Someone once said that “Common sense is the least common of all sense”. I am not sure how right that is, however it is certainly befitting when listening to the government and opposition debate their respective policies on housing. It is frustrating listening to them struggling with a problem, the solution to which is so darn obvious.
Government can’t be truly keen on proposing anything serious or substantial. Secretly they are glad that property prices stay up, because this is a major contributor towards rekindling the feel-good factor amongst the populous middle class. The pre-budget document does finally acknowledge the dire situation in housing and promises some assistance to cater for those who are really, but really, hard up. The proposals however leave out the other 95 per cent of us, burdened as we are with larger loans, smaller homes, and more recently, rising interest rates.
Then, of course, there is the Harvard-brewed economic magic from Labour. Alfred Sant is, very unoriginally I might add, promising to throw money at the problem. Lots of it. He is committing to give away 10 per cent of the price of a property to first time buyers if properties are capped at Lm50,000. In addition he is promising to cap interest rates at 4.5%. “Cool!” one might be tempted to think, until of course you realise the flaws in the proposals – I can count at least four. The first is the absurd proposal to attempt to cap property prices, the result of which will be to send more brown envelopes under the table. The second flaw is that the Lm5,000 subsidy (which could amount to some Lm10 million annually) is not “free money”, but must be financed from the taxpayer i.e. you! The third is that Alfred Sant is not the governor of the European Central Bank and therefore cannot fix interest rates – hence he will also have to subsidise interest rates, again with your money. The fourth flaw, the most serious one, is that if you are already a property owner, the proposed financial subsidies will not apply to you. Sorry, but Labour is only interested in helping out first-time buyers, because (allow me to speculate on this one) Sant is targeting voters aged 18-25. Economic nonsense? Most definitely. Electoral ploy? Most probably.
So, you may rightfully be asking, what is the obvious solution to the problem? A solution in four words – FORTY THOUSAND VACANT PROPERTIES. That is the number of properties, be they flats, maisonettes or houses that lie vacant in this already very over-built island of ours. One property in every five in Malta. One in every four in Gozo and one in every three in our world heritage capital city. These 40,000 properties, by the way, do not include holiday homes, which amount to another 12,000. The solution lies in having policy, both environmental and fiscal, to discourage speculation and put more of these properties onto the market. The first thing that government should do is ensure that nobody is allowed to leave property in the kind of dilapidated state that so many vacant properties are already in. For starters, government should enforce minimum standards on the maintenance of property facades. It is a reasonable obligation that will also embellish our urban environment. If owners of vacant properties are required to maintain these properties (i.e. a cost), then a number of them will consider placing them on the market for rent or sale (i.e. a revenue). Secondly, there should be fiscal policy that encourages rental; not because I believe that renting is superior to buying, but because renting provides an alternative to buying both for those who wish to rent, and also for those who cannot afford to buy and must therefore rent. In the submissions made for the pre-budget exercise, Alternattiva Demokratika proposed that all vacant properties that are not the owner’s primary or secondary residence are to be subject to a fixed minimum charge of 0.45% of the capital value of the property. Thereafter any rental income earned will be tax free. For example this would mean that the owner of a third property worth Lm50,000 would be subject to a charge of Lm225 per annum, but would then not incur any income tax on rent received. With this policy in place, more of the 40,000 vacant properties would effectively come on to the market. That, of itself, would help to take off some of the pressure on rising prices.
The money generated from this mechanism (Lm6-8 million) should not be used to favour first-time buyers exclusively, but should be earmarked to help families cope with loan repayments or rent payments during the most difficult times of their lives. In my opinion, and I’m speaking from experience, this is not when one first buys property but when the family starts growing. If this government, or the next, really wants to assist with housing, a rethink of paternal leave and children’s allowances is what will really help.
Edward Fenech is spokesperson for Finance and the Economy of Alternattiva Demokratika – The Green Party