Landlord lobby

Alternattiva Demokratika has launched a referendum campaign to reform the outdated rent laws. Fiona Galea Debono got their views and other opinions.

Petitions to hold a referendum to abrogate the outdated rent laws are "spreading like wildfire", according to Alternattiva Demokratika chairman Harry Vassallo, who said signatures, which need to total 30,000, will be counted when the verification process starts.

Dr Vassallo is pleased with the way the referendum campaign is proceeding and feels things can improve through imminent plans to step it up a notch. A leaflet is being sent to every house in the country, asking everyone to take a stand on the issue, he said.

"We are really helping people who have a serious problem and who feel they have been neglected for a long time, without any real hope of change." The response from them had been "significant".

AD firmly believes in the overall success of the referendum. Whatever the outcome, it would result in the coalescence of a lobby which is today totally dispersed. All those who own or have inherited a house that is subject to controlled rent have never been brought together and have suffered privately. But today, they already feel that there are thousands of them and this will grow, according to Dr Vassallo.

In a year's time, by the time the referendum is held, Dr Vassallo believes everybody will be fully aware of the situation. "By then, these people would have met several times, they would have voiced their opinions and political parties would no longer be able to ignore them.

"We would have inverted the situation from having a non-lobby to having a major lobby that cannot be ignored. That is a victory in itself, no matter what the outcome of the referendum is."

According to Dr Vassallo, there are more landlords than tenants: "We are talking about old rents, the majority of which are occupied by older people, one or two, (only the minority are relatively new tenants), while a small house can have up to 50 part owners." Moreover, there are also ex-landlords, who are still furious because they have had to sell their family properties for peanuts. Plus, there are also decent people who can see the injustice and are revolted by the situation even if they never owned a property.

The contrast between having a house that earns you Lm20 a year, while the house next door is sold for Lm200,000, is "just astronomical. Anyone with any common sense can see that this has to change and they can also understand why it does not.

"If this government and the previous one have been on their knees before the hunters and the boathouse squatters at Armier, there is no reason why this cause, which is recognised as just by everyone, should not have a result."

Dr Vassallo intends to hammer out the issue until everyone understands the situation.

As a Green party...

"The heart of the matter in green politics is a rational use of resources. The issue of the rent laws is clearly a kingpin for the rational use of land in Malta, which will always be the country's primary environmental issue. Because we do not use our urban property resources in a rational manner, we are continually encroaching on the countryside.

"The Central Bank estimates that there are Lm44 billion worth of property in Malta. That this should be used rationally is a sine qua non. It is a lot more than the country's national debt, which is a major concern. If this is a real value, Malta has the resources to turn the economy into something new and brilliant."

Dr Vassallo maintains that the Maltese should be earning money from this capital, using this resource and also safeguarding it for the future. "If we look at the old towns, we have immense architectural gems that are falling to pieces because the tenants and landlords cannot afford to repair them. As a result, we are all losing out.

"At the end of the day, as Greens, we feel that ownership is a question of responsibility. We are custodians for the future, especially in a place like Malta where buildings last for hundreds of years. The fact that we are destroying this simply because of political stagnation is a huge challenge to a Green party."

Social and economic reasons

It is a huge injustice for families that are not well off to be financing millionaires - as is sometimes the case, Dr Vassallo maintains.

There are also opportunists, who sell their houses to go and live with their grandmothers, for example, in controlled tenancies, pulling their capital out of their own property and putting it to more profitable use. "These are the clever ones, except that they are cheating someone."

The problem of the sky-rocketing property prices is not due to a scarcity of houses. On the contrary, there is a surplus. The situation is "insane" and the main reason why the market is so warped is because of the rent laws, he insists.

Meanwhile, more and more people are being excluded from the possibility of ever owning a house. "And if things are left as they are, the situation could only get worse. What would the answer be then? Is any government in a position to provide them with housing? It will just turn onto vacant properties. By doing nothing about the situation, we risk going back in the direction of requisition.

"Malta has a 60-year culture of people who are afraid to rent to Maltese. There has been an increase in rentals to locals but it is not enough and is mainly due to the fact that more and more people are looking to rent because they have no choice to buy," Dr Vassallo said.

"To address the situation you have to address the culture of fear and instil confidence, such as incentives and, if necessary, disincentives. However, it is wiser to start with the carrots rather than the sticks.

"If the government makes a radical reform and persuades everyone that the whole system has changed once and for all, then more landlords would be willing to rent. They can be rewarded in many ways, with a flat tax rate on all income from rent as is the case with part-time work, for example."

Dr Vassallo also suggests a 10-year tax holiday for all formerly controlled rent properties. "We cannot ever hope to compensate the landlords that were robbed through this system but we can definitely try to overcome their fear by inviting them to earn money from their properties as it would be completely tax-free. If, in years to come, the market has not taken off, disincentives could then be introduced.

The procedure

After the signatures are collected they would have to be verified by the Electoral Commission, which would then bring them before the Constitutional Court to hear objections if there are any. The date of the referendum would then be announced, after which AD's proper campaign would start.

At that point, AD expects to be given air time by the Broadcasting Authority on the grounds that this is a national referendum. It would be able to address a wider public as opposed to just the dispossessed property owners, who are currently the target as they would be the direct beneficiaries.

The Referendum Act only allows for the abrogation of laws. The question is whether the Maltese want the four rent laws removed. Yes or no?

The 1995 amendments liberalised the market for post-1995 contracts but what AD would like is a situation where everyone is in that condition. A new law would have to be enacted to govern the transition.

Although the law does not impose a timeframe, AD has set a its own deadline to collect the number of signatures required - the end of July - to prevent the process from being too open-ended. "We expect to succeed but if we do not it is no big deal. We will carry on until we have more than the required numbers."

The government's point of view

The revision of the rent laws is a highly charged, socially and economically sensitive issue, says Family and Social Solidarity Minister Dolores Cristina. And the Nationalist government understood fully that the system as is needs to be reformed.

It has repeatedly committed itself to finding a just solution, so Ms Cristina really does not see any need for AD's war cry for a referendum.

The government's underlying principle, she says, remains moving towards legislation that would give owners a fair and just deal but still protect the vulnerable groups that occupy low rent property.

As regards AD's insistence on the abrogation of the pre-1995 rent laws, Ms Cristina maintains that, in so doing, it is showing a lack of responsibility, particularly towards vulnerable people.

"I have yet to learn what AD's proposals are. I have already made it clear that the government is working and will continue working on the issue. But AD's chairman, Harry Vassallo, was very annoyed when I commented that AD is jumping on the government's bandwagon to obtain political mileage."

A working group has been meeting regularly in the past months and the ministry has now wound up the proposals and is putting the final details to a memo that will be presented to Cabinet this month.

Following Cabinet directions, a White Paper will be prepared so that public consultation can follow.

The revision of the rent laws is a highly complex issue, with far-reaching economic and social repercussions, the minister explains. It is a legacy that has been inherited from times past and now presents various anomalous situations.

The country's focus in previous years was on other matters, although 10 years ago it enacted legislation which liberated the rental market. Since 1995, parties have been free to agree on the term of the rental period and the amount to be paid as rent. This, however, did not result in any significant development in the rental market, as many had expected, and many properties remain vacant. Landlords may fear that a change in government may see an introduction of requisitioning, Ms Cristina says. In 1995, the government abolished requisitioning but the MLP has not stated its position in this regard.

The derequisitioning of properties wherever possible is an important ongoing exercise the government has undertaken, Ms Cristina adds. In 1998, the number of requisitioned properties in Malta and Gozo stood at 12,800. By the end of 2004, the number was reduced to 8,900.

At the opening of the 10th Parliament in 2003, President Guido de Marco had specifically declared that the third part of the government's programme, dealing with social policy, included a revision of the rent laws. In fact, he had said, "rent laws will be revised and incentives will be granted for the use of our sizeable stock of empty dwellings".

Outlining her role in the matter, Ms Cristina said that on her appointment as parliamentary secretary in 2003, Prime Minister Lawrence Gonzi, then Social Policy Minister, underscored that this revision was a priority issue. A research and listening exercise started in summer of that year and, in fact, one activity was a day-long meeting with people from various sectors, including Dr Vassallo. This was followed by several one-to-one meetings at which people were sounded out, particularly on their views as to the best way to go about introducing reforms as smoothly as possible.

"On my appointment as minister some months later, I asked Peter Grech from the Office of the Attorney General to prepare a report and collate the various suggestions and recommendations made by the commission set up by Minister Alfred Portelli in 1997. Its brief was to look at possible rent reform legislation. Unfortunately, the commission never finalised its work.

"I wished to utilise the work that had already been undertaken rather than starting afresh. Dr Grech's report was presented to Cabinet but as the members of the commission had not finalised and certainly not approved the different proposals and recommendations included, it was decided that it would be unethical to make it public."

Ms Cristina said she came away from Cabinet with a commitment to present proposals within that forum by mid-year. To this end, the working group has been meeting regularly.

The landlord says...

AD's move is a reflection of many decades of stagnation in the landlord-tenant relationship, said landlord Alex Bonello Dupuis, who feels that the party is addressing "one of the biggest injustices in Maltese history".

He described as "cruel" the fact that the government landlord has one yardstick while the private landlord has another.

The government went on about encouraging and liberalising the tenancy market, yet it had not taken steps to abrogate the rent laws, Mr Bonello Dupuis said.

The issue, he said, is a classic case of the government creating laws for emergency needs and never again adapting them to the current situation - "a question of not upsetting the apple cart". After all, the majority rules - there are probably more tenants than landlords, so the former are protected, he continued.

"The injustice is there, it is correct to deal with it and action is long overdue." But, having said that, AD is using the argument of the liberalisation of the rental market, which, he claimed does not hold water, to promote the cause.

The market was liberalised with the change of the law in 1995 and landlords have since rented to Maltese tenants with no problems. What would help liberalise the market would be encouraging buying to let, as well as tax incentives as was the case in the UK.

Mr Bonello Dupuis suggested the creation of a mechanism where rental revenue is taxed at source via estate agents. It would be a matter of withholding 15 per cent as opposed to the current situation of being taxed at the full rate.

He also suggests a council tax on properties. "The minute an empty property starts costing you Lm200, you would want to start letting it." That would be a way forward in the elimination of unoccupied properties, although it would be an unpopular measure.

Despite being a landlord himself, Mr Bonello Dupuis also believes it would be unjust and immoral to immediately terminate the pre-1939 rent laws. "You cannot just send a 75-year-old out shopping for a flat!" The correct way, on the other hand, would be to immediately do away with the inheritance of rent.

Facts & figures

¤ An opinion survey reported in The Sunday Times, June 2003, showed that: 17.6 per cent of all tenancies are rent-controlled; only 20 per cent of them relate to tenants in the lowest income bracket, while six per cent relate to tenants in the highest income group; eight per cent of rent-controlled properties belong to owners in the lowest income group.

¤ A recent online poll by The Times showed that more than 70 per cent of respondents want the abrogative referendum to be held.

¤ Estimating that each of the properties have a conservative value of Lm30,000, the rent-controlled properties represent a global value of Lm510 million.

¤ A conservative 25 per cent of properties in Malta are vacant - enough to create a ghost town the size of Gozo.