Malta is a nation of homeowners. The homeownership rate, which stood at 81.9% in 2021, has remained remarkably stable over the last 15 years despite increasing concerns that housing is no longer affordable in Malta. These concerns are at odds with statistics showing that among all the countries of the EU, Maltese households have among the lowest housing overburdened rates. How is this possible?
Housing affordability refers to the relationship between housing costs and household income. While this sounds straightforward, measuring it is more challenging.
One approach stipulates that housing costs in excess of some threshold, typically set at 25% or 30% of the household income, places excessive strain on affordability. The reason is that spending a higher amount on housing will leave insufficient funds for other necessities such as food, transport and healthcare.
The problem with this approach is that for some low-income households, even if they spend 25% of their income or less on housing, they may still be left with inadequate money to cover the basic necessities.
To address this concern, an alternative approach focuses on whether households can still afford a basic standard of living after housing costs are paid. The Caritas report on the minimum budget for a decent living in Malta falls within this literature.
Any serious analysis of affordability should move away from looking at the average household, whatever that means, and focus instead on those categories that might be at risk.
The Housing Authority has recently conducted a similar analysis, making a distinction between different household types and income levels. The results point to a clear picture. While housing costs are affordable for most households, some categories of low-income households are clearly at risk.
As the above chart shows, three categories of low-income households stand out as having housing costs in excess of 30% of their disposable income: a) single persons younger than 65 years (which can include young single first-time buyers or those with a relationship breakdown later in life); b) single parents with dependent children; c) large families with three or more dependent children.
The identification of these categories allows us to assess whether the schemes of the Housing Authority are successful in addressing the needs of these households and to identify any remaining gaps. Rather than listing them one by one, our schemes are best grouped by their intended objectives.
The first category is intended to help individuals become homeowners. Most individuals require that small push that enables them to become homeowners. Among these we have the provision of social loans, a scheme that covers the 10% downpayment for first-time buyers through an interest-free loan and the Equity Sharing scheme, whereby the Authority enters as a partner with borrowers that are unable to purchase the property on their own. Since 2018, more than 627 individuals have benefitted from these schemes.
These schemes complement other targeted initiatives announced by the government. For instance, first-time buyers are exempt from paying stamp duty on the first €200,000 of the value of their property. Similarly, a recently announced incentive gives first-time buyers the opportunity to benefit from a one-time subsidy of €10,000 spread over 10 years, which amounts to €1,000 per annum. The latter is not intended to help individuals access the property market but rather to assist their purchasing power to make their house a home. The fact that these incentives are targeted instead of broad-based is intended to limit the inflationary impact on property prices.
We want to take a holistic view of housing
Second, we have schemes intended to provide relief and assistance to low-income earners who are not homeowners yet are able to rent out their own place. The increased demand for rental housing by foreign workers and tourists staying in private accommodation has resulted in a sharp increase in rents that placed excessive pressure on low-income households residing in this sector.
Around 17,183 individuals have benefitted from rent subsidy schemes since 2018, almost double the amount prevailing between 2013 and 2017. The budget for this rental assistance amounted to €30,080,870 over the five-year period ending 2022.
And let us not forget about the rent reform introduced in 2020. It still baffles me how this sector, which accommodates thousands of Maltese and foreign households, has been allowed to operate for several years without even the basic standards that today we take for granted.
While this reform kept the price mechanism untouched, it sought – and succeeded – to introduce basic yet professional standards that are suited for a modern rental market. These included the mandatory registration of contracts, including the amount deposited and an inventory list, procedures for renewals and terminations, and an adjudicating panel to ensure that small disputes are resolved quickly. It is no wonder that without this essential regulation abuses by unscrupulous landlords, despite being a minority, were taking place.
The Housing Authority also manages the scheme for households leased before June 1995. These households, most of whom are elderly, were allowed to keep their residence to ensure that they are not displaced from the place where they have spent their entire life. At the same time, the rightful owners of these dwellings are now able to receive a much fairer rent based on the value of their properties.
Third, we are aiming to increase the stock of social housing. While the Housing Authority is primarily geared towards addressing issues in the housing sector through the innovative initiatives mentioned above, social housing is intended for low-income households who can neither afford to purchase nor lease a property on the open market.
The construction of new units in several localities across the Maltese islands is planned to raise the stock of social housing by around a third. Malta has not seen such an impetus in social housing in years. But it is not just the creation of new social housing units (and the renovation of older ones).
Through another scheme, the Housing Authority leases properties from the private sector for a 10-year period and sub-leases them at a subsidised price to low-income households. A total of 728 beneficiaries have benefitted through this scheme between 2017 and 2022. The authority has also recovered 50 keys since 2018 from elderly tenants who move to public elderly institutions, which became available to new eligible beneficiaries.
Finally, the Housing Authority and the Ministry for Social and Affordable Accommodation are always with ears on the ground and in consultation with stakeholders to identify new pockets of vulnerability.
Two recently launched schemes fall in this category. The scheme called New Hope is intended for borrowers that find it difficult to obtain life insurance, which is required to qualify for a mortgage, due to past life-threatening illnesses or medical conditions. Another scheme, Sensability, provides financial assistance for the equipping of a sensory room for autistic persons. While the number of beneficiaries for these schemes is not large, let me assure you that they make a large impact on the lives of the beneficiaries. And this is what matters for us.
The wide-ranging schemes of the Housing Authority are able to reach several households that would otherwise face unaffordable housing costs or unable to become homeowners. I am driven to ensure that as they did in the past, incentives help to maintain the homeownership rate at a high and stable level. But we should not rest on our laurels.
The Housing Authority is currently embarking on a National Housing Strategy to make sure that no gaps are left unattended and gives a clear direction of where we want to go. We want to take a holistic view of housing. Affordability. Adequacy. Standards. Nothing should be off the table. This is important to ensure that despite the fast-paced economic growth and societal changes, no one is left behind.
Matthew Zerafa is chief executive officer of the Housing Authority.