City Hall is to investigate how high service charges are affecting London’s housing crisis after assembly members found that an average household was paying nearly £4,000 per year in fees.
The Greater London Authority, which is headed by the mayor, Sir Sadiq Khan, has approached the London Housing Panel – a group set up to represent those affected by the crisis – to start work on a research document looking at service charges.
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.
Last year Khan was told to take action to cap service charges after the London Assembly housing committee found that an average household was paying out £3,912 every year. The assembly scrutinises the mayor’s policies and issues that affect Londoners
Now the 15 members of the London Housing Panel, which is funded by the GLA and Trust for London, a charity, 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 Local Democracy Reporting Service.
Reporting to Deborah Halling, a senior policy officer at the GLA, the engagement session was billed as an “early-stage conversation” ahead of a wider piece of research, which could influence the mayor’s future policies.
The panel’s 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.”
City Hall sources confirmed they were 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 was still at a very early stage.
The mayor has set up a service charges charter, a voluntary agreement which sets out commitments that housing providers are expected to comply with.
Zoe Garbett, a Green party assembly member who chaired the housing committee 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-association homes 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, said: “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. In Greenwich, the council has indicated that it may not support shared-ownership homes in future because so few of its residents can afford them.
The issue of leasehold reform – which Londoners are uniquely exposed to compared with other regions – ultimately lies with the government.
The Leasehold and Freehold Reform Act became law in 2024, but many provisions are yet to come into force.
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.
Matt Pennycook, the housing minister and Greenwich & Woolwich MP, said on Wednesday: “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.”
Kumail Jaffer is the Local Democracy Reporter covering London’s mayor and assembly. The Greenwich Wire is a partner in the Local Democracy Reporting Service, which is a BBC-funded initiative to ensure councils are covered properly in local media.
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