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Harry Vassallo | Wednesday, 28 January 2009

Rent: Chinese water torture

It is not the first time that the Object and Reasons attached to a Bill in Parliament seem to be written in cynical doublespeak. The Bill presently before Parliament to reform the rent laws is one such.
It is aimed “to establish social justice with the owners of leased tenements”. It may do so in many cases but certainly not in all cases. For those owners with young tenants and for those having tenants with offspring there is no hope. All pre-1995 controlled rents have been raised to a minimum of €185 per annum. In doing so, the law acknowledges that there are houses and apartments from the most squalid to the absolutely splendid rented for less, possibly for the last 60 years.
In the case of the unfortunate minority of owners having tenants entitled to stay on in the premises, the future is bleak. They are entitled to increases every three years for the combined lifetime of their tenant, his/her spouse and their children at the rate of the official cost of living index. Since the increase starts from a basis of €185 on 1 January 2009, a percentage increase of next to nothing will always be next to nothing.
While acknowledging the violence perpetrated by the law in effectively expropriating owners for the past 60 years, the law adds insult to injury by establishing the basic annual rent of a residence at significantly less than what the same Laws of Malta establish as a minimum fine for smoking in a restricted area €230. In fact it must be impossible to rent any acceptable place of residence in the liberalised market for €185 per month let alone per year.
The law also claims that “in a phased manner it liberalises leases made before the 1 June 1995”. It does liberalise many of them. The rents of all stand alone garages will be fully liberalised next year. Some commercial properties go on the market when their contractual term expires unless it has already been extended by law. In the case of many residential properties it will take a lifetime. It is a phased liberalisation. It is also a lottery, with the viciously oppressed minority of dispossessed landlords being divided and reduced to leave the remnant to lose what little political clout it ever had.
Bombastically it claims that it “lays the foundations for a lease market which would function properly and thus provide a suitable alternative for adequate and affordable accommodation.” When the rest of this magnificent edifice will rise above these poor foundations on God knows.
What is there in this law to entice any property owner to rent it? The removal of a 60 year screaming injustice? Wow. The idea that some but certainly not all leases have been liberalised? The mysterious regulations to be issued by the Minister which will govern the fate of the leases of clubs of all sorts some time in the future? His right to grant exemptions as he deems fit? The increase of rent from €185 per annum? What?
The reform is already a failure becomes it comes nowhere near its stated objects and reasons let alone approaching a reasonable reform granting justice not only to owners but also to tenants.
The first step in any such reform should be to bring as many as possible of the 50,000 properties standing vacant onto the rental market. Each should have been registered at the local council with two months and then subject to a nominal tax if they are still vacant 12 months after registration. A similar registration of rent agreements at local councils would provide valuable data as well as reducing litigation. It would allow government to collect revenue and offer a deduction on income tax from rental income – a flat rate of 15%?
Without the instant and easy availability of alternative accommodation at a reasonable rent, the phasing-out of controls remains necessarily, awkward, painfully slow and inevitably unjust.
The first principle of any such reform should be that the state should shoulder the cost of social housing and all and any assistance to tenants who cannot afford a reasonable rent should be forked out of public funds. This reform leaves an untold number of owners to subsidise housing assistance for the state on a completely arbitrary basis.
In fact it is incorrect to call this a reform. It is yet another patch-up job necessitated by the passage of time. It is in fact nothing more than what has happened so far every 10 years or so since 1931. A reform implies a vision and the will to realise is. This is simply slow attrition, a reluctant response to outside pressure.


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