The point on affordability

Recently someone told me the main problem faced by Maltese society is housing affordability. Thinking about it later, I could not help but feel the statement was not too way off the mark.

The property ladder grew steeper to climb in the past decade as the decoupling intensified between the rate of increase of property prices and the rate of increase of median income.

There are plenty of facets to the issue. The first is socio-cultural and refers to the willingness of the average Maltese individual to step onto the property ladder, become a homeowner, and ascertain the tightest possible tenure.

The inclination towards homeownership is not a natural occurrence. The Maltese nation did not always abhor renting their house. Whole generations that preceded the world wars, those who grew through the interwar period, and the post war generation were all very much used to renting their house. Not least due to stringent renting laws which elevated rent’s security of tenure almost to an equal footing to ownership – laws which only started facing their phase-out with the wide-ranging reform coming into effect last June.

Today’s high homeownership rate is mainly due to public policy. Homeownership was seen as the principal tool to support social mobility and vast tracts of land were made available for the young adults and couples of Generation X, with few if any strings attached. The same period was complemented with an unprecedented building programme of social accommodation which provided adequate housing for the rest.

Making the latter social accommodation available for purchase by their occupiers who were once in need of State assistance, meant a very fast track to social mobility and is an oft-overlooked factor to the high rate of homeownership.

Adequate housing is a human right.

The Maltese nation became so used to ownership that the generations which followed were imparted a sense of longing toward ownership to the extent that many persons who reach 30 years and are not yet ‘settled’ in their very own house, speak of an overwhelming sense of underachievement.

The success of homeownership assistance policies of years gone by is that they truly facilitated social mobility. The lack of strings attached to such policies which made ownership so attainable to previous generations is not commonly discussed however, even though they partly but surely affect today’s market.

Altogether these developments blended the notion of housing and property in the average Maltese mind.

With interest rates in the banking sector hitting historically low levels in the new millenium, there is an added incentive for the average saver to invest rather than save. Not only, but the prevailing idea is to invest in property resulting in considerable wealth being stored in vacant or underused property.

The idea that immovable property is the least risky investment to make with the highest possible return, became a self-fulfilling prophecy in that the more the inhabitants invested in land and built it, the more land became scarce, and the more its value spiked.

The reality is that the island today experiences conditions of many urban centres across the globe.

Recent State intervention in the housing market started with mild regulation of the private rented sector which endowed the sector with a degree of much needed stability, security and transparency, rendering it a more viable alternative of accommodation when compared to the previous two decades. This is not to say that it led many to ditch their itch to own and opt to rent instead.

It should be the State which in the long-term seeks to encourage private investment in the supply of affordable accommodation.

The several financial solutions provided by the State in collaboration with local commercial banks represent another form of assistance for different categories of people to become homeowners. In their differences they share one basic quality: they all aim to bridge the gap between low to medium income to the increasing rates of the property market.

With land getting scarcer and demand for ownership higher, the sky is the limit. Developers quickly conclude that the only feasible solution is to raise the permissible height limitations. A rather simplistic solution given that a parcel of land which would be able to host more units will undoubtedly cost more itself, leading us into a catch 22.

Considering that the end of the aforementioned decoupling between the growth in market rates and in median income is not foreseen anytime soon, issues of affordability are now reaching new cohorts of people. Short term remedies are certainly in order and ought to further optimise the solutions currently in place to make the homeownership market accessible to income, professional and age categories which are new to facing such challenges. 

With the government ever-present in people’s lives, it is clear that government policy works in rerouting the course of history in this island State. Notwithstanding the globalisation of investment markets, the Maltese investor seems very much inclined to look inwardly to enhance their worth.

It should be the State which in the long-term seeks to encourage private investment in the supply of affordable accommodation, offering a viable alternative to the prevalent quick-buck idea of aiming to exclusively supply the higher echelons of demand. Real estate investment funds and trusts could lie at the core of a future more inclusive Maltese housing market. It should also be the State that reroutes ceaseless investment in property aiming to fight the defeating idea of storing wealth in underused dwellings.

Affordable housing is in the long-term interest of all of us. Adequate housing is a human right and its commodification runs the risk of undermining social cohesion in a Maltese society which only ever thrived on it.

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Frans Camilleri
Frans Camilleri
2 years ago

While I go along with most of this, I think that we should be more careful about asserting something which is not grounded in facts. Thus, while the provision of adequate housing, particularly by the State in respect of vulnerable and socially-excluded persons, is highly desireable as a policy objective, there is no such human right as the one to adequate housing. A reading of the United Nations Declaration of Human Rights, the European Convention on Human Rights, and the Constitution of Malta suffices.