Labour has set out plans to ban the sale of new private leasehold houses and flats in an overhaul of property ownership rules that could slash the costs for homeowners of buying their freeholds.

The shadow housing secretary, John Healey, said the proposals would end exploitative practices by freeholds, “from rip-off ground rents, to punitive fees to onerous contract conditions stating what they can and can’t do to their own homes”.

The government has already announced it will axe leaseholds on all new-build houses, though it is not clear when the measures will formally take effect. However, the Labour policy also proposes a ban on the sale of new leasehold flats by the end of the Labour government’s first term, a substantially larger number of homes.

It also says leaseholders should be able to buy the freehold of their home for 1% of the property value, which could substantially lower the costs. However, owners of current leasehold flats are likely to need to band together to buy the freehold of the block.

At least 4.3 million homes across England are owned on a leasehold basis. For a property in England priced at £250,000 with a 90-year lease, Labour says its proposals could mean the cost of buying the freehold is slashed from over £10,000 to £2,500.

It also calls for ground rents for existing leaseholders to be capped at 0.1% of the property value, up to a maximum of £250 a year. The government has also already announced plans to tackle exploitative ground rents, slashing them to zero on new leasehold flats.

There have been cases where buyers have discovered that their ground rent doubles every 10 or 15 years, including one example of a Birmingham flat owner who discovered her ground rent was not £250 a year, as she had believed, but was now £8,000 a year and would keep doubling so that in 95 years it would be £8m.

“Leasehold is a symbol of our broken housing system, with millions of England’s homeowners feeling like they’ve bought their home but still don’t own it,” Healey said.

“We need a revolution in rights for leaseholders. This consultation document sets out the next Labour government’s ambition to end the broken leasehold model for good.”

The shadow housing minister, Sarah Jones, said leaseholders often had the odds stacked against them. “England is one of the only places in the world which has failed to move away from this feudal system,” she said.

One leasehold flat owner, Jay Beeharry, told the authors of the report he had been charged £50,000 in fees over four years after buying a modest two-bedroom flat in London. “I have lost thousands of pounds, significant time, life and equity in my leasehold flat that I have been unable to sell. I have been threatened with forfeiture of my home,” he said.

“Residents tried to challenge the freeholder four times in tribunals – where in one case we were told repair costs had risen from £79,000 to £525,000 and another case where repairs had risen further to £600,000. I discovered an invoice which showed residents had been charged £72,000 for part of the works which only cost £21,500.”

Martin Boyd, the chair of the campaign group Leasehold Knowledge Partnership, said the proposals were well thought through and signalled a political consensus was building on the issue.

“It’s likely to give a lot more certainty to leaseholders knowing where they stand. The reality is that developers are finding it harder to sell leasehold houses anyway and that market has almost collapsed. But the commitment to end leasehold flats within the first term of a Labour government is excellent,” he said.

He said there were still “huge issue with existing right-to-buy properties”, including leaseholders who had purchased former council homes being hit with huge bills. Earlier this year, 20 leaseholders in Southwark, south London, received estimated bills of up to £151,000 each for the regeneration of the estate where they had bought their homes.