The rental market is not a homogeneous reality. While eighty per cent of households own their own home, the remaining 20 per cent rely on the availability of rented property.

The top end of the market has seen a surge of demand in the last few years as a result of the influx of senior foreign employees working in Malta’s new services industries. This boom in demand was also experienced in the mid-range market where foreign workers needed temporary accommodation.

The lower end of the market that is mainly the target of low-income Maltese families was impacted by this demand growth that exacerbated already acute social problems associated with the working poor.

The highly anticipated rental reforms announced by the Prime Minister were heralded as being “the most substantial overhaul of the sector for decades”. They included several measures aimed at stabilising the spiralling increase in rents.

High rent inflation has a variety of negative effects. It crowds out many locals from what used to be affordable property, puts Malta’s low-cost competitiveness at risk and introduces new undesirable practices like having two or more families sharing a small apartment. It has led to ‘evictions’ when unfortunate tenants were unable to afford a sudden spike in rent, imposed by landlords who may have let greed get the better of them.

The headline reform is the five per cent capping on rental increases in multi-year contracts. This capping may seem reasonable for high earners but it certainly is not for heads of households on wages that are not increased by such an amount on an annual basis.

Joseph Muscat acknowledged the ineffectiveness of this measure when he conceded nothing could stop landlords from entering one-year contacts and charging much more in the next annual contract.  The new regulations’ insistence on the registration of rental agreements and the incentives given to both landlords and tenants to encourage this reasonable practice is a positive development.  Whether it will be enough to curb abuse remains to be seen.

In a market where demand from low-earning families exceeds the supply of affordable housing, tenants may often be forced to be “pragmatic” and accept any conditions to secure a roof over their heads. With the government’s poor record on enforcement, not many are convinced that the Housing Authority will be effective in policing the rental market as promised by the Prime Minister.

For families living on low incomes, the announced reforms are little more than an attempt to nibble at the enormous problems they face. The Prime Minister made it clear that the reform will not impact pricing, which would remain subject to the free market. This confirmation is undoubtedly a blow to those families who aspire to move up the social ladder.

Many such families are prepared to work harder, and invest more time and effort in their children’s education, so long as they can be confident they can have access to decent housing in the long term. Giving tenants three months’ notice before the termination of a rental agreement is not going to make tenants feel more confident about their future.

Following the latest rent reforms, the most disappointed families are those who have little hope of finding property they can afford. The working poor do not appear on the social radar of the government. These rent reforms do not provide any incentives for the provision of affordable housing for those who are earning too little even to rent modest accommodation in a market that has little consideration for their plight. This failure is not what makes a fair society.

One hopes that the most recent rent reforms are at best a modest attempt to close certain loopholes in current legislation. Much more remains to be done.

Two court decisions have opened a new Pandora’s Box as they seem to threaten the security of tenancy that holders of leases signed pre-June, 1995, enjoyed. While landlords’ rights for a fair return on their property have been acknowledged, thousands of families now need to know how they will be protected from possible financial shocks caused by market-driven increases in the rent they pay. 

The government’s attempt to update the regulations has some positive effects but it will not resolve the challenges that many families who depend on the rental market are facing. At best, the recent reforms are tactical moves aimed at putting some order in the market.

What is missing is a long term strategy that respects the rights of landlords and tenants and, at the same time, supports families who need affordable housing.