Social housing – not enough space to swing a cat | PKF

A lot has been written about the merits of having a proactive Housing Authority. This was established in 1976, by an Act in Parliament, and has been contributing to the strengthening of societies ever since its establishment. Its noble mission statement reads “Through social housing, help provide life solutions to those who really need it”.

One may be excused to ask why there has recently been such a hue and cry about the acute rental market where rents are increasing at a rate which go beyond the average tenant. The increase in rent, particularly for properties, has been the bone of contention with the Federation of Estate Agents.

Quoting Simon Debono, the president of the federation, he laments that the increasing number of homeless is perhaps directly related to the sudden escalation of rental rates. In his opinion, prices of property, both rental and for sale in Malta, have now gone up beyond that which the average worker can afford with the sorry plight of tenants being disposed of a roof over their head. If you cannot afford to pay you are evicted. No wonder rents are going higher and the rooms getting smaller – too small even to swing a cat.

The easy solution seems to be that of slowing down the heavy influx of foreigners with fat cheques, perceived to be top brass with iGaming companies. Another popular slogan is that the government is held to ransom by developers of luxury apartments and office space and thus cannot plan for the day to day provision of low-end accommodation, although reading the Housing Authority financial statements this seems to be investing heavily to reduce the housing problem.

The last audited figures show in 2017 that it reported a loss of over €8 million. It comes as no surprise that a recent survey conducted by government shows a shortage of affordable rental property within the €400-€700 per month. Naturally the rental offerings beyond €1,500 monthly are easily available.

The myth that iGaming executives are living like kings and do not mind rent escalation has been challenged when one reads about certain interviews carried out by the press. Quoting MaltaToday, I reproduce some of the qualms shown by a cross section of gaming executives.

To start with we note how Julian Perigo, a managing director at Boston Link, said that the significant increase in rental costs seen over the last three to four years is creating an issue for the industry. In his view, “One argument is that the higher rents are caused by rising salaries in the sector; but I think there’s an argument that works the other way. Higher costs of living are driving employees to demand higher salaries”.

Moving on to Anne Muscat Scerri, currently a group executive secretary at Bethard, she said rent rates were comparable to those of London or Stockholm. It goes without saying that quality accommodation is expensive everywhere but Muscat Scerri thinks that, “This of course has a bearing on workers when deciding whether to stay in Malta,”. She goes on to add that many of their employees have tales to tell of incredibly greedy landlords who give no service, have poorly-built flats, but still expect an increase in rent after the contract expires. Another complaint about the rising tide of gentrification in Malta comes from Imre Guaglianone, working for the past three years at Legolas as head of development.

He told MaltaToday that a one-bedroom 58sq.m apartment in Gzira costs him €700 a month whereas previously he used to pay €600 a month for a 250sq.m flat with a garage in Mellieha.

But according to Finance Minister Edward Scicluna it is not all doom and gloom. There is an upside to this recent economic phenomenon. Home owners were benefitting from a buoyant rental market, he added since National Statistics Office figures showed that 22% of families were renting. Therefore, the announcement about the issue of a White Paper on Housing asking for public consultations did not come a moment too soon.

It is proposing two models to encourage longer leases and set annual increases in rental payments apart from the compulsory registration of rental contracts. A novel idea to speed the process of litigation is the creation of a second chamber to deal with disputes. The first model proposes the introduction of mandatory minimum rental contracts with annual increases in rent agreed beforehand between the landlord and tenant whereas the second model ditches the forced minimum duration and relies on fiscal incentives to encourage landlords to offer longer leases with agreed annual increases.

The White Paper targets primary residences and excludes properties such as hotels and other similar abodes used for tourist accommodation or short lets to foreigners residing in Malta for a brief period. The cherry on the cake is that the consultation document proposes that increases in rent be pegged to the Property Price Index, with the government imposing additional caps to prevent sudden increases.

This must have been the straw that broke the camel’s back when the Malta Developers Association is a powerful lobby and objects to any shackles to a free housing market. To sugar the pill, government does not consider fixing initial rent prices, which housing parliamentary secretary Roderick Galdes said would stifle the market and dampen investment.

One expects a healthy discussion on this important social problem and being issued in the wake of the 2019 Budget it will keep the press going for weeks with comments and counter-arguments.

The uniqueness of the matter is that whereas in the past the problem concerned solely low-income workers it now reaches the middle-class. Many trumpets have been sounded by developers offering to join government to build large-scale housing projects assisted with fiscal concessions to provide low-cost housing.

This can be compared to the payment in favour of a joint foundation with the Steward Organisation. The latter took over from Vitals to run the three hospitals namely Gozo medical school and General Hospital and St Luke’s. Conversely, pressure on Castille is mounting to allocate public land on concessionary rates as was the case with Portomaso, MIDI and SmartCity, this time to kickstart a subsidised housing project. It is not rocket science – that the market responds to incentives.

Thanks to a healthy growth in GDP one can plan ahead over the next decade to mitigate the undisputable pangs of gentrification. This phenomenon is no stranger to other developed countries where a cluster of high-income foreigners converged. It happened in Vancouver, Spain, Portugal and Monaco.

In conclusion, households spend a great deal of time in the spaces in which they live, and housing conditions have a significant impact on the nation’s wellbeing.  Individuals who cannot afford decent accommodation live in substandard housing which often suffer from water leaks and dampness, poor sanitation and noise pollution.

The usual suspects are the poor, low-income families, individuals with disabilities, single mothers, immigrants, and other marginalised groups. They cannot poke their snouts in the trough – so the White Paper is here for their liberation.

FURTHER READING: Rent reform will not fix prices, targets stability through longer leases