Left: Landlords at a recent MDA consultation session (Photo: MDA), Right: A social housing unit in Pembroke (Photo: Google Maps)
A White Paper proposing reforms in the rental market has got landlords worried and investors thinking twice before investing in buy-to-rent properties.
“Landlords don’t usually like talking about their problems but they’re scared,” Malta Developers’ Association general secretary Michael Stivala told Lovin Malta. “We receive around five calls everyday from people asking for updates on this White Paper and whether it’s worth investing in rental property. I think they’re more scared than they should be, but they’ve been burned in the past so once bitten, twice shy.”
The MDA yesterday organised a well-attended consultation meeting with landlords ahead of its upcoming position paper on the White Paper. In a statement, the MDA said several landlords rejected any potential loss of freedom of contract, with some warning they would rather remove their property from the market than subject it to such controls.
Although the White Paper doesn’t propose fixed rent prices, it does limit the flexibility of landlords to increase rent prices, binding such increases to the Property Price Index.
It also calls for longer rental contracts – either with rent increases agreed in advance between landlord and tenant or by incentivising landlords to offer longer leases.
Stivala noted how the Canadian state of Ontario recently decided to reverse rent control laws in an attempt to incentivise more people to buy property to rent and therefore boost housing supply. A similar problem exists in Sweden, where a supply shortage means it takes several years to be granted rent-controlled housing.
Landlords pack a hall at a recent MDA consultation session
“It’s a shame on government that people who own yachts are allowed to remain in social housing while those who genuinely need that help are stuck on the waiting list”
The MDA is urging the government to stop focusing on rent control and to start tackling the delicate issue of well-off tenants in social housing.
“What the government needs is a stock of 2000 or 3000 social housing apartments with residents moving in and out according to means tests carried out every three years,” Stivala said. “When a tenant’s situation improves, he must leave his social housing and buy property like the rest of us. Why should taxpayers keep supporting people with a good income to live in social housing for the rest of their lives? Why should these tenants get to pass these apartments on to their children while other children must save up to buy a property at market value?”
“The government should educate people and help push them up the ladder but not support lazy people and allow them to steal money from those who really need social housing. It’s a shame on government that people who own yachts are allowed to remain in social housing while those who genuinely need that help are stuck on the waiting list.”
He advocated a social system present in the Germany and the Netherlands, whereby the state rents out properties at market value but grants tenants financial aid, calculated through regular means tests, so as to allow them to pay the rent.
“Renting shouldn’t be encouraged, but rather we must continue convincing people to buy property,” he said. “After all, property is a very important tool to protect pensioners. While pensions are higher in other countries, they must fork out part of it to pay the rent. If you buy a house, then you can pay off the loan in full by the time you retire.”
Property and rent in Malta have soared in recent years
Isn’t property in Malta too expensive though? Doesn’t it make more sense to rent in a property market that is constantly soaring upwards?
According to the Malta Developers’ Association, the blame for this doesn’t lie with developers and property owners but rather with the Planning Authority for introducing a number of development-unfriendly regulations.
“They increased the minimum size of a one-bedroom apartment from 45 to 55 square metres, of a two-bedroom apartment from 76 to 90 square metres and of a three-bedroom party from 96 to 115 square metres. If the size of an apartment increases by 20%, then you can expect the price to rise by 20% too.”
Also, for some reason, only 20% of apartments in a block can now consist of one-bedroom apartments, rendering these cheaper property options much harder to find.
A more recent frustration is the PA’s revision of its parking fee, that used to require developers to pay €2,096 for every parking space not provided on site. A three-tier system has now been introduced, whereby developers are fined €2,500 for the first two missing parking spaces, €6,000 from the third to the ninth ones and €10,000 from the tenth onwards. Therefore, if a developer builds a ten-block apartment without providing a single parking space, they must fork out an additional €36,000 in fines, around €15,000 more than they would have had to until recently.
Parliamentary secretary Roderick Galdes at a recent consultation meeting
“The reality is that it’s extremely difficult, and sometimes impossible, to set up new parking spaces in areas like Gżira and Sliema,” Stivala said. “If developers are forced to pay these fines, they will respond by increasing the price of their properties accordingly.”
Another cause for the soaring property market is that prices for services and supplies have gone up practically across the board.
“From accountants and auditors to architects and carpenters, everyone in Malta keeps increasing their fees,” he said. “If the government binds landlords with fixed prices, will it bind their suppliers too? If not, it will control their selling prices but not their purchasing prices.”
Parliamentary secretary for housing Roderick Galdes has in recent days been undertaking a widespread public consultation process of this White Paper with sectors of Maltese society – from estate agents and gaming companies to social NGOs and the general public – ahead of the drafting of a Bid to update rental laws.