management.

That transition should succeed over time. But adaptation needs confidence and confidence comes from detail, testing and a sense that ministers understand how development actually happens.

If the government gets this right, commonhold could help restore trust in flats at the same time as supporting more urban delivery. If it gets it wrong, it could hamper development further, at considerable political, personal and economic cost to all concerned.

Tim Foreman is managing director of land and new homes at LRG