Last Sunday this newspaper carried an interview with Chris Grech. There are many reasons why what he said matters. Grech is the chairman of Dhalia, a company that has been a key player in the real estate business in Malta since 1982. If there’s one person who knows the trade, it’s him. He would also know everyone else who’s involved in it in some way or other.
Grech is a developer, but not quite in the same mould as the dozen or so infamous names – or nicknames, rather – who specialise in things like dumping rubble in valleys, carrying wads of cash in their backpockets, and breeding Siberian tigers.
His is a more urbane, white-collar style that tends to slip under the radar of journalists looking for a colourful story.
The point is that the interview with Grech gives us a glimpse into the workings of a developer’s mind. It speaks volumes about the construction frenzy that is turning Malta into an ugly and depressing bleakscape of showrooms and flats.
Grech discussed two topics: rental properties and rents, and business parks. The first is particularly timely, given the ongoing campaign by the Alliance against Poverty to get government to control rents. In a recent interview, campaigner Charles Miceli told The Times that the number of people was growing whose income was not enough to keep up with increasing rents, and who risked ending up on the streets.
A dreadful prospect, except Grech has a solution called ‘supply-demand’. Grech observes (with considerable glee, I imagine) that demand is growing, and that rents are steep. As he sees it, the best way to keep rents in check is to increase supply; “market forces” would see to it that, as supply met demand, rents would stabilise and become widely affordable. He adds that the process would “take time”.
Translated into everyday language, Grech’s suggestion is for developers (like him, by coincidence) to be encouraged to build more and more. At some point, there would be so many flats to choose from that rents would go down. We don’t know exactly when that would happen – in fact, we’re not sure it would happen at all. Meanwhile, he can carry on making pots of money. Nice.
Government is not, of course, part of this proposal. Or rather it is, but tacitly. Assuming there is a political will to do something about rents, rent control is a big no no. The way forward is to make it possible and preferably easy for developers to “increase supply”. Methods could include a relaxed planning regime, for example – even if, as is, the planning regime appears to be sitting on a beach sipping cocktails.
Now I think Grech is right to argue against price controls. I can imagine how Byzantine a scheme would have to be that attempted to set ‘fair’ rents for the hundreds of different kinds of properties and locations. I also think that price controls would discourage property upgrades, among other problems. In any case I’m too corrupted by reading Hayek to entertain that kind of State meddling.
It is truly astonishing, and shows just how brazen big business generally and developers in particular have become
The rest of what Grech said about rents does not follow. First, should supply ever momentarily match demand, developers would not likely lower rents. Instead, they would suggest that we really need to attract more foreign workers, reclaim some land, or knock down flats and build smaller ones (as happens with houses now).
Rents for those tiny flats would be astronomical and a white-haired Grech would remind us that he did say, back in 2017, that the process would take time. Rather like the receding horizon in an Indian miniature, the supply-demand equilibrium would be conveniently trapped in a perennial future.
Second, if the notion of supply-demand is slippery at the best of times, it’s positively treacherous in a speculative market. As is, developers do not build flats to meet an already-existing demand. Rather, they build to rent in a market that might exist. Much the same thinking has transformed whole swathes of Indian cities into ugly apartment blocks. In a recent book, Llerena Guiu Searle calls these money-making machines “landscapes of accumulation”.
As if that weren’t bad enough, Grech went on to talk about the desperate and urgent need for business parks. For example, business owners (like him, coincidentally) who have offices in Mrieħel have a problem: they have to rub shoulders with the semi-industrial tenants who got there before they did.
Again, Grech has a solution: “Eventually someone will have to pay a price and move them out, giving them a good deal. And the only party that can do that would be the government itself.”
In everyday language, Grech is unhappy that he has to share the street where he works with places that sell wholesale, repair cars, manufacture aluminium, and so on. That was probably why he got his offices at a good price, and it is also what most of us have learnt to live with, but never mind. He now wants taxpayers to fork out money – money that could be used to build social housing, given he’s so concerned about rents – to effectively evict his unworthy neighbours.
I spilled my coffee all over the sofa when I read this. It is truly astonishing, and shows just how brazen big business generally and developers in particular have become. In one sentence, Grech is against government intervention to fix things like fair rents. In the next, he would have government intervene to pay undesirable neighbours to move out.
It turns out that the infamous nicknames are not alone after all. Developers like Grech may have little interest in taming tigers, but they certainly know how to make the State jump through hoops and hold out its docile paw.
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