A financial surplus, yet an environmental deficit

As was expected, last Monday’s budget speech solemnly announced a budget surplus for the first time in many years. However, the environmental deficit was, as usual, hidden between the lines.

The budget is aptly titled Preparing for the Future (Inlestu għall-Futur). In dealing with environmental issues, the budget speech does not lay down clearly the path the government will be following. At times, it postpones matters – proposing studies and consultations on subjects that have been in the public domain for ages.

On the subject of vacant properties, the government prefers the carrot to the stick. In order to get dilapidated and empty properties in village centres back on the rental market, it is offering a €25,000 grant to renovate such properties, but then rightly insists that, once renovated these should be made available for social housing for a minimum of 10 years. In previous budgets, various other fiscal incentives have been offered to encourage such properties being placed back on the market.

After offering so many carrots, it would also make sense to use the stick by way of taxing vacant properties in situations where the owner is continuously ignoring the signals sent regarding the social, economic and environmental impacts of empty properties.

The budget speech announced improvements to rental subsidies. However, it then opted to postpone the regulation of the rental market. It announced a White Paper on the subject which, when published, will propose ways of regulating the market without in any way regulating the subject of rents. In view of the currently abnormal situation of sky-high rents, this is sheer madness.

It is fine to ensure that the duties and responsibilities of landlords and tenants are clearly spelt out. Does anyone argue with that in 2017? It should have been done years ago. Instead of a White Paper a Legal Notice defining clear-cut duties and responsibilities would suffice: there is no need to wait.

It is, however, too much to bear when a “social democrat” Finance Minister declares  that he will not even consider rent control. There are ways and means of ensuring that the market acts fairly. Other countries have done it and are still doing it, as rental greed has no preferred nationality. Ignoring this possibility is not a good omen. The market should not be glorified by the Finance Minister; it should be tamed rather than further encouraged to keep running wild with the resulting social havoc it has created.

This brings us to transport and roads. The Finance Minister sends a clear message when he stated (on page 44 of the budget speech) that no one should be under the illusion that upgrading the road infrastructure will, on its own, resolve the traffic (congestion) problem. Edward Scicluna hints on the following page of his speech that he is not too happy with the current situation. He laments that the more developed countries encourage active mobility through walking, cycling and the use of motorbikes, as well as various means of public transport, simultaneously discouraging the use of the private car. However, he does not then proceed to the logical conclusion of his statement: scrapping large-scale road infrastructural projects such as the proposed Marsa flyover or the proposed tunnels below the Santa Luċija roundabout announced recently by Minister Ian Borg.

These projects, like the Kappara flyover currently in its final stages, will only serve to increase the capacity of our roads. And this means only one thing: more cars on our roads. It is certified madness.

While the Government’s policy of increasing the capacity of existing roads through the construction of flyovers and tunnels will address congestion in the short term, it will lead to increased traffic on our roads. This moves the problem to the future, when it will be worse and more difficult to tackle. The government is acting like an overweight individual who ‘solves’ the problem of his expanding wasteline by changing his wardrobe instead of going on a painful but necessary diet.

This cancels out the positive impact of other policies announced in the budget speech such as free public transport to young people aged between 16 and 20, free (collective) transport to all schools, incentives for car-pooling, grants encouraging the purchase of bicycles, pedelec bicycles and scooters, reduction in the VAT charged when hiring bicycles as well as the introduction of bicycle lanes, as well as encouraging the purchase of electric or hybrid vehicles.

All this contributes to the current environmental deficit. And I have not even mentioned issues of land use planning once.

Published in The Malta Independent on Sunday – 15 October 2017

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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