Tory MPs are threatening to rebel over the government’s new housing proposals.

In a letter to Chancellor Jeremy Hunt, more than 30 Tory MPs have stated their dissatisfaction with the current leasehold system and implored the government to scrap ground rent on leasehold properties.

Currently, there is no cap on the amount freeholders can charge existing leaseholders for “ground rent”. That’s the money to literally have property on the ground that their freeholders own.

Leaseholders will continue to pay annual ground rent capped, after the housing secretary Michael Gove was been forced to water down the reforms in the Bill following resistance from the Treasury.

It has been widely reported that annual charges levied on leaseholders will now be capped at £250 rather than being cut to zero, or “peppercorn” rate, as first outlined in the Conservative 2019 manifesto.

Gove, who last year referred to leasehold as a “feudal system that needs to go”, has faced opposition from Treasury to his plans.

A number of pension and insurance funds have invested huge sums in ground-rent portfolios and an internal Treasury analysis suggests that up to £37bn of investment could be wiped out, which may lead to compensation claims aimed at the government.

However, a number of Tory MPs have expressed their dissatisfaction and – citing that pledge made in the Tory 2019 manifesto.

They wrote: “It’s time to finish what Margaret Thatcher started and implement peppercorn ground rents and other much needed reforms to leasehold.”

The letter says the reforms to leaseholds they want to see are crucial to upholding Tory aspirations of creating a “property owning democracy”.

There are close to 5m leasehold dwellings in England, according to Department for Levelling Up, Housing and Communities data published last May, which is 20% of the English housing stock, and so naturally scrapping leaseholds would prove to be a popular policy with potential voters.

Former housing minister Robert Jenrick is among those that wants to see leasehold system scrapped altogether.

“It’s an affront to the Conservative dream of homeownership, it’s not fair and it’s not right,” he said.

Harry Scoffin, founder of campaign group Free Leaseholders, commented: “Every single Conservative MP elected in 2019 stood on a manifesto committing their party to restricting ground rents to a peppercorn, or zero financial value. The Conservative Party has a clear choice: it is on the side of young homeowners and aspiring first-time buyers, or rent-seekers, extortionists and middlemen? Rishi Sunak must hold his nerve and stand up for the little guy.”

A government spokesperson said: “It is not fair that many leaseholders face unregulated ground rents for no guaranteed service in return, and we remain committed to reducing ground rents to a peppercorn as set out in our 2019 manifesto.

“We recently consulted on a range of options to cap ground rents for existing residential leases, and we are carefully considering the responses before we make an announcement in due course.”