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[WATCH] Rent regulation would be jumping the gun, Muscat says on Malta’s rising property costs

Fighting poverty or tax avoidance? Joseph Muscat admits doubling rental subsidies for low-income tenants against presentation of contract ‘is uncharted territory’

Matthew Vella
18 October 2016, 4:56pm
Rent regulation would be jumping the gun - Joseph Muscat
Prime Minister Joseph Muscat has admitted that an attempt to bring out slumlords into the open by doubling their tenants’ rental subsidy against the presentation of a contract, was “uncharted territory” for his government.

In a Budget that Muscat described was showing that Malta’s economic prosperity had purpose, the Labour leader seemed to give the impression that a move to make tenants present rental contracts was treading a fine line between the fight against poverty and going after tax avoiders.

“It is a key concern. It was one of the issues that we debated at length, internally, with our colleagues. One of the arguments against raising the subsidy is that it foments further the price of rents: a precedent was the tax rebate on school transport, that led to a hike in prices,” Muscat said when asked about concerns from social workers that the rental subsidies would encourage landlords to raise prices.

“The caveat in the Budget speech was that we expect all rental contracts in Malta to be registered with the Inland Revenue Department: the 15% tax rate for landlords is reasonable enough, and just like we register promise-of-sale agreements, so must these contracts be registered.”

The government will only double rental subsidies for low-income earners if they present a contract, that will in turn ensure the taxman can have tabs on more landlords.

“We recognise this is uncharted territory… no government has ever entered into the market in this way,” Muscat said. “Our other pilot project to encourage landlords to keep rents stable over seven years will be a way for us to test the waters there, so that we can incentivise landlords to keep rents stable against more favourable tax rates. I understand what people like [Alliance Against Poverty’s] Charles Miceli is saying, but a blunt rent regulation without testing the market, would be jumping the gun.”

MaltaToday suggested that a land hoarding tax could be introduced on empty housing, when finance minister Edward Scicluna claimed that rising rental prices were an answer to low supply.

“This is a trend that has been taking place over the last three years, as the economy started expanding like never before,” Muscat said in an intervention. “Before taking such a major policy shift for state intervention into a free market, we have to exhaust other routes and see what their effect is.”

Muscat added that higher rents could not just be the effect of skilled foreign workers. “These prices are reflecting the desire of people to come and live here… At this point time, we are seeing different policy options that we can balance out: there are imperfections in the rental market, usually stemming not from a regulated market, but from an underground market, when not knowing who is renting and at what price.”

Matthew Vella is executive editor at MaltaToday.