In October 2018, the Parliamentary Secretariat for Social Accommodation within the Maltese government published a 40-page white paper titled Renting as a Housing Alternative, which aimed to offer “a carefully studied approach that [provides] landlords and tenants with greater stability and security.”
This article summarises the content of the white paper and highlights the most important changes being suggested to improve management of the Private Rental Sector (PRS).
Changing society, changing households
“Homeownership [is] still perceived as an ideal in our society, [but] there are serious social indicators and cultural shifts which are pushing locals into rented accommodation.”
Recent data about the rental market confirms that the tenant population in Malta has risen significantly in recent years and that current developments in the property market are pointing towards decreasing affordability.
The white paper lists five social, political and economic forces that may explain this phenomenon:
- Shared housing
- Unhomeliness, transience and anxiety
- Employment instability
The document also lists nine shortcomings of the current regulatory system:
- Rental agreements are generally offered from six months to one year
- Agreements do not always foresee the possibility for renewal
- Notice periods are too short to enable tenants to find alternative accommodation
- No national register for agreements
- No draft contract template that ensures legal conformity
- No entity capable of deciding minor issues quickly
- No Tenancy Deposit Scheme which protects deposits and ensures a timely return
- No system or guidelines to manage Housing in Multiple Occupancy (HMOs)
- No entity to inform landlords and tenants of their rights and responsibilities
The Maltese regulatory framework from a comparative European perspective
Rent-regulating mechanisms are being revised across most European countries as the intensifying demographic pressures is threatening housing affordability and stability.
State intervention in the PRS is neither contrary to the European Convention on Human Rights nor any European Union instrument. The belief that government intervention in the PRS leads to its paralysis is an erroneous one, which is readily dispelled by the experience of other European countries.
The negative Maltese experience with rent control mechanisms stems from the fact that Government had employed extremely strict measures in the past. Since the end of the 1980s, when the Maltese economy undertook a series of pro-market policies, there has been a general negative political attitude towards any form of government intervention.
The weakness of the current Maltese regulatory model when compared with the legal regimes in place in other EU countries reveals how Malta merely conceives rentals as a short-term tenure.
“Measures proposed for the regulation of the PRS should only be applicable to rental agreements negotiated for a primary residential purpose.”
- Reform the regulatory framework so that it also covers particular instances of short-term agreements, e.g. temporary workers and students.
- Manage the sector more effectively by promoting:
- a minimum contractual term with periodical rent increases
- the capping of increases during the contractual term
- the optimisation of the rent subsidy scheme
“This White Paper puts forward two distinct frameworks, both aiming to promote a longer contractual duration for residential leases. The first framework proposes a mandatory minimum contractual duration (fig. A) whilst the second one presents a model where longer leases are promoted through fiscal incentives (fig. B).”
- A standard minimum contractual duration of several years would go a long way in rendering leases a more stable tenure.
- Medium-term contracts will not prejudice the landlords’ economic position; they are also compatible with the regular contracts of employment entered by foreign tenants as well as their average stays in Malta.
- A longer contractual period would also allow local households to create homes in their rented accommodation.
Compulsory period for tenant and notice of withdrawal
- Tenants should remain free to withdraw unilaterally from the contract, if they give due notice to the landlord and only after a minimum contractual period would have lapsed.
Notice of termination or renewal by landlord
- The landlord would by not be bound to renew the lease; however, notice of termination must be given to the tenant by not later than a specified prior to the expiry of the agreement.
- Failure to do so would result in the agreement being prolonged for a further term at the same conditions as the previous one.
Predictable rent increases
- The Property Price Index (PPI) remains, for the time being, the most adequate tool to regulate increases, although government should additionally consider a cap beyond which rents would not be able to rise.
Measures to improve the functioning of the Private Rental Sector
“[During research,] both landlords and tenants expressed concerns on the poor management of the sector, starting from the formalisation of the agreement to the process of eviction in the case of contractual default.”
- Amend laws to reduce court delays in the eviction process.
- Submit a declaration of deposit and present an inventory with the contract.
- Create a new public agency that oversees the registration and enforcement of private residential leases.
- Optimise rent subsidy schemes by introducing individualised means-testing
- Encourage payment by bank transfer, rather than in cash.
- Give tenants direct access to the water and electricity services on their rented premises, as well as to their bills.
More affordable housing
“Beyond the measures designed to improve the management of the PRS, the ultimate solution to the rental problem lies in a stronger supply of affordable housing.”
“The most effective solution lies in the diversification of the housing market through limited profit or not-for-profit building.”
- Give owners of vacant dwellings grants to carry out repairs and make the property habitable again.
- Diversify the marketing with Third Sector Housing through limited-profit or not-for-profit entities tasked with constructing affordable housing on public land.
- Real Estate Investment Trusts (REITs).
Other long-term measures
- Identify a minimum habitability standard for rented properties.
- Regulate houses in multiple occupation (HMOs), where many tenants are residing and living communally due to constraints.
- Regulate estate agents and assessing which professional standards they are expected to meet.
You can read and download the full white paper at this link (opens PDF file).