The Greater London Authority (GLA) is launching a formal investigation into how escalating service charges are exacerbating London's housing crisis, the Local Democracy Reporting Service (LDRS) can exclusively reveal.
Scope of the Investigation
The GLA has contacted members of the London Housing Panel to initiate work on a comprehensive research document examining service charges in relation to the affordability of new homes across the capital. This move follows a London Assembly Housing Committee report last year that found the average London household was paying £3,912 annually in service charges, prompting calls for the Mayor to cap these fees.
More than a third of London's housing stock—36.1 per cent—is leasehold, meaning property owners are liable for service charges imposed by freeholders. Londoners are more than twice as likely as the rest of the UK to be leaseholders, making this a uniquely acute issue for the capital.
Early Stage Consultation
The 15 members of the London Housing Panel, funded by the GLA and Trust for London, have been asked for initial feedback on the "cost and implications of service charges across all housing tenures," according to an email seen by the LDRS. Reporting to Deborah Halling, Senior Policy Officer from Housing & Land at the GLA, the engagement session was billed as an "early stage conversation" ahead of a wider research piece that could inform future policy decisions.
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."
Political Reaction
City Hall sources confirmed they are starting to examine the impact of service charges on both affordability and housing delivery as part of "routine, ongoing work to get homes delivered, in particular genuinely affordable homes." They stressed the investigation is still at a very early stage.
Green Party London Assembly Member Zoe Garbett, 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 associations 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, leader of the Liberal Democrat group on the London Assembly, added: "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."
Shared Ownership Concerns
Assembly Members have previously raised concerns that Shared Ownership homes—considered affordable housing—are no longer in reach for many due to uncapped service charges. Sue Philips, founder of Shared Ownership Resources, said: "Problems with shared ownership service charges are widely acknowledged. The Housing Ombudsman reports that service charges comprise the third most common source of complaints from shared owners. And a survey carried out by the Shared Ownership Council found that nearly half of their respondents are unlikely to recommend shared ownership, with service charges being a significant factor. Consequently, Shared Ownership Resources welcomes the City Hall probe into ballooning service charges paid by Londoners, and calls upon the Mayor to ensure that words lead to meaningful action."
Government Action
The issue of leasehold reform—which Londoners are uniquely exposed to compared to other UK regions—ultimately lies with the Government. The Leasehold and Freehold Reform Act became law in 2024, but many provisions are yet to be enforced. 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.
Housing Minister Matthew Pennycook MP said on Wednesday (April 29): "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."
