Retirement housebuilder McCarthy & Stone (LON:MCS) shares plunged after the government announced it will force developers to cut controversial ground rents to zero for new homes.
The company said it has made a “strong case” to the Department for Communities and Local Government for retirement housebuilders to be exempt from the new rules.
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Shares dropped 10.3% to 152p each in morning trading.
McCarthy & Stone said it does not build leasehold houses and does not employ the types of escalating ground rents that have prompted DCLG's review of the issue.
“The proposal to set all ground rents to zero will result in a disruption of housing supply and contradicts the government's stated objective of seeking new sources of housing,” said chief executive Clive Fenton.
“We understand and support the need for action to address leasehold housing and aggressive escalation clauses for ground rents, however this blanket approach will result in reduced housing delivery as well as choice for ordinary people.”
Its apartments include an annual leasehold ground rent charge for maintenance of the building, which is managed on behalf of elderly residents. Rental growth is in line with retail price inflation or 2%, whichever is higher.
The group will “continue to work positively with DCLG to ensure they recognise the importance of retirement housing in the face of an ageing population,” Fenton added.
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In addition to the new rules on ground rents, the government will ban the sale of new-build homes on leaseholds.
Sajid Javid, the communities secretary, said the government will also write to all developers that have sold homes with “onerous ground rent terms” to ask them to provide “necessary redress”.
“It’s unacceptable for homebuyers to be exploited through unnecessary leaseholds, unjustifiable charges and onerous ground rent terms. It’s clear from the overwhelming response from the public that real action is needed to end these feudal practices.”