A government housing scheme has been used to fund thousands of purchases of ‘rip off’ leasehold properties, it was revealed today.
More than 17,000 houses have been bought under the controversial terms using Help to Buy since 2013.
Government estimates suggest there are 4.3million homes with leases in England, 1.4million of them houses.
The Leasehold Knowledge Partnership campaign believes 100,000 families are trapped in houses that are now unsellable because their contracts are so unfair.
More than 17,000 homes have been bought on leasehold terms using Help to Buy since 2013 (file picture)
Some double charges every decade, while other freeholds are sold on to third parties who only allow homeowners to buy them out for exorbitant fees.
Ministers have pledged to outlaw the sale of ‘almost all’ newly built homes with leases following a public outcry.
However, officials have admitted they cannot stop Help to Buy being used for leasehold purchases until 2021, when the current version of the scheme expires.
Shadow Housing Secretary John Healey uncovered the official figures showing Help to Buy had been used to purchase 17,586 houses leasehold since 2013.
Families who use the scheme to get a mortgage need to raise a deposit of just 5 per cent while the Government puts up 20 per cent of the value of the newly-built property.
When the property is sold, the homeowner has to repay 20 per cent of the sale price, which means if the value falls the Government does not get its money back.
Mr Healey told MailOnline: ‘Craven Ministers are not only continuing to let developers sell home-owners rip-off leasehold houses, they’re subsidising this practice through Help to Buy.
‘Across the country, the leasehold scam means people buy their home but find they don’t really own it.
‘They are being fleeced by unfair leasehold contracts, which mean they have to ask and pay freeholders for permission to own a pet, change their carpets or build a conservatory.
‘Ministers should put an immediate stop to Help to Buy cash funding the building of new leasehold houses, and act to tackle the wider pressures leaseholders face.’
Housing minister Heather Wheeler said: ‘It’s unacceptable for home buyers to be exploited through unnecessary leaseholds on new houses.
‘We have announced measures to ban leaseholds for all new build houses unless there is a genuine reason, and moved to end the scandal of soaring ground rents.
Shadow Housing Secretary John Healey uncovered the latest figures laying bare the involvement of Help to Buy
Heather Wheeler MP, Minister for Housing, speaking at the Housing, Communities and Local Government Committee
‘We have been clear in telling developers that Help to Buy funding should not be used for leasehold houses, and recent statistics show this practice is already reducing.’
Ms Wheeler faced a backlash last week when she suggested those already hit by the problem will be left to fend for themselves.
Speaking at a Commons committee, Mrs Wheeler said legal advice showed legislation would be ‘horrendously expensive’, adding: ‘I’d much rather go down the voluntary route.
‘There have been agreements between freeholders and leaseholders and clearly we want that momentum to carry on.’
What YOU need to know about the leasehold scandal affecting homes
What is a leasehold property?
When a home is sold as leasehold, the buyer owns only the house itself. The freeholder owns the land, meaning the buyer has to pay ground rent each year. They may also have to pay to make changes to the property. Ownership returns to the freeholder when the lease comes to an end.
Why is this a problem?
Leaseholds have been used for many years with the freeholder charging small ground rents. But developers saw this as a way to make money and many set rents quite high – at £200 to £400 a year – and some have doubled every decade.
Can families buy their freehold?
Sometimes. But, in some instances, the freeholder sells it to a third party who then charges a sky-high fee to sell it on to the leaseholder.
Why don’t they sell up?
Many find their homes almost unsellable as some lenders will not grant mortgages against homes with excessive ground rents. Potential buyers may also fear the prospect of rents doubling.
How many are affected?
The Government says there are about 1.4million leasehold houses in England. The Leasehold Knowledge Partnership estimates that 100,000 of these are affected by onerous ground rents.
So what is the Government doing?
It has proposed a ban on the future sale of newly-built houses with leases. It has also encouraged freeholders to soften the terms of lease contracts to current owners. But this is purely voluntary and campaigners say it is not enough.