published on Sunday, September 21, 2008
by Carmel Cacopardo
The social objectives of housing policy can and should be attained without causing further damage to our urban fabric and natural environment. Housing like all other areas of policy should be compatible with the environment, otherwise it should be seriously re-examined.
Over the years, in the absence of a rental market (for most) home ownership became the only manner in which they could acquire a home. As a result today around 70% of Maltese families reside in owner occupied residences. The reform of rent legislation currently in the pipeline will introduce an alternative through the reassembly of a rental market. Over time this should ensure that it is once more possible to live in a reasonable and decent home without being its owner. A forty year mortgage could be history for the upcoming generations.
Ensuring that each and every one of us has decent accommodation housing his family is a social need, but the decision as to whether to own a residence is not. It is an investment decision which in a great number of cases is today subsidised through the taxpayer’s pocket under the guise of social policy. This distinction has not been made easy by a sixty year inertia in reforming rent legislation.
With at least 60,000 vacant properties at hand there is surely no social need to build more dwellings except maybe to justify the existence of the construction industry which currently employs some 11,500.
The rent reform White Paper rightly points out that whether one rents or purchases a residence is an economic choice. Although such a statement is theoretically possible, at this point in time no choice is available.
In the absence of a rental market, home ownership has for years been the focal point of housing policy. Public monies have been used to construct housing estates containing hundreds of dwelling units whilst at the same time at least 60,000 vacant dwellings have been allowed to accumulate. In the long term this is the situation which the rent reform exercise will have to address.
The process will be slow and painful. It will reverse past injustices. It will however inevitably create new pains as well as new gains.
The community will be a net beneficiary as in the long term there will be less building construction going on while it is hoped that no more agricultural land will be taken up. The pressure for demolition of old properties should dwindle. Vacant properties may at last generate a decent income for their owners.
In order to survive the construction industry will have to commence a restructuring exercise. A larger part of it will have to shift from construction works to the rehabilitation of dilapidated properties as well as participating in a much needed urban regeneration. There will be a demand for skills which are not sufficiently available today. The traditional building trades will be highly in demand, slowly at first but at an increasing rate subsequently. Sufficient time is available for retraining in order that the shift causes the least pain possible in the employment sector.
The rent reform currently in the pipeline is the first step in the inevitable greening of housing policy. It will tackle the most obvious environmental deficiency of social policy in Malta and it will in the long term prove that it is possible to attain the highest level of social standards in housing policy and at the same time observe all environmental norms of modern society.
Other steps will necessarily follow. If one pays rent at commercial rates it will be logical to seek smaller residences thereby reducing the rental bill by doing away with unnecessarily large homes. Coupled with the diminishing size of the typical Maltese family this will lead to an increased mobility of the family unit, moving from a small dwelling on its formation, to a larger one when additional space is needed and possibly back again to a small residence in old age.
These practical consequences in addition to an effective moratorium on large scale building construction would result in a reduction of the expense required in running a decent home. This saving would be primarily in the energy costs which could be reduced substantially through the use of smaller residential units.
In an article published by Joseph Darmanin in the BOV Review entitled The Computation of a Housing Affordability Index for Malta in the Spring 2008 issue it is concluded that first time buyers are gradually being pushed out of the housing market. Housing affordability is presently linked to purchasing of property, as a rental market is practically inexistent at the lower end of the scale. Housing affordability is gauged by comparing the Housing Price Index with the disposable income. It resulted to Joseph Darmanin that in 2007 the median house prices were 8 times the average per capita income whilst in 2000 they were just 6 times the average per capita income. This leads to the conclusion that over the past eight years it has become less affordable to purchase a property. At the lower ends of the scale the pinch is felt sufficiently to be able to pose the question as to whether the whole “home ownership policy” at the forefront of housing policies for the past 25 years is sane.
There are no easy answers to obvious questions which everybody has been evading for so long.
The are obviously two options.
The first is more of the same insane home ownership politics as a result of which we may end up with banks dishing out home loans repayable over 60 years or more such that it will be possible for our children to inherit a mortgage in addition to a home! With the spiralling cost of property and more of the same this will be the inevitable result.
The alternative is to abandon home ownership as a social policy tool and substitute it with a policy of assisted rent. Those who cannot afford to buy their home should not be forced to. They have the right to an alternative.
Rent reform if adequately tackled can provide the solution. Those who cannot afford to own their own home can be assisted to rent a suitable residence: suitable for their needs. There is no need for a large three-bedroomed flat at the taxpayers expense for a newly wedded couple: a one-bedroomed one would be sufficient initially. Subsequently they can move on depending on their real needs.
I am aware that this runs contrary to the manner in which housing politics has developed over the past 60 years. The state has always been expected to provide for all. In reality it cannot, never has and should not be expected to. Rent reform paves the way for a role of the private sector to place on the market properties which can be rented out. The properties required are available. The only heavy investment required is in goodwill! Financial outlays required will in the long term be significantly lower than those made available to date, and most probably with better results.
This will lay the foundation for housing policy to commence on the path of sustainable development. Social needs will in this manner be satisfied through a respect for environmental norms.