Taming the residential rental market

The proposals in the White Paper entitled Renting as a Housing Alternative is a breath of fresh air in the long overdue debate on the need to regulate the rental market for residential property.

As rightly pointed out in the White Paper, the Maltese community has developed an allergy to local rent regulation as, when it existed, it was generally too rigid. It oscillated from strict over-protection of the tenant to absolutely no controls.

For a very long time, we also ended up with temporary legislative provisions enacted during the war which were over-stretched too long after their useful life. In effect, this reluctance over the years to introduce proper landlord and tenant legislation effectively killed off the rental market for a long time and it is only as a result of this fact that Malta is a nation of home-owners: it would not have developed in this way, had the post-war governments got their priorities right.

The proposals put forward by the White Paper are generally a good step forward. If properly implemented, they will go a long way towards laying the foundations for a stable residential rental market based on adequate (and necessary) protection of both landlords and tenants. A serious debate is, however essential in order to avoid creating unnecessary difficulties.

The rental market is currently in a state of anarchy, where the only applicable rules that apply are those of the jungle – where might is right – because, so far, the state has abdicated its duties to protect the vulnerable from the excesses of the market. Subject to the three exceptions listed in the White Paper (temporary foreign workers, tertiary education students and temporary leases for persons repairing and/or upgrading their own homes) establishing the period of one year as the minimum length of a residential lease addresses the abuse currently resulting from short-term leases. Likewise, establishing as a duty of landlords to give a suitable notice period of their intention not to renew a lease is right and proper. It is in everybody’s interest that everyone is aware of their rights and duties, as this will lead to better planning on all sides and, consequently, to a more stable and civil relationship between landlords and tenants.

It was also about time that the deposit requested on the signing of lease agreements are properly regulated – both as to the actual need for a deposit, its quantum and the circumstances in which it would be reasonable for it not to be refunded. This is a subject about which countless stories of actual abuse on the part of both landlords and tenants abound and regulation of it will bring some sense into the subject.

It is also right that variations to the rent to be paid during the period of the lease are properly regulated,  thereby defining the limits of permissibility. Too strict a limitation, however, will lead to a preponderance of short-term lease agreements because the market prefers frequent rental revisions that enable the rent payable to be as close as possible to the full market value.

Registering lease agreements is a step forward. It will not only lead to a check to  ensure that agreements comply with the new legislation but will also have the potential to ensure that tax evasion associated with rent paid is history.

When considering the White Paper’s proposals, one should avoid introducing unnecessary exceptions as these will only serve to stultify the objective of the exercise: the development of a stable rental market for residential properties. In particular, the proposal in the White Paper to justify the premature determination of a lease agreement, when a landlord needs the property for his own use or in order to sell with vacant possession or else to redevelop it, is uncalled for. Given that the residential leases in question will most probably be short-term leases anyway (between one and five years) no harm will be done to anyone if the landlord patiently awaits until the end of the lease before taking back possession.

The current proposals, with the one exception referred to above, are an essential next step to help the residential rental market develop properly. On their own, however, they are insufficient because they must be supported by a Housing Authority that proactively addresses the needs of the vulnerable when facing the market, which is eager to fleece those who meekly submit themselves as they see no way of becoming homeowners!

 

published in The Malta Independent on Sunday – 22 October 2018

Advertisements

The rental markets

The liberalisation of the rental market over the years has not served its objective. Those who own property are still reluctant to rent out to Maltese tenants and the rental market is, albeit slowly, developing in such a manner as to mostly serve non-Maltese residents and ignore the locals.

I have no quarrel with non-Maltese residents renting residential property in whatever form or shape. The problem is, however, that as a result the high rents demanded have squeezed out of the market the small numbers of Maltese residents who, not having the means to purchase, must perforce rent out.

The rental market was dormant for over 60 years and was resurrected primarily as a result of the 2008 overhaul of rent legislation. It was a process that started with earlier amendments to the law in 1995. Unfortunately, there was no real preparation for the impact of its resurrection in the residential sector.  The end result was that the residential rental market is functioning in a warped manner, catering for the high (foreign) earners and ignoring those at the lower end of the scale: the low wage earner who lives from hand to mouth.

Malta and Gozo are being incessantly raped to produce more residential units, primarily for renting out to non-Maltese employees in the financial services and betting sectors that are mushrooming to benefit from favourable taxation rates. Yet the properties that can be rented out to the locals are being left vacant, as can be ascertained by an examination of the information published as a result of the last census.

Subsidies dished out by the Housing Authority may be of some help in reducing the resulting social pain. However, what is required is a radical overhaul that would place all vacant properties on the market. Ideally, this should be done through fiscal incentives that would encourage owners to shoulder their social obligations. A number of incentives have been or will be rolled out to encourage the rehabilitation of dilapidated property. The carrot will certainly function in a number of instances and a number of vacant properties will, as a result, return to the marketplace.

However, after the carrot has carried out its duty, it should be the turn of the stick. Properties vacant for a long time, say for more than 5 years (or some other reasonable length of time), should be taxed until they are put back to use. In such a small country we cannot afford to waste any of our scarce resources. Ensuring that this waste is avoided is everybody’s business.

published in The Malta Independent on Sunday : 22 January 2017

Environmental Governance

construction_site_img_9716

Having over 70,000 vacant residential properties is a very serious matter which both the Nationalist and the Labour parties have ignored in their electoral manifestos. Rather than being ignored this fact ought to serve as the launching pad for a different way of looking at land use planning issues.

The Housing Authority in the past months has opted not to build new social housing units but instead decided to tap the stock of vacant dwellings held by the private sector. It was a very positive decision pushed forward by Minister Chris Said on taking up his Ministerial responsibilities early in 2012.

In its electoral manifesto Alternattiva Demokratika has listed a number of specific proposals which would go a long way to address the land use planning chaos which will be inherited by the government that takes office after the 9 March general elections.

As a first step Malta requires a moratorium on large scale residential development. The building industry cannot keep constructing flats and maisonettes in hundreds, adding to the stock of vacant dwellings. The number of vacant residential properties is equivalent to 9 times the size of the residential parts of B’Kara.

While the Malta Environment and Planning Authority has issued development permits, the State has, through our taxes, been paying up for the development of the infrastructure (roads, public sewer, water and electricity distribution networks………) which is underutilised. These funds could have been put to better use than to service vacant dwellings.

The boundaries of the development zone have to be rolled back. Those lands which, in August 2006, were included as land suitable for development as part of the so-called rationalisation exercise and have not yet been committed to development should return forthwith outside the development zone where they belong.

The construction industry, aided by a myopic MEPA, has made a havoc of our towns and villages through encouraging overdevelopment. In 2006, when the final decisions on most of the Local Plans were being considered,  the Government had access to the 2005 census results which determined the existence of 53,136 vacant dwellings. This was a substantial increase over the 17,413 vacant dwellings identified 10 years earlier as part of the 1995 census.

Publication of the 2011 census results on property is long overdue, but it is expected that the numbers this time will exceed the 70,000 mark substantially.

Faced with these numbers, a responsible government would never have proposed extending the development zones. The 2005 census result provided the evidence for their curtailment not for their extension. In addition to extending the development zones, the PN-led government increased the permissible building heights practically all over Malta, the end result being a further substantial increase in the number of vacant dwellings.

In addition, the height relaxation policy put in place in 2006 had another serious impact. It placed a number of dwellings in the shade of new buildings surrounding them, these being built in line with the new permissible heights. As a result, the residents in these dwellings cannot make use of solar energy. Not only the use of photovoltaic panels is out of the question but also their solar water heaters are in most cases no longer of any use!

Faced with this situation, it is political madness to propose considering the construction industry as an important and fundamental component of the economy, as the PL is proposing. The construction industry must shrink rather than expand. It must be assisted to manage its essential and unavoidable restructuring.

The construction industry can be directed towards three specific areas of activity: rehabilitation of old properties, road construction/maintenance and marine construction works. Each of these three areas of activity requires training in construction skills. Rehabilitation works require old building trades on the verge of disappearance. Roadworks, though improving in quality, still require a more skilled labourforce. We also need to take stock of our marine infrastructure which requires substantial improvement as well as regular maintenance.

The Government can assist the construction industry to change through providing training facilties for its labour force, thereby reducing the social impacts of change. Funds from the European Social Fund are available to assist in this exercise.

Land use planning should be subject to environmental governance rules. It is for this reason that AD considers it essential that rather then splitting up MEPA, the Government should go for a defragmentation, consolidating all environmental functions in one authority through the amalgamation of MEPA with the Resources Authority.

In such a consolidated authority, environmental considerations should be overriding and, in particular, land use planning should be put in its proper place: under the continuous supervision of a properly staffed Environment Directorate.

This is the basic change required in environmental governance. Placing the land use planning and the construction industry in their proper place and ensuring that environmental governance is defragmented.

published in The Times, Saturday 23rd February 2013

Cleaning up the mess

 

published Tuesday July 8, 2008

by Carmel Cacopardo

__________________________________________________________________________________________________

Over the years governments could not be bothered with rent reform. The resulting mess is such that the purposes of rent reform at this stage is primarily one of restoring sanity in the use of built-up resources. The White Paper aims at removing the accumulated injustices faced by generations of landlords, without creating new ones, and paves the way to reduce the perceived need to embark on more so-called development.

As aptly pointed out by the White Paper, the decision whether to buy or to rent is an economic choice depending on whether the annual rental value of a property is more attractive than the cost of purchasing property. This is an issue for the market to resolve over a period of time. To date the state has repeatedly intervened, strangling the rental market, encouraging home ownership and thereby putting on high gear the rape of our countryside and village cores. Rent reform is thus not just concerned with the rights of landlords and tenants but with housing policy, sustainable development and social and environmental justice.

A useful point of departure in this discussion is that throughout the years, primarily as a result of the maze of rental legislation, it has been next to impossible to distinguish between the right to accommodation and the right to own a home.

The concept of home ownership as successfully marketed by different governments and skilfully manipulated by the construction industry is considered a right.

The result is that our families are burdened with mortgages spanning a lifetime for properties which rather than providing them with a home are providing them with an investment which most can ill-afford but yet are forced to have.

The net beneficiary is the building industry, which as a result of this artificial demand keeps on churning out residential units at increasing prices and reducing sizes, at the end pleasing no one but themselves and the banks!

The state through the Housing Authority (and its predecessors) is the major culprit in this respect. Throughout the years political parties viewed the concept of home ownership as the means through which to make good the vacuum created by rent legislation, which was patched up in time of emergencies and has thereafter been retained as a permanent relic of these emergencies.

The White Paper entitled The Need For Reform. Sustainability, Justice And Protection, seeks to reverse all this. It attempts a solution through 33 recommendations most of which are valid and should be supported.

They are, however, underpinned by three issues which merit some discussion.

Firstly, there are too many perceived exemptions.

The separate consideration of agricultural leases may be valid. But this has to be considered within the context of a detailed examination of the agricultural sector, including measures required to halt the further sub-division of agricultural holdings. The party in government had tackled this issue in an electoral manifesto presented for the 1981 general elections. It needs to be revisited urgently and simultaneously with an examination of agricultural leases.

The White Paper is also not applicable to political parties, band clubs, sports clubs and other organisations of a social nature. Social Policy Minister John Dalli has clarified that this area of the rental market will be liberalised too, although they are not covered by the White Paper recommendations.

As long as the issue of rent reform applicable to agricultural property, political parties and other organisations is also tackled in the same spirit found in the White Paper there should not be any difficulty with its acceptability.

The second issue is an anachronism in that the White Paper selects the traditional family as worthy of social protection and dumps emerging relationships. This ostrich-like social policy ignores cohabiting couples and same sex couples. I have no difficulty in subscribing to a policy of reinforcing and defending the traditional family but I find it reprehensible that those who select an alternative lifestyle are dumped as not being worthy of the same civil rights as the rest of us.

Thirdly, the White Paper creates transitional protective periods which are too long. The 20-year transition period for commercial leases, in particular, could easily be halved. This would reduce the urge of those who could be tempted to lobby for a reversal of the proposed reforms.

Barring the above, the White Paper is positive and presents a reasonable proposal on the basis of which a reform of rent legislation can be carried out. If the government takes serious note of all the alternative proposals that will be announced in the coming weeks, the White Paper recommendations may be substantially improved.

Bridging the Gap

10 May 2008

by Carmel Cacopardo

 

During the past week the Prime Minister stressed that sustainable development tops the government’s agenda. On May 2, in a speech inaugurating the new Rempec offices, he said that “the main thrust of the government’s action in the next years will be sustainable development”. On May 4, interviewed by The Sunday Times, he further emphasised that “I consider sustainable development to be the biggest challenge the country has right now”.

This is very encouraging.

Since the early 1970s, in the immediate aftermath of the Stockholm UN Conference on the Human Environment, in line with other governments all over the world the environment was promoted in Malta as a responsibility at Cabinet level. In 2001, the National Commission for Sustainable Development (NCSD) was introduced in the Environment Protection Act.

Chaired by the Prime Minister it is intended to implement the provisions of Agenda 21, approved at the Rio Earth summit in 1992, the 20th anniversary of the Stockholm Conference.

The Sustainable Development Strategy for the Maltese Islands was drawn up by the NCSD primarily but not exclusively through the inputs of civil society. Concluded late in 2006, it articulates the interrelationship between all policy areas and draws up the objectives of the paths our country should take in its transition from its present state to sustainability.

Sustainability is attained as a result of sustainable development, that is, by ensuring that all activity carried out by the community is based on a long-term view that places emphasis on the need for an integrated approach: policy and its implementation must integrate environmental, social and economic considerations.

As a result, while present generations satisfy today’s needs, future generations retain their options such that they too can make their choices.

NCSD identified 10 areas of action, namely (1) air quality and climate change, (2) energy efficiency and renewable energy resources, (3) biodiversity, (4) freshwater, (5) wastes, (6) marine and coastal environment, (7) land use, (8) transport, (9) natural and technological risks, and (10) leisure and the environment. In each of these areas it is required that policy and rhetoric are aligned thereby bridging an existing green gap.

Priorities will be identified by the political programme of the government, to be announced today when Parliament convenes for its first sitting after the March 8 election. Such a programme will not be written in stone. There are already a number of areas, notably the financial sector, in respect of which there is cross-party consensus. Sustainable development should be another such area. A consensus can be developed on the basis of the National Sustainable Development Strategy.

The longer it takes for the development of such a consensus the greater the damage to our economic/social/environmental fabric and the more difficult the healing period required.

While all the 10 areas identified by the strategy have to be tackled, I consider that priority action should be focused on renewable energy, conservation of water resources, development of an efficient public transport system, containment of the building in-dustry and protection of biodiversity.

A number of existing policies would as a consequence have to be revisited. For example, rent reform has to be tackled without further delay.

The Housing Authority would do well if it were to separate issues of social accommodation from those of ownership.

The former is a social need; issues of ownership are not. Rent reform could assume a different perspective from that identified to date.

In respect of pre-1995 tenancies it could retain security of tenure but not protected rent, thereby creating a reasonable basis for reform which would be fair to both owners and tenants.

In the case of tenants who are at the lower end of the income scale the Housing Authority could subsidise the fair rent but then it should not subsidise the well-offs who have been making use of third party property at meagre rents for generations.

An equitable reform of rent legislation would over a number of years, given suitable encouragement from the Housing Authority, release into the rental market a substantial number of the 53,000 vacant properties, thereby freeing pressures on unbuilt land.

There are other areas that need to be tackled, among them tourism, which to date is primarily linked to the hotel industry and practically ignores other more sustainable forms, like ecotourism and agritourism.

All are steps which assist the sustainability trajectory.

As a first step however we need to bridge the gap by ensuring that the National Sustainable Development Strategy is owned by the community and not just by the political parties.

If this first step is assured, I have no doubt that a fruitful implementation of the strategy can be initiated.

L-iskandlu tal-kirjiet ikkontrollati

housing-authority-tn.jpg

Il-bieraħ ħadt sehem f’konferenza stampa tal-AD dwar ir-riforma meħtieġa fil-liġijiet tal-kera. Riforma li iha fuq l-ixkaffa għal dawn l-aħħar 63 sena.

Il-liġijiet tal-kera kif inhuma jitfgħu l-piż fuq is-sidien tal-propjeta’. L-effett huwa li qed tingħata protezzjoni lil kull min jokkupa post b’titlu ta’ kera irrispettivament jekk għandux bżonn din il-protezzjoni jew le. Huwa fatt magħruf li fil-pajjiż hawn bosta sinjuruni li qed jokkupaw propjeta b’titlu ta’ kera u jħallsu kera miżerabbli għal dan l-iskop. Il-protezzjoni għandha tingħata lil min verament għandu bżonn biss. Għandu iżda jkun l-istat permezz tal-Awtorita’ tad-Djar li jagħti din il-protezzjoni. Is-sitwazzjoni attwali hi li huma s-sidein li qed jissussidjaw kemm il-housing soċjali kif ukoll ir-residenti ta’ xi sinjuruni permezz tal-kirjiet ikkontrollati.
 
Alternattiva Demokratika fil-Parlament bħala parti
minn Gvern ta’ koalizzjoni tassigura li jsiru l-emendi neċessarji għall-liġijiet tal-kera. Mhux biss biex tingħata l-għajnina lil min verament għandu bżonn iżda ukoll biex b’hekk ikun jista’ jerġa’ jinħoloq is-suq tal-kera u jkun possibli li jerġgħu jidħlu gradwalment fis-suq it-53,000 dar vojta. Fl-aħħar ikun possibli li jibda jonqos il-bini bla waqfien kif ukoll it-twaqqiegħ u l-bini mill-ġdid ta’ propjeta’ f’kull rokna ta’ Malta.
(ara stqarrija AD fuq http://www.alternattiva.org.mt/page.asp?n=newsdetails&i=11074 )