For decades we managed to create a social framework within the legal regime regulating the residential rental market that enabled everyone to have the peace of mind of having a roof over one’s head.  Naturally, with time, the value of properties appreciated exponentially, also given the scarce availability of this important resource.

Today circa 85 per cent of all residential properties are privately owned by the persons who inhabit them. This was also thanks to the various ‘home loan’ schemes  provided by the local banks over many years.  However, there still are a considerable number of persons who do not own the property in which they reside.  Such persons must constantly remain within the radar of policymakers, given that statistics show that they are typically vulnerable persons with a rather low income for various reasons.

It has been made clear by the European Court of Human Rights that certain rental controls and restrictions that existed on private property breach the fundamental right to private property as entrenched in the Convention of Fundamental Human Rights of which Malta has been a signatory since 1987 and which is also part of our law.  This is precisely why previous administrations, in 1995 and 2009, effected two important reforms to the legislation that regulates rents toward a more liberalised market.

I participated in the 2009 reform as representative of the Labour Party on a government-appointed commission en-trusted to lead the reform.  At the time, considerable and significant work was done.  However, since then, there were other important developments especially with respect to residential rents.

Firstly, the value of properties kept growing at exponential rates and secondly, although there was a somewhat increase in the supply of residential units available for rent, there was an explosion in the demand for such units driven mainly by the arrival of foreigners that are joining the local workforce within the context of the national economic growth that is expected to persist in the years to come.

Furthermore, it is estimated that the demand for foreign labour will nearly double within the next five years.  It is important to note that foreigners arriving to work on our islands are not solely those employed in the ‘high income’ economic sectors. This puts these foreign workers in direct competition in the rental market with the locals with low incomes, inflating the rental prices.

It is therefore natural that the debate on a possible further reform of rental laws is given prominence again, especially within the context of social justice and assistance.  The government has already announced that a White Paper will soon be published. This is a challenge that we need to effectively address, even given the expected and continued economic success, in order not to allow the issues to exacerbate further.

I do not believe that the solution to these issues is a government-imposed regulation of the market.  I still believe that a liberalised market can effectively work, provided that there is proper and ongoing monitoring of the market, together with fiscal discipline.

There still remains a significant, if not the main, portion of rental agreements that are not declared at all

Furthermore, when one assesses the judgements delivered by the European court of Human rights (vide, inter alia, Amato Gauci vs Malta [2009] and Zammit & Attard Cassar vs Malta [2015]) and consequently their application to the local context, one finds a clear trend towards attaining a real balance between thewider community interests for the availability of social accommodation on one side, and the rights to private property owners on the other.

The basic principles are the following: that the principle of proportionality is respected, that is, ensuring that the rental cost is proportionate to the value of the property at that time.  Secondly, that there are instances, indicated by the relevant legislation, where it is possible subject to certain conditions for the rented unit to be transferred back to the owner and such a ‘right’ be periodical and safeguarded by the law itself.

The government should only possibly intervene in the rental market in a smart manner. It is the responsibility of the government, not the private sector, to safeguard the vulnerable members of our community and one avenue that needs to be taken is to ensure an immediate increase in the stock of residential units for social accommodation. The government has already announced its firm intentions in this respect, and I am confident that we will see tangible results very soon.

Each rental agreement needs to be registered in the same manner as is currently done with promise of sale agreements on the transfer of immovable property or in a simpler form to be devised.  The previous Labour administration took the right step in introducing a fixed 15 per cent tax rate on rental income as an incentive to ensure that rental income is actually being declared for income tax purposes.

This was surely a positive measure, however, there still remains a significant, if not the main, portion of rental agreements that are not declared at all.  This is clearly not acceptable.

There is also a need for further fiscal incentives for owners who are prepared to rent out properties for residential purposes for typically longer periods and on other conditions set out by the Housing Authority.  Besides this, there is also a need for other incentives to ensure that ‘closed’ properties are appropriately put to use and possibly placed on the market too.

The Labour Party in government is determined to address and tackle this important issue that became even more urgent due to the unprecedented economic success that we are currently enjoying and that we expect to maintain in the coming years.  We need to ensure that everyone in our society is reaping the benefits of this economic success, while the government safeguards further those most vulnerable members of our community.  This is another challenge that we will together manage and successfully address, as we effectively did on many fronts during the past years.

Edward Zammit Lewis is a Labour MP, a lawyer in the property law field and was part of the commission leading the 2009 Rent Reform.