When supply is free, demand is infinite

When presenting the Housing Authority’s estimates for discussion in the House of Representatives last Monday, the Minister for the Family and Social Solidarity, Michael Farrugia, gave what were described in the media as a few first-hand examples of people giving reasons why they had applied for social housing.

The one that made the headline concerned a person who expected to be given a seaside flat – not just a roof to live under. I was once told by a single mother who lived in a government flat with her two children and subsisted on social benefits, that it was time for her to move on in life and therefore she expected the state to provide her with a house and garden, rather than a flat.

I remember I had asked her, somewhat facetiously, how big she expected the garden to be and whether it had to include mature orange trees. This was over 20 years ago. Nothing has changed. People still go around asking ministers for handouts and serious political issues are still being eclipsed by voters who hound politicians expecting favours in the form of gifts that they do not deserve – clientelism at its worst.

Minister Michael Farrugia might have made the right noises in Parliament last Monday but these will soon be drowned out by the noises of Labour supporters expecting extremely cheap – if not free – ‘social’ housing just because they are loyal Labour supporters.

Over the years successive administrations have pumped millions of euros – and before that millions of Maltese liri – into social housing, but the request for social housing is never satisfied. It will never be because these successive administrations – of both the PN and the PL – pursued a policy that considers social housing as a permanent gift given to anyone who makes a successful claim that he or she is in dire need of social housing.

First and foremost, quite a percentage of recipients do not merit such state help, given to them because of their political affiliations to the party in power – a tendency that is set to remain with us unless the authorities embark on a serious and radical change in social housing policy.

This is a permanent Maltese scourge, whatever any past or present minister responsible for housing says. The tendency to consider one’s political affiliation as the most important merit when one asks for social housing might have been created by Labour in the past, but it has grown from strength to strength even under PN administrations.

Then there are the fraudsters who make money out of social housing, including the now infamous way how two ‘independent’ single parents are given a housing unit each while defrauding social service benefits as ‘single parents’, and then proceed to create some sort of income from an illegal third party use of the ‘extra’ unit! This sort of fraud has never received the ‘Nelson eye treatment’ either from PN or PL administrations but the creativity of fraudsters knows no bounds.

And, last but not least, there are also the genuine cases that sometimes end up lost in the rush for the ‘El Dorado’ that social housing is considered to be.

The truth is that, over time, the state has been financing the housing of more people who do not deserve it than of those who do, because of their dire financial straits. A cursory look at the lifestyle of people living in government built flats or in houses developed on building plots that were practically handed out free by the state should be enough to confirm the veracity of this statement.

Undoubtedly, the social housing sector in Malta is living proof of the accuracy of the economical adage that when supply is for free, demand is infinite. And so long as social housing is free and for life, the list of pending applications for such housing will never be exhausted.

In an intriguing coincidence, the speech of Minister Michael Farrugia was delivered a week after the Minister of Finance, Edward Scicluna, made some interesting observations about social services on his regular video blog.

Minister Scicluna, while explaining that many governments were finding it difficult to sustain social benefits, insisted that social services must be temporary, until beneficiaries can stand on their own feet and do not remain dependant on benefits.

According to Minister Scicluna, governments often did not make it easier for such people to fend for themselves and come off benefits. The state, therefore, needed to change its systems in a way that would encourage people to come off benefits, and reward them for doing so

Minister Scicluna was speaking mostly about unemployment benefits but, perhaps unwittingly, he actually diagnosed the real problem with the demand for social housing. Because, in Malta, once a person or a family benefitted from the social housing system, the benefit is for life. People who might have really needed state housing for them to start an adult independent life, keep on utilising this benefit when they have moved on and can afford to pay for their housing without the need of any state help.

When someone gets a subsidised level of rent for a housing unit because of his or her financial situations, the subsidy is for life, and survives even when the financial situation of the recipient has changed to the extent that the benefit is no longer merited.

Housing subsidies are for life and not for a limited period, until ‘beneficiaries can stand on their own feet and do not remain dependant on benefits’ - as the Minister of Finance put it.   This is what is patently wrong with our system.

Subsidies on rent should elapse after a predetermined period of, say, 10 years, after which the rent charges would automatically revert to an unsubsidised rate. The state would have given the beneficiary a much-needed temporary advantage during a critical stage in life, and not one that lasts for life.

Is the present administration courageous enough to embark on such a reform, in line with the principles enunciated by the Minister of Finance himself?

I doubt it. I seriously doubt it.

I rather think that as long as the supply of subsidised housing will remain free, demand will remain infinite and the list of applicants for social housing will never dwindle.

Plus ça change, plus c’est même chose!