Explained: How a much-questioned affordable housing project will work

Private developers who win a contract to design, build and sell residential blocks at 30 per cent less than market value on government land will also have to pay land and administrative fees.

The fees will be paid to the Foundation for Affordable Housing (FAH) that is handling this joint venture between the government and the Archdiocese of Malta to offer at least 250 new housing units at four different sites – Kirkop, Fgura, St Julian’s and Marsascala – to people at 30 per cent below the market price.

The proposal has drawn criticism from the Malta Developers Association (MDA) that has called for it to be abandoned as it risks destabilising the market by giving developers land “for free under the pretext of affordable housing”.

The land has been transferred from the Housing Authority to the FAH under a perpetual emphyteusis.

The winning bidder will not be granted full ownership of the land but will be granted sub-emphyteutical rights to only develop residential units and sell them 30 per cent below market value.

The buyer of the property will then have a temporary 65-year emphyteutical, with the option to convert to freehold after 20 years.

€215,000 for a two-bedroom apartment in St Julian’s

On each plot, the winning tenderer will be able to build up to three/four floors plus a semi-basement, which is equivalent to the maximum allowable height of 17.5 metres.

Four tenders for each site were opened on July 8 and are set to close on September 5.

This type of tender differs from more common ones where contractors usually place an offer with the amount they would charge for their work.

During the announcement last month, CEO of FAH, Jake Azzopardi, said that they chose this model as it reduces risk by placing more responsibility on the developer.

According to Expression of Interest (EOI) documents seen by the Times of Malta, the maximum sale price for housing units in St Julian’s are as follows: €165,000 for a one-bedroom apartment; €215,000 for a two-bedroom apartment; €260,000 for a three-bedroom apartment.

Times of Malta did not have access to selling prices for the other localities.

Is land being given away for free?

EOI documents show that the winning tenderer is required to pay a land fee covering any laudemium fees – ground rent – due to the foundation.

The fees vary depending on the size of the land. The largest plot of land up for grabs is the one in St Julian’s covering 4,800 square metres, which has a land fee of €2.1 million.

For Kirkop, the fee is €1.5 million for 1,970 square metres of land, while for Marsascala it is €180,913 for 337 square metres of land. Times of Malta did not see the EOI for Fgura.

The fee will be split proportionally among all housing units, and the portion assigned to each unit will be paid by the winning tenderer when that unit is transferred to the buyer.

Besides this, the winning bidder must also pay the foundation nine per cent of the final cost of each residential unit or garage that they sell.

The MDA also sent a letter to the prime minister and the archbishop saying that developers normally make around 15 per cent profit on their developments, but since the winning bidder is not required to pay any land acquisition fees, then they will be able to make approximately 33 per cent profit.

When MDA’s president Michael Stivala was asked whether the association’s profit calculations took into consideration the land fee and the administration fee, he said these do not change anything as “one assumes that both the ground rent and the administrative cost will be transferred to the buyer and there is no way for the authorities to ascertain otherwise”.

Stivala added that estate agents’ commissions were not included in their calculations.

Although it is true that the buyer will have to pay a yearly emphyteusis, the EOI document states that the successful tender will have to pay this land and administrative fee, not the buyer.

ADPD deputy chairperson Carmel Cacopardo, on his blog, noted how the €2 million land fee for St Julian’s is very low.

“The commercial value of this land is much higher than that. Whoever is chosen for the San Ġiljan land, in other words, is getting a substantial discount. What a gift for the chosen ones!” he said.

‘Two months is far too short’

Within the two-month window, bidders will need to publish a proposed design, a list of suppliers and subcontractors, a programme of works, the cost of each apartment, among other things.

Following this, the proposals will be handed to an evaluation committee that will follow a scoring system to determine which proposal offers the best price-quality ratio. In simple terms, the foundation aims to pick the offer with the best design at the lowest price.

Cacopardo said that the two-month tender period is far too short and said that only someone who would have known about the tender beforehand would be able to gather all the information.

PN MP Albert Buttigieg also questioned the short time frame, through a post on Facebook.

He suggested that it would have been better if the government had built the apartments itself and given subsidies on them.

The FAH did not wish to comment on the matter at this point in time.