Last week, I sat for a podcast with Ricky Caruana, which is scheduled to be aired on Monday. We discussed quite a few topics. However, one of the topics that we discussed, which is currently trending, relates to property and rent prices, including the system of rent subsidies.
In fact, before I sat down with the interviewer, I did not know how rent subsidies are decided in Malta. I had to go on the Housing Authority website to download the information. The provided information is quite detailed, I have to say. Certainly, we need controls, and a high level of governance. And it’s important that the Housing Authority, as well as the relevant social departments, implement strict conditionalities and screening. During the podcast I explained that Malta’s rental market did not function the way it would have functioned if there were not so many controls in the preceding decades. We can reason that controls were perhaps needed because people did not have any accommodation and were severely deprived of basic utilities. Malta was still impoverished, due to the effects of the second world war and we needed to advance economic progress, as swiftly as possible to catch up with the rest of the world. It sounds a bit selfish, and I think it is, but controlling rent in Malta served as a safety net for those who were severely deprived. Certainly, when reviewing UN reports and other development reports written by various British economists about Malta’s economy, one of the recommendations was to address overpopulation through mass migration.
Actually, the PL government of Dom Mintoff needed to house as many people as possible, in a relatively short period of time. It was not possible to provide thousands of dwellings in a short period of time. From the 1970s onwards, the PL government faced the task of driving economic growth and doubling Malta’s national income to enhance the population’s standard of living. Dom Mintoff managed to do it in quite a short period of time and built hundreds of social housing units across Malta. Certainly, any successive governments did not change the rent laws in Malta, and the market experienced a negative distortion, as well as price imbalances. It was in 1995 that we saw a change in the rent law in Malta. The Nationalist Party in government liberalised the market post 1995. With this change, any contracts that were signed after 1995 gave rights to property owners and not tenants. Indeed, tenants were not entitled to enjoy the property ad infinitum leaving property owners with no rights to enjoy their properties, with generations inheriting the rent and occupying the property forever. Indeed, it turned out that the imposition of not allowing property owners to enjoy their property, is a violation of human right. Numerous property owners brought cases against the state to the European Court of Human Rights. Consequently, the state was found to be in breach and was obliged to compensate the property owners and their heirs, resulting in substantial financial payouts.
Leaving out the cosmetic revisions of rent regulations of 2007 the biggest push to rent out properties occurred with the new business models of booking.com and Airbnb, as well as the introduction of 15% tax on rental income post 2013. It was the carrot and stick for property owners to start declaring income, and at the same time pushing them to buy additional property for eventual renting. This resulted in additional collection of government revenue. The unprecedented economic growth, the increase in foreign workers, as well as a liberalised market resulted in astronomical parallel rental and property prices. The topic that we discussed during the podcast was that of affordable housing, which I already treated in preceding articles, as well as the way rent subsidies are designed.
So, let’s take for instance a single person with no dependents. The maximum subsidy entitlement per annum is €4,200, which translates to €350 per month. My understanding is that someone on an annual income of €21,000 would not be entitled for a maximum rent subsidy. Likewise, someone on an annual income of €14,000 wouldn’t be entitled for the full rent subsidy if we take it pro-rata, which means proportional. However, I had cases where even on €14,000 they received a rent subsidy of €120 per month which translates to the minimum capped price floor. And this has nothing to do with having piled savings up in bank accounts.
In fact, I wondered how rent subsidies are calculated. Someone, who was quite helpful, told me that this is taken pro-rata. When I asked about the type of pro-rata, they provided no answer. They kept repeating pro-rata. Frankly, I was wondering whether it is pro-rata of the mass of planets, of kilograms of sugar and coffee or of absurdities. I was never given a straight answer. Perhaps what they did not realise is that they were discussing the pro-rata concept with an economist. They can sell it to Ċetta or Ġanna, but obviously not to me. When I kept pressing for more information I was still left without an answer. No wonder people are so frustrated. If we ask questions we demand answers. It is, at its core, a fundamental citizens’ right.
In Belgium things are done differently. True, it is not an easy country, and bureaucracy is tenfold when compared to Malta. However, Belgian citizens know their rights. They would have a schedule of what they are entitled by income bracket in a form of income schedules, within the income brackets published on the Housing Authority’s website. Or better, they would be explained the formula. What I fail to understand is that if a formula exists, then they must give it to people.
To make matters worse, someone rang me to tell me how it is calculated. In brief, it turns out that anyone qualifying for a rent subsidy, is required to cover 25% of the annual income, and then a pro-rata difference is given on the capped entitlement bracket of €4,200 per annum subsidy. The person who rang me was very nice. However, it seems that the information is not given to the public. Or at least, we get to know it by serendipity. An appeal to the authorities would be to make this formula publicly available. People have a right to know. Giving some form of incomplete information is not transparent, at all. Surely, we need to conduct means testing for everything, including bank savings and other forms of wealth, if and when available. Obviously, authorities are not screening clients through social media otherwise we would end up like China.
Authorities must make such information available to its citizens. We can’t get hold of information serendipitously!
