Affordable housing: translating words into action

Building or acquiring a stock of housing units to be offered at below market prices for first-time buyers takes time, which is why the government must act now

A study published by Grant Thornton and Dhalia a fortnight ago shed new light on housing affordability in the Maltese market. The study confirmed that affordability is a growing challenge for sections of the population that want to become property owners.

The study showed that a two-adult household with a median income of €40,000 can borrow around €304,000, exceeding the market price for an average housing unit by around €40,000.

But the report flagged that there is a significant number of two-adult households that earn salaries below the median income level. If the two people earn a minimum wage, they can only borrow around €145,000, rendering the average housing unit unaffordable.

Single persons earning a median income of €21,000 a year are worse off and unable to borrow enough money to buy an average-priced housing unit on the property market.

The study attributed an average price for a finished housing unit at €259,000 but the study also mapped the disparities in prices based on geographical regions.

The cheapest prices are found in localities like Marsa, Ħamrun and Gozo. In these areas, house prices can go as low as €165,000, making it affordable for two-adult households earning up to the median income.

The study put into figures what poverty campaigners and others have been clamouring about for years. Housing prices have shot up, probably a reflection of the rapid economic boom experienced over the past decade.

The study found that housing prices are still going up, but are doing so at a slower pace. If the past is anything to go by, it is unlikely for prices to drop but most probably will plateau, allowing average wages to catch up.

But this is unlikely to be a consolation for those earning below the median wage, and more significantly earning just above the minimum wage.

Government has introduced a raft of housing incentives to address different pockets of people with difficulty to access the home owner market.

These measures, which include assistance to fork out the 10% deposit when taking out a bank loan, and the shared equity scheme, have helped certain categories to acquire their own house.

But there is a section of the population that may not qualify for either of the current schemes and are not entitled to social housing, who simply cannot afford to tap into the market because their earnings are not enough to secure an adequate bank loan.

Prime Minister Robert Abela acknowledged as much during his Workers’ Day speech, describing affordable housing as a problem where the country has to make the “next big step”.

“The next step is to ensure that government takes initiatives to build a strong stock of apartments at affordable prices to target those who want to become home owners but cannot irrespective of the many initiatives we have already taken,” the Prime Minister said.

Acknowledging the problem and identifying what has to be done are important first steps but now the government must get down to action.

Building or acquiring a stock of housing units to be offered at below market prices for first-time buyers takes time, which is why the government must act now.

The solution was explored in the past. In the 1970s, 1980s and 1990s, first-time buyers had the option of buying government housing at reduced prices. Eventually, the strategy was abandoned with the Housing Authority focussing only on the provision of social housing. Having a varied stock to cater for couples, single people and budding families is important. Buyers of these properties should be tied up with conditions so that they will not be able to speculate later on in life with property that would have been provided to them by government at below market value.

Abela must translate his words into concrete action and ensure this stock of properties starts being delivered within the next three years.