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A rental sector that works - Roderick Galdes

The recent demographic changes fuelled by Malta’s impressive economic performance prompted us to rethink our housing policy.  This government embarked on an economic model that veers towards attracting foreign investment.

Success resulted in a significant increase in the resident population as the number of foreign workers grew to 36,453 by the end of last year, both due to the skills gap in the medium-to-high income sectors and the need for workers in the more elementary occupations. Added to this was simultaneous growth in the tourism industry.

The net population of the country has risen steadily since Malta’s EU accession. In the early days of membership, we mostly welcomed migrants from Africa.

Though the numbers of incoming mig-rants have drastically diminished in recent years, we still host our fair share. They now mostly come from the Middle East.

In those early days, Malta also welcomed European Union nationals, who flew here to work in construction and other elementary occupations.

With 76.5 per cent of Maltese households owning their dwelling, the housing market was at relative equilibrium until a few years ago. The historic emphasis on ownership shifted public attention from the development of alternative forms of tenure, specifically the private rental sector.

Such new housing practices can no longer be ignored.

The present administration has already undertaken a number of projects involving the construction of social housing units, which act as a soft landing for all those in financial distress, including those who for some reason exit owner occupation. There is a well-being gain in a housing system that caters for all socioeconomic classes.

However, the construction of social housing units will not suffice on its own. We estimate that since 2011, the private rental sector (at free market rates) has doubled, while the supply of apartments stagnated until 2016, when the issuance of planning permits started to pick up again.

There is no breach of the right to property when the market remains profitable for the landlord

Given that the local economy will need 12,000 new jobs in the coming year, and with economic growth not showing signs of abatement, it is simplistic to believe that housing prices will stabilise merely by fuelling supply.

In this light, a White Paper on rent reform, which is still a work in progress, is a crucial endeavour for understanding the function of the private rental sector and how it is affecting housing and the well-being of society at large. The White Paper thus goes far beyond the 2009 reform, which had the limited scope of phasing out leases entered into prior to 1995.

It is no secret that the government is contemplating regulating the market – without fixing artificial prices or keeping the market completely liberalised, extremes that were conveniently opted for by previous administrations.

The scaremongering about rent control is unfounded, just like the erroneous references to decisions taken by the European Court of Human Rights against Malta (ECtHR). In all those decisions, the ECtHR makes it clear that in respect of rent control, it is against models that propose the complete detachment of rents from their market prices.

There is no breach of the right to property when the market remains profitable for the landlord.

Similarly, there is no breach without excessive protection afforded to the tenant beyond their basic right to decent housing.

We believe in a free market that works for everyone. It is not right for rents to go through hefty overnight increases. It is wrong whether the tenant is a Maltese family, a Gozitan student, a single parent or a financially stable foreign worker.

The majority of experts, operators and consumers with whom we have discussed believe, like we do, that it is time to introduce a transparent mechanism that can reflect the fair market price of property, and that the lack thereof or under-declaration is challenged, new ways are sought to manage transactions between landlord and tenant and more efficiency in judicial proceedings related to rent is called for.

In this way, both landlord and tenant gain from a fair system.

The reform we are envisaging is not merely a measure to protect the socially vulnerable persons but one that is to establish fair conditions for all those renting a dwelling in Malta.

The reform will help us attain better social and economic stability while ensuring that our country continues to attract and sustain the best talent and investment.

We intend to make the private rental sector a viable housing alternative that meets the commercial expectations of landlords and the rights of tenants.

Roderick Galdes is an urban planner and Parliamentary Secretary for Social Accommodation.

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