Church-state housing project is speculation subsidised by public land, MDA says

The real beneficiaries of a new church-state initiative to offer apartments at discounted prices will be a small number of private developers whose profits will be artificially inflated, the Malta Developers' Association said on Monday.

"This is not affordable housing. This is unaffordable speculation disguised as a social policy," the association said in a letter to the prime minister and the archbishop. 

It was referring to a government–church project announced last month to build 260 new housing units and sell them at 30 per cent below market price. The apartments will be available to people who cannot afford a property on the market but do not qualify for social housing.

The association slammed the project in a statement last week. 

"The announcement that this initiative will deliver a few hundred apartments at prices “30% below market value” is designed to appeal to popular sentiment. Yet, when one analyses the numbers, the scheme reveals itself to be less about affordability and more about speculation subsidised by public land," the association said.

It pointed out that according to the KPMG “Construction Industry and Property Market Report” it had commissioned, the typical cost structure for a two-bedroom apartment under normal market conditions was broken down as follows:

Land acquisition 48%; Construction 22%; Finishing 15%; Developer profit 15%; Total 100%.

This model shifted under the proposed scheme, where the Joint Office-owned land was made available free of charge: Land Cost 0%; Construction 22%; Finishing 15%; Homebuyer Discount 30%; Developer Profit 33%; Total 100%.

"This tells a revealing story. With no land acquisition cost, and despite a 30% discount passed on to the buyer, the developer is able to walk away with a 33% profit margin. This is more than double the typical market return, courtesy of public coffers," the association argued.

"Yes, a few hundred families may benefit from discounted purchase prices. But the real beneficiaries are a small number of private developers whose profits will be artificially inflated. This is not affordable housing. This is unaffordable speculation disguised as a social policy."

It insisted that if this project was truly driven by its declared social mission, and if developers were to earn the standard 15% margin, the discount to buyers would need to be as high as 48%, reflecting the full value of the free land.

Moreover, if the Foundation is to operate in the spirit of public service, then it should be expected that developers contribute to the national effort by accepting reduced profit margins in return for the privilege of building on public land.

The MDA warned that offering homes at such deep discounts came with its own risks. It would lead to serious distortions in the housing market, undermine existing property values, and create divisions between the few who benefit from the discounts and the many who do not.

The MDA said that while some would probably find it ironic that it was putting forward these points, it was being consistent with its constant call for a level playing field. Public land should only be used through transparent, fair, and economically sound methods.

The prime minister and the archbishop were urged to urgently review their initiative and halt its implementation until the fundamental issues were addressed. This included re-evaluating the financial model and ensuring that all such projects undergo a transparent procurement process.