Why Malta urgently needs a rent regulation scheme.
by Matthew Darmanin
A rather common misconception in Malta is that poverty is reserved only for the “hungry children in Ethiopia, plagued by disease and deprived of the most basic human needs”. The mistake in this case is thinking that all poverty is indigence or extreme poverty, whereas true vulnerability encompasses a larger group of the world’s population. Taking into account the widening income gap between the less economically developed (LEDCs) and the more economically developed countries (MEDCs) – and within them – it makes more sense to speak about a relative poverty threshold which extends the definition of ‘financially vulnerable’ to all those at the risk of poverty in addition to those who are currently regarded as poor.
Being at risk of poverty, as measured by the NSO, is defined as having a National Equivalised Income at or below 60 percent of the national median, valued at €8,143. As of 2016, 16.5 percent of the population i.e. 69,920 persons are deemed to be below this threshold. This percentage has been on the incline for a number of years, despite the contrasting claims that the booming economy is expected to eliminate poverty.
As Charles Miceli, a front-liner of the Alleanza Kontra l-Faqar, said back in 2016, these statistics should be taken with a pinch of salt. Announcements of absolute declining poverty fail to consider such important aspects as affordability of decent quality of life. The household expenditure on food and drink is growing, further throttling those with a lower income. Another major aspect which is ought to be considered when speaking of poverty risks is housing – more specifically, availability of affordable properties of an appropriate standard to the majority of population.
During the past couple of years, property speculations have been growing out of proportion, with no signs of stopping whatsoever. The free-enterprise logic dominates the topic: the Minister of Finance, Edward Scicluna, urged us to trust the free market. The Governor of the Central Bank, Mario Vella, has recently stated that the social housing should not be a lifelong entitlement. Having mentioned the need to “develop projects which will become to an extent self-financing, through a combination of social housing provision and programmes to enhance the employability of individuals“, he, nevertheless, subscribed to the market orthodoxy.
We should keep in mind, however, that the excessive rental rates are themselves a product of the property market, hence the market ‘solutions’ are unlikely to be effective. On the other hand, banks would benefit directly from abolishing of life-long entitlement to social housing.
If a family is forced out of a social housing, they would have to opt for a loan in order to purchase a property of their own. Given the atrocity of the housing prices, loans are inevitable meaning that the banks stand to gain profit. On the other hand, the steady increase in property prices means that even an average single earner with a secure job will soon find a mortgage unaffordable, let alone a low precarious earner. Sadly, Vella’s declaration is yet another elitist declaration which portrays social housing and its inhabitants solely as leeches, depleting Malta’s welfare.
With regards to both social housing and private renting, Roderick Galdes (Parliamentary Secretary for Social Accommodation) has admitted that the housing affordability has become a pressing issue. When considering the new job opportunities created, one could assume that the supply and demand would balance each other out, however, this market logic promises more problems than solutions. Whilst I am in complete agreement that there is a need for transparency, as well as assurance for both the tenant and the landlord, it seems that the landlord is always two steps ahead.
Some would argue that the mentioned propositions are still better than what we have now, yet we ought to keep in mind that the ultimate goal of a socially-beneficial policy is to ensure decent standards of living for each and every citizen. In the absence of policies designed to keep the predatory nature of property market in check, tenants should be provided with an opportunity of having a decent living space and a sense of security – which is social housing.
Unfortunately, tenants and landlords do not enjoy equal opportunities. I remember getting my hopes high when I saw the words ‘Housing Authority’ and ‘private properties’ in the news last August. I also remember the dismay upon reading the whole article. In layman’s terms, private property could be leased out as social housing, yet, whilst the tenants are still subjected to the standard tax rates on their earnings, the landlord’s income from rent would be tax-free.
Furthermore, the MDA recently suggested that in new apartment blocks, more floors would be permitted if certain apartments were allocated to social cases. Essentially, landlords would be using social cases to parade through regulation and maximize their profits off the back of the lower earning percentile. The latter is but another issue where those earning money could ease their conscience by arguing the legality of the matter, as was the case in the Panama and Paradise Papers.
Despite the free-market advocacy of Malta’s officials, the concept of rent control is anything but alien to the global economy, with New York alone having over 1 million properties subjected to regulation, be it control or stabilization.
Why would Malta benefit from a rent regulation scheme?
One of the reasons is to prevent landlords from ‘legally’ evicting low-income families in order to rent out properties to those with more cash. Another argument in favour of rent regulation is to facilitate transparency and to make it easier for the respective authorities to spot landlords who currently declare deceivingly lower incomes, essentially evading tax and blatantly robbing the general public.
It has truly become exhausting to point fingers since the ones to blame are all around us. One could blame our inherently selfish human nature. One could also blame the general public for electing the same parties time and time again. Personally, I blame the governments’ (both past and present) apparent lack of concern for the low and average earners while giving a blessing to the upper percentile to fill their ever-deepening pockets with the poor man’s measly income.
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