Harry Vassallo | Wednesday, 21 January 2009

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With 50,000 housing units threatening the property market with total collapse, our MPs are having a wonderful pillow fight in parliament over rent reform.
Evarist Bartolo whacked Tonio Borg full in the face over hypocrisy on the gay rights/housing issue. Borg had knocked Joseph Muscat sideways by accusing him of running with the hares and hunting with the hounds over the whole issue.
Neither side dares acknowledge the absurdity of the whole situation. The only reason that anyone could quarrel over the protection due to tenants in controlled rent properties is because the massive housing oversupply is kept ‘extra-commercio’. It is a massive, colossal, humungous hoard.
To be fair our politicians have already gone further than expected in debating this issue in taking positions outside their right/left stereotypes. Gone are the days when Labour could be held up as the bogeyman preventing all reform. The PN, far from being the landlords’ party, is the protector of tenants, the destroyer of freedom of contract.
Expecting them to take on the frightening issue of a property market bursting at the seams, even as they tackle an issue that has stagnated for 60 years, may be asking too much of them. Yet if they fail to bind the two together they will inevitably make a pig’s breakfast of the whole thing.
The best way to protect tenants is to give them access to the oversupply of properties, to end the hoarding. They would no longer require draconian legal protection because they would then lord it over landlords. If the rent offered was too high they could up sticks and move to the next property.
If the hoarding ended, the constant upward trend of property prices would vanish. The speculative value of property would evaporate. The idea that one can make more money from having a building stand vacant than through any other legitimate business would become part of our history. Property would become more like other assets: if we don’t use them, we lose them.
If we did not expect to make very significant capital gains on properties we would be more careful to maintain them. We would count the cost of maintaining them a serious loss to be recouped from renting them out. This is the way it works everywhere else in the world.
Thanks to protectionism in rents, nobody has built a single housing unit for rental purposes since 1948. Keeping properties out of the market, hoarding, brought the response of requisition, the government seizing private property to hand out to needy and not so needy persons. At the time there remained around 20,000 properties vacant but nobody pointed it out, nobody explored the reality scientifically or proposed a less draconian state knee-jerk response. What did happen was that the myth of the scarcity of property in Malta was reinforced. Because the government resorted to such measures we assumed that property was scarce. Generations of us grew up with the idea that the population was greater than the housing stock. In fact this was never so.
After requisition and with some overlap, the government took on the role of developer, seizing private and church lands and distributing them in the form of housing estates. Government land was also distributed at giveaway prices. In a country with an unmanageable housing surplus, the government squandered its resources in land and money to build new housing. The political advantage and the loyalty gained from families given a home are easy to see.
The scandal bound to rent reform is not the matter of political party clubs forcibly occupying private properties at absurdly low rents, nor the issue of powerful commercial enterprises playing dog-in-the-manger with a controlled rent premises. The true scandal is how we have continued to waste our most precious resources simply because we have been unable to face up to reality.
What is needed is to end the hoarding. Once that is done, there are no significant problems. If just 10,000 of the surplus 50,000 properties were to come onto the rental market it would be impossible to rent them all out let alone to ask for astronomic rents. It would be a tenants’ market.
The bit that sticks in our administrators’ throats is that ending the hoarding also means ending our eternal property boom, a tectonic shift in our economy which they are very loath to ponder. They would rather let it happen on its own and avoid taking the blame for it. Never mind that if and when it happens on its own, the effects could be devastating. Meanwhile they are quibbling over protection and effectively giving the absurd rent laws a new lease on life.
The hoarded billions are safe... for now.

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