The property rental market is passing through a boom that is arguably unprecedented. At the same time, it is failing to satisfy the needs of thousands of people who can no longer afford the exorbitant rents that are being demanded by landlords. This phenomenon is marginalising those who are most in need of social emancipation.
The economic growth of the last few years has been supported by the influx of over 40,000 foreign workers with different skills levels and with different expectations on the quality of accommodation they need while living in Malta. Demand for all kinds of housing has crowded out lower income families who cannot afford to compete with foreigners in a market that gives little importance to social values.
The Prime Minister himself has described the rental market situation as “untenable”. Put simply the property rental market is broken and it needs fixing. The government has promised a rent reform with Dr Muscat describing the forthcoming White Paper on rent as “controversial”. Few details have been given. One proposal may be the introduction of an official rent agreements register.
One weakness that cannot be attributed to the Prime Minister is that of naivety. When he said that one thing that he can’t understand is how we have a situation today where some rent contracts are not registered this admission has less to do with an honest evaluation of a weakness in the property market, than failure to admit that politicians have little appetite to control the submerged economy.
The Malta Developers Association president Sandro Chetcuti blames the failures of the rental market on the cost of land. He offered some “solutions” including guaranteeing the 10 per cent deposit usually required to buy a new property for those who cannot afford such a deposit. He also offered to participate in public-private partnerships with the government in a bid to find social solutions for those struggling to rent property. Presumably, the MDA expects the government to provide public land for building or to extend the Outside Development Zone perimeters.
Speaking in a Malta Institute of Management seminar economist Gordon Cordina commented that low rentals might have been masking the real extent of poverty. He warned the government to beef up its data on the rental market and not to underestimate the impact of rising rental prices.
What is glaringly absent in the debate on the failure of the rental market is a critical evaluation of the sustainability of Malta’s present economic model. Growth at all costs seems to have been the mantra that determines the government’s economic policy. When the MHRA sounded its concerns about saturation in the tourism industry, tourism policymakers ignored these concerns.
The influx of both highly-paid and highly-skilled as well as low-paid and low-skilled workers has caused massive inflation across the whole spectrum of the property market. But the government has indicated that this influx will continue as future economic growth will depend on it. Many rightly ask whether growth at all costs is indeed what the country needs for its future prosperity.
The broken rental market cannot be fixed by stopgap measures however controversial they may be. What is needed is an honest assessment of the desired balance between social and economic priorities in our long-term plans.
This is a Times of Malta print editorial