Plans to abolish the “feudal” leasehold system have been watered down by Rishi Sunak in his second U-turn within two days.
Michael Gove, the Levelling Up Secretary, had committed to put an end to the “outdated” property model across England and Wales.
But the pledge will be left out of legislation later this year because such large-scale reform cannot be completed before the next election.
The Government will instead focus on quicker fixes, such as bringing in a cap on ground rents and making it easier for leaseholders to buy the freehold of their home.
The slimmed down reforms came a day after Downing Street prompted Brexiteer fury by ditching a long-planned bonfire of EU laws.
Unfair system ‘needs to go’
Mr Gove told MPs in January that he would “absolutely” abolish the leasehold model and the Government would “bring forward legislation shortly”.
He has previously described it as “an outdated feudal system that needs to go”.
Under leasehold terms, buyers only own their property for a set period of time and usually have to pay maintenance charges and ground rent.
There have been complaints that the model is deeply unfair, with hidden fees often running into several thousands pounds a year.
The Levelling Up Secretary wants to replace it with a commonhold system like those used in Australia and the US.
This alternative system ensures buyers own their home indefinitely and have a much greater say over the management of their building and associated costs.
‘This Government has caved’
Government sources said the upcoming legislation would be a “big step” towards a commonhold system and that plans for one haven’t been dropped.
But Labour accused the Prime Minister of abandoning yet another promise on housing, saying the climbdown showed the Government was in chaos.
Lisa Nandy, the shadow levelling up secretary, said: “In the space of a few months this Government has caved into backbenchers on housing targets, locked themselves in internal battles on making the basic improvements for renters and is now rowing back on leasehold commitments.”
Labour drew up plans to replace leasehold with commonhold in the run-up to the 1997 election, but they were never enacted by Sir Tony Blair.
The National Residential Landlords Association also hit out at ministers for downsizing their proposals.
A spokesman said: “Leasehold reform is always on the Government’s agenda, but very rarely seems to reach the top of the pile.
“A significant proportion of landlords own leasehold property and the ongoing uncertainty about reforms is unhelpful against a backdrop of poor investor confidence.
“Given the challenges facing leaseholders in dealing with the aftermath of the building safety crisis there will be many who will feel let down by this change of policy.”
‘Significant improvements’ made
There are around 10 million leasehold owners in England and Wales, with strong public support for abolishing the system altogether.
Polling for the campaign group Commonhold Now showed that six in 10 people who voted for the Tories at the last election would back the change.
More than half of voters favour the switch to a commonhold system with only 9 per cent opposed, according to the survey carried out by Opinium.
Karolina Zoltaniecka, the co-founder of Commonhold Now, said the Government’s watering down of their plans was a betrayal.
A spokesman for the Levelling Up department said: “We are determined to better protect and empower leaseholders to challenge unreasonable costs.
“We have already made significant improvements to the market – ending ground rents for most new residential leases, and announcing plans to make it easier and cheaper for leaseholders to extend their lease or buy their freehold.
“In line with our manifesto commitment, we will bring forward further leasehold reforms later in this Parliament.”