Rent reform: The big picture

Every time I even mention the rent reform issue publicly I begin to receive calls and messages from people encouraging me to invest greater energies in the campaign for the holding of a referendum to abolish the existing rent laws. It was the same following last week's Xarabank appearance when I merely noted the complete absence of the issue from the budget.

It is something of a giveaway. The fact that the government has not devised any measure at all to cater for a situation of change seals up the issue for at least another year. Regardless of the déjà vu proposed by Minister Dolores Cristina in her promise to present a report on the issue to Parliament (she promised to do exactly that last year also) most onlookers can make out that it was just hot air without any money assigned to deal with it.

It does not make banner headlines but the people affected do take it to heart. They have been taken for a ride for decades. Whenever some government minister claims that his party had addressed the issue in the 1995 reforms, the fury is immense. All those whose properties earn them a pittance know that it is not true. They know they are not affected in any way by the 1995 changes in the law.

They are also aware that it would take next to nothing for the government to do away with the inheritance of leases giving them a hope of recovering their properties eventually. Not even that has been done. The government carried out the eco-crime of the century in the extension of development zones almost overnight. The owners of controlled rent properties experienced it as another slap in the face in contrast to the neglect inflicted upon them.

It is time for us to forge ahead and finalise the collection of signatures in the referendum campaign. Nothing else is going to work. We have waited on the minister's promises. We have been patient and ready to cooperate on a consensual reform. Our patience has not paid off. It is time to ignore the promises and the PR sops.

Tomorrow morning I will be addressing a public meeting in the rent reform campaign at the Phoenicia Hotel. It is my duty to update the reform lobby on the means and the methods, on the scenario as it presents itself today. They want to know because they are the people primarily concerned. Yet, it is a mistake to imagine that it is only the owners of controlled rent properties who have a stake in rent reform.

From the outset the issue was embraced by the Green Party as the only available legal means to oblige Parliament to take cognizance of the issues surrounding the skyrocketing of property prices, our national obsession with construction, the obsession of our political class with construction as an economic quick-fix. Malta is in the global rat race whether we like it or not and we have no chance of winning or gaining on the competition if we carry on with this economic navel-gazing on a grand scale.

What the construction sector contributes to the economy is little more than the badly-neglected agricultural sector: something around three per cent of GDP. We have over-invested enormously in the sector. It has become our favourite wealth sink with very few economic activities able to compete with it. It has distorted our economic thinking, making a host of businesses dependent on property speculation to a greater or lesser extent. By comparison, most other businesses seem unrewarding. Because we are all involved in the mess in one way or another whether as property owners or as property speculators it has been very easy to create and sustain an elaborate mythology.

The first of these is that property prices will never go downwards. They have climbed steadily and spectacularly for 60 years and nobody believes they will ever behave differently. This is based on the second great myth: that property is scarce in Malta.

More scarce than Tokyo property that took a spectacular fall some years ago? More scarce than that in SE England which saw a race to the bottom after hop-step-and-jump speculation for years before? The plain answer is no. There is more vacant property in Malta than in either of those locations before the big bump. We were told it was about 25 per cent vacancy nationwide, with Gozo topping the list with about 33 per cent.

Should we not mention these facts? Should we pretend that this reality does not exist because something grim may happen? What we are saying is that grim things may happen if we behave like ostriches ignoring the obvious. Economic fundamentals will not be trifled with, no matter how many myths we care to create. It is incumbent on anybody in politics to recognise threats and to address them. If the other parties are happy to lull people into false security, the Greens have no business following suit.

It is a Green economic fundamental that we must make the most rational use of our resources. Solving the rent issue is a small piece of the puzzle, a safety valve that can ease pressure on property prices and allow wages to catch up with them before too many generations. We do not believe in big-bang economics, allowing the market to take its course even if it means letting the bubble burst. It seems cruelly insane from where we stand to allow any such misery to befall any of us.

Creating a functioning rental market is no big deal at all. The properties are there and so are the potential tenants. Taking a 40-year loan to buy a two-bedroomed flat is not a great future for a young family. The choice is between enjoying one's earning in real time, living decently or postponing one's life to leave one's heirs a part-mortgaged property. Some people may opt to give their children a decent upbringing rather than a life of penny pinching.

If a large number of vacant properties were enticed onto the market through a series of fiscal incentives, repair and maintenance subsidies and any number of other measures possible, we can begin to change the trend. With home-seekers given a realistic and attractive alternative to buying their homes, the pressure will ease off the price of properties. A property price plateau will attract investment to other more substantial economic activities. Perhaps the bubble may not be inflated further.

The first step has to be rent reform. It is simply not possible to contemplate another year of the injustice suffered for six decades by some families but not others. The insanity of homes rented for Lm8 per annum must end. The unique situation of the government renting bits of streets for Lm11 per annum must be terminated. The insult of a raise in rent limited to 100 per cent every 15 years making it impossible for most property owners to request this minimal increase because legal fees and costs would gobble up decades of rent, must stop. Our laws must no longer be the accomplices of millionaire opportunists squatting in controlled rent properties commercial and/or domestic.

Only if terms are fair and remedies are timely and effective will anybody be willing to rent out a property. Only if properties for rent are plentiful will the option be truly attractive to potential tenants. Only then will the problem of housing those needing social assistance be manageable. The social problem used as a negative myth by the government as an excuse for doing nothing is just that, a myth. If it is to the clear advantage of landlords to rent their properties and also unquestionably safe, there will be a wide range to choose from.

It is easily conceivable that the government's role in the housing sector can be reduced to providing financial assistance to those who truly need it rather than being the country's only developer for rent. We may even save the remnant of countryside not condemned to death by construction-obsessed governments.

Dr Vassallo is chairman of Alternattiva Demokratika - The Green Party.

www.alternattiva.org.mt

www.adgozo.com