Malta’s rocketing rental prices demand a cure, says Caritas director

Finding a solution for the spike in rental prices that has left many households struggling with the cost will be “the cure” for having failed to anticipate how the country’s economic growth would affect low-income earners, Caritas director Leonid McKay has said.

“The first mistake was that we did not anticipate the market demand and now we are searching for ‘a cure’. It would be wrong to think that social housing and commercial rents were separate: the link between the two is solid,” McKay has told MaltaToday.

The pressure from rocketing rent prices is not only felt by low-income earners and lone parent families; however their vulnerability exposes them more to the struggle. McKay insisted that rental costs should not take up half of their monthly expenses.

“As Caritas we believe that housing is a basic human right, which has to be not only decent but also affordable,” he said, adding that authorities should invest more in public housing systems for low-income families.

Prime Minister Joseph Muscat this week announced that, if the market fails to regulate itself in a more “just manner”, the government may have to intervene. 

“The hardship is not new and previous administrations did not lift a finger for at least the past 15 years. This is the first government that has lifted the lid on this issue and started to take the first real steps towards trying to solve it. It is precisely because we are closely monitoring what is going on that the Prime Minister has already announced that further action will be taken,” a spokesperson for the Prime Minister told MaltaToday.

The Office of the Prime Minister argued that taking “knee-jerk decisions” could have serious social repercussions: “Such a complex issue cannot be fixed through simplistic solutions that may create more harm; we are addressing it incrementally and taking an evidence-based policy approach by observing the market’s reaction to the subsidies, and then take further decisions after consulting all stakeholders.”

As reported in the flagship Caritas report on decent living, 71.2% payments of 56,000 dwellings which are rented or on emphytheusis are made to private landlords.

Eurostat figures on housing affordability indicated that in 2014, 1.6% of Maltese lived in households that spent 40% or more of their equivalised disposable income on housing.

The Caritas report made it clear that the rental costs have become a hardship for households who find themselves “in unusual circumstances”, especially lone parents who do not have access to social housing.

For months, Caritas urged the authorities to give “special attention” to housing costs. 

In its ‘minimum essential budget for a decent living’, Caritas had computed a very conservative rental rate of €300 per month: “In reality, the commercial rents are constantly increasing fairly unchecked.”

For Budget 2017, the government announced it will be doubling rent subsidies for low-income earners living in private residences – from a monthly maximum of €83 to €166.  However, the subsidy will only be granted to those who present a copy of their rental agreement, that will in turn ensure the taxman can have tabs on more landlords. 

But it is a double-edged sword, as the landlord is required to sign the contract which the tenant is expected to present – and not all owners are ready to cooperate.

Labour MP Silvio Schembri has taken the initiative to bring experts together – including McKay – to launch talks on what can be done. The informal group is expected to meet in the coming days.

“Rent has become a social scourge: the reality is that Malta’s economic success has attracted more foreigners, pushing wages up and increasing property demand. Whereas six years ago a property could be easily rented out at €250, the starting prices today are at a minimum of €400.”

Schembri came face-to-face with this reality when he met a mother of three, living in a flat that has been divided into three rooms and rented out to three tenants at the same time. The mother and her kids live in one of the rooms, with high humidity levels and paying €400 a month.

The rent is not covered by a contract so the family risks being evicted the moment the landlord decides he wants to use the room; because there is no signed agreement, the family cannot apply for the government subsidy.

One may argue that the woman should have never accepted to move in in the first place, but as McKay explained, landlords are currently in an advantageous position: the demand on commercial rent is high and tenants are forced to accept such conditions.

“This blatant abuse has to stop,” Schembri told MaltaToday. “It’s useless for the government to allocate funds if those who should be entitled to the money cannot access it.”

Schembri said that removing the landlord’s signature from the subsidy application was a good step. However, the shortcoming in the law is that, without a written contract, no one has rights: the tenant can refuse to pay the rent whilst the landlord can evict a tenant without notice.

“This law offers no protection to the tenant and leaves the door wide open for the property owner to avoid declaring his income and paying tax… which this government reduced from 35% to 15%.”

Schembri’s informal group – which includes people who are directly or indirectly involved in the sector – aims to come up with suggestions and proposals which would then be presented for discussion in the parliamentary group.

Although the ideas have yet to be discussed in further detail, Schembri has proposed the introduction of harsh fines for owners who do not provide a written contract for rents exceeding three months.

A second suggestion would be the setting up of a mechanism by which a tenant can prove that they were living in a rented place for more than three months, but the landlord did not provide a contract. In this case, the law would automatically come into force, activating a rental contract as stipulated by law which would be binding over a five-year period.