A retrospective ground rent cap: Economic risks and unintended consequences

A new report from WPI Strategy examines the potential economic and housing market impacts of proposals to cap ground rents on existing leases at £250.

The analysis finds that while the policy is intended to support leaseholders, it would deliver limited and uneven benefits, while imposing potentially significant economic costs. Government estimates suggest up to £18.7 billion could be wiped from the value of ground rent investments, with much of this exposure held by UK pension funds.

The report also highlights potential knock-on effects for housing supply and investment. By increasing policy risk and financing costs, a retrospective cap could reduce development viability and push up required investor returns. This, in turn, could reduce annual housing starts by as many as 15,000–20,000 homes and lower total business investment by up to £9 billion, potentially undermining wider government objectives on housebuilding, growth and productive investment.