The failure of the rental housing market to meet the demand for affordable units is behind the government’s initiative to introduce a legal framework that aims at protecting the interests of both landlords and tenants.
The White Paper ‘Renting as a housing alternative’ is a well-meant attempt to ensure that a shortage of affordable rental property does not have adverse economic and social impacts. It has been welcomed among others by the Malta Employers’ Association and by Caritas.
The chief merit of this White Paper is the good quality of the socio-economic research that is at the basis of the recommendations. The main thrust of the document is that the government should not tamper with the price dynamics of the rental market. At the same time, it wants to promote stability and transparency.
On a first reading of the White Paper, the headline comment is that no rental price controls will be imposed as this would discourage new investment in this crucial market. Another important objective is to lengthen the duration of leases to provide both tenants and landlords with the stability and predictability that comes when leases are not too short. Better subsidies will also ease the burdens of the more distressed families.
The White Paper rightly steers away from price controls while promoting more transparency to ensure fiscal rectitude on the part of landlords and the protection of tenants’ rights. The registration of lease contracts should ensure that a significant element of the submerged economy enters the mainstream official economy.
The White Paper rightly argues that the present rental market crisis is not merely a question of excess demand and limited supply. It comments that the present short supply of property “is not merely of how many dwellings are built but, rather, what kind of dwellings and by whom they are built”. The promotion of public-private partnerships, based on the concept of the government providing public land while private enterprise builds affordable housing there, could improve the supply of affordable housing.
A question the document does not address adequately is that of the likely effects of the government’s apparent economic strategy of promoting growth at all costs rather than be more selective in what investment to welcome. Growth in some economic sectors is becoming dependent on both low-paid and highly-paid foreign workers who are crowding out low- and medium-earning families from the rental market.
For instance, a cost-benefit analysis of the continuing increase in tourist numbers seems to be a low priority for policymakers. One of the costs is the pressures on the affordable rental market that low-paid low-skilled foreign workers are exerting. Foreign low-paid workers may soon be unable to afford to lease accommodation and could decide to leave.
The legal framework changes proposed by the White Paper aimed at stabilising the rental market are positive. Whether they will be enough to cater for the yet unknown pressures that can come from a continued rise in demand from the influx of foreign low-paid workers is uncertain.
Free market economic policies have a self-adjusting mechanism that, ultimately, should result in stability and equilibrium between supply and demand.
However, it is often the weakest in a society that have to pay the social price for economic corrections. That must be borne in mind.
This is a Times of Malta print editorial