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

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

Taxxa fuq propjetà vojta

 

 

Fit-Times tal-bieraħ, l-ekonomista veteran Joe Consiglio jitkellem dwar taxxa fuq propjetà vojta. Dan hu sinjal tajjeb. Anzi, huwa tajjeb ħafna li ekonomisti jiddiskutu din il-materja.

Tajjeb li jkun emfasizzat li Alternattva Demokratika hi l-uniku partit politiku f’Malta li tkellem u ħa posizzjoni favur taxxa bħal din.

Il-proposta ta’ Alternattiva Demokratika ilha li saret 23 sena u għaldaqstant saret fil-kuntest regolatorju ta’ dak iż-żmien, lejliet l-elezzjoni ġenerali tal-1992. Alternattiva Demokratika, dakinnhar kienet preokkupata bl-ispekulazzjoni li kienet qed tirriżulta bħala konsegwenza ta’ propjetà li kienet qed titħalla vojta u abbandunata għal snin twal.

Ftit wara, fl-1993, ġiet introdotta l-Capital Gains Tax li kienet tindirizza parti mill-problema u dan għax, jekk imħaddma tajjeb din it-taxxa tista’ tindirizza sewwa l-issue tal-ispekulazzjoni.

Fl-aħħar budget il-Gvern ħoloq inċentivi (tnaqqis ta’ taxxi) biex jinkoraġixxi d-dħul fis-suq ta’ propjetà li dwarha kien hemm problemi ta’ wirt. Bla dubju dawn l-inċentivi jistgħu jnaqqsu xi ftit il-problema.

F’dan il-kuntest ikun tajjeb jekk niddiskutu iktar taħt liema ċirkustanzi tkun ġustifikata li tkun introdotta taxxa fuq propjetà li titħalla vojta.

L-art f’Malta hi limitata u ma nistgħux nibqgħu nużaw iktar art għall-bini, meta għad hawn min għandu propjetà mibnija u jibqa’ ma jużahiex jew ma jħallihiex tkun użata. Il-liġijiet tal-kera, li inbidlu fl-2008, illum huma iktar raġjonevoli u propjetà tista’ faċilment tinkera għal perjodu limitat sakemm sidha jkollu bżonnha.

Għaldaqstant dawk li setgħu kienu raġunijiet fil-passat (li wieħed seta jifhem) biex propjetà titħalla vojta m’għadhomx jagħmlu sens. Propjetà li ma tintużax u titħalla vojta toħloq pressjoni bla bżonn biex tinbena iżjed art meta Malta ma tistax titlef iktar art għall-kapriċċ ta’ min iħalli l-propjetà tiegħu vojta. Il-pajjiż jonfoq flejjes kbar biex jiżviluppa l-infrastruttura u jagħti servizzi li fejn propjetà tibqa’ vojta jibqgħu ma jintużawx.

F’artiklu li ktibt fl-Independent tal-Ħadd 11 t’Ottubru kont eżaminajt iċ-ċifri ta’ propjetà vojta li jirriżultaw minn l-aħħar ċensiment, dak tal-2011.

F’Malta għandna 71,080 propjeta vojta. Minn dawn 29,848 jintużaw kulltant – probabbilment il-parti l-kbira minnhom huma villeġġatura jew ta’ sidien mhux Maltin li jkunu Malta perjodikament. Il-bqija huma vojta. Uħud vojta għal ftit żmien u oħrajn vojta fit-tul.

Jekk tħalli barra l-propjetà użata bħala villeġġatura, l-ammont ta’ propjetà vojta s-sena kolla xorta jibqa’ enormi: 41,232.

Dan tajjeb?

L-introduzzjoni ta’ taxxa fuq propjetà vojta bla dubju tħajjar ħafna mis-sidien biex jevitaw il-ħlas tat-taxxa u jsibu użu għal din il-propjetà u b’hekk tonqos il-ħtieġa li tinbena iktar art. Tajjeb li nkomplu d-diskussjoni.

Tackling vacant property

 

Malta Developers Association president Sandro Chetcuti took a good step forward this week when he said that the government should address the issue of abandoned property. It is a small step, but certainly a step forward.

Alternattiva Demokratika – the Green Party – would prefer it if all vacant property is considered, and not just abandoned property. This would help reduce pressure on undeveloped land and, given that less than 70 per cent of existing dwellings are fully utilised, there is room for much improvement in this respect.

Let me start by spelling out the facts, as resulting from the 2011 Census, published in 2014.

In 2011, Malta and Gozo had 223,850 dwellings of which 68.2 per cent were occupied, 13.3 per cent were in use occasionally (seasonally or for a secondary use) and 18.4 per cent were completely vacant.

Table 1 clearly shows that Gozo has a concentration of seasonal accommodation, whilst the actual extent of the problem of vacant dwellings is 18.4 per cent of the housing stock. Another interesting fact shown in Table 1 is that less than 50 per cent of housing stock in Gozo is occupied all year round.

 

Table 1 : Properties in Malta: data extracted from Table 85 of the Census 2011 report

	Malta	%	Gozo	%	Total	%
Occupied	141140	71.0	11630	46.4	152770	68.2
Occasional use	22404	11.3	7444	29.7	29848	13.3
Vacant	35236	17.7	5996	23.6	41232	18.4
	198780	100	25070	100	223850	100%

 

Additional data of interest made available by the 2011 census is that in Table 2 relative to the state of the unoccupied property, this being the total of the property which is either in occasional use or else completely vacant.

 

Table 2 :  State of unoccupied property: data extracted from Table 140 of the Census 2011 report

	Malta	%	Gozo	%	total	%
Shell	5374	9.32	1563	11.63	6937	9.76
Dilapidated	1495	2.59	341	2.54	1836	2.58
Serious repairs	4312	7.48	841	6.26	5153	7.25
Moderate repairs	8098	14.05	1126	8.38	9224	12.98
Minor repairs	10475	18.17	1922	14.30	12397	17.44
Good condition	27886	48.39	7647	56.89	35533	49.99
	57640	100.00	13440	100.00	71080	100.00

 

A total of almost 7,000 dwelling units in shell form is substantial, even though most probably the great majority of these properties would be in shell form only for a short period of time. It would be a good step forward if Mepa were to establish a time frame within which properties under construction are to be completed.

In a number of cases, a validity period of five years is too long for a development permit. Permissible completion dates should vary and a system of fines would ensure that our towns and villages are not permanent building sites and would be most welcome by our local councils. This would reduce the presence of dust resulting from building construction material and would be of considerable help in reducing the contribution of building sites to air quality.

This leaves the properties requiring repairs totalling slightly fewer than 29,000. The abandoned properties referred to by Sandro Chetcuti would most probably be those in a state of dilapidation or requiring serious/extensive repairs totalling 7,000.

This is the essential information on the basis of which authorities need to take a decision. It is known that most of these cases are the result of either inheritance disputes or ownership by a multitude of owners whose share has an insignificant value. Fiscal incentives to encourage the consolidation of ownership rights where such properties are concerned are most probably the best way forward. This would address the problem of a number of such properties owned by a large number of co-owners who do not consider it worth the effort to do anything, as they would end up exposing themselves to substantial expenses without any practical benefits.

Reasonable action has to be taken to ensure that properties are not vacant as a result of administrative failures. Subsequently, we can consider the circumstances under which owners of vacant properties who leave such properties vacant for a long period of time should share the financial burden which the state has to shoulder to regulate and service new development. This financial burden is paid for through our taxes and it is only fair that these taxes should be shouldered by the owners of vacant properties.

published in The Malta Independent on Sunday : 11 October 2015