[WATCH] Rent reform: Galdes says courts have accepted 2% cap on property value as ‘fair return’ for landlords

A proposed capping for pre-1995 rents that is equivalent to 2% of the property’s value is “a tried and tested” formula, Social Accommodation Minister Roderick Galdes said.

He said the rent that landlords would be able to charge under proposed changes to the law constitute a “fair return” that has been accepted by the courts.

Galdes was speaking in a feisty debate with Nationalist MP Ivan Bartolo on TVM’s Xtra about the proposed reform of controlled pre-1995 rents.

Government unveiled its proposals last Saturday, addressing a situation that has long been decreed as illegal by the constitutional court and the European Court of Human Rights.

The situation concerns rent control legislation that was introduced after World War II to prevent having homeless people. However, the law was never changed after the emergency seized to exist and reforms over the past decades did not go far enough to give tenants peace of mind and landlords a fair return on their property.

Galdes said the new law will seek a means test of tenants and those without means will be afforded protection. However, landlords will also be able to seek a valuation of their property and charge rent at 2% of that value.

Government will be forking out the difference in rent that tenants will then be asked to pay.

Galdes insisted the country was in a financial position to be able to meet this demand, which will come at a hefty cost.

He said that the expense on public coffers is expected to be around €1 million in the first year, rising to €5 million by the third year.

Opposition spokesperson Ivan Bartolo

Nationalist Party spokesperson Ivan Bartolo said the Opposition in due course will put forward its proposals to improve the law but criticised government for not consulting it.

He questioned whether the 2% cap set by the government was going to be enough but shied away from saying whether this should increase.

Bartolo said the proposed reform was promising tenants who lived in properties valued at more than €500,000 alternative accommodation but insisted this flew in the face of government’s failure to put a single social housing unit on the market since 2013.

He accused the government of being out of touch with reality, insisting poverty was on the rise.

The reform affects some 9,600 households concentrated mostly in the Grand Harbour region.

Another aspect of the reform will end the inheritance of the rental protection between different generations.