A few days ago, the Foundation for Affordable Housing released its latest publication, Entryways to homeownership – Family strategies and intergenerational transfers in Malta’s housing system, analysing the important role that families play in ensuring that the young are able to purchase their home.
This pattern is very common in Southern European countries, less so further north, though. The report also investigates the evolution of the roles played by the government and the Church in response to realities of the time.
It strikes a chord with the mission of the foundation as it outlines the need for innovative products to bridge the gaps left by previous supply-side solutions that were phased out across past decades. We often think that housing affordability became a challenge only recently. In reality, housing affordability was already a challenge of public policy from the 1960s to the 1980s as it attempted to address realities experienced in those days.
As Malta was recovering from the war and finding its feet as an independent nation, numerous state initiatives were set up to make homeownership accessible to working-class couples. These efforts included the state selling land at significantly reduced prices and providing financial assistance for construction through subsidised rates via Lohombus Bank (Loans for Homes Business). Lohombus, which ceased operations during the late 2000s, offered favourable credit terms for house purchases.
The Church also played a crucial role, encouraging the state to sustain homeownership programmes for specific groups, such as engaged couples, and providing land and housing, particularly to vulnerable populations.
As these initiatives typically provided undeveloped land, the main financial burden on families was related to construction. Here is where families often stepped in, offering financial assistance or non-financial support such as physical labour. It is not uncommon for people from that generation to say “we built this house ourselves”, a concept that must seem unusual to younger people today.
Today, the landscape has dramatically changed. Demand for affordable housing has re-emerged on the back of years-long decoupling between the rate of growth of the value of property and that of median income. However, the availability of land that can be developed has significantly decreased.
Understandably, there are no state support policies comparable to those offered in the 1960s, 1970s and 1980s. The state’s involvement has been limited to mainly financial assistance programmes but there is no longer a dedicated financial institution like Lohombus Bank to provide subsidised lending arrangements.
In this context, Dylan Cassar’s study, published by the foundation, has shown that the family has now re-emerged as a significant entity which directly addresses housing affordability issues. In fact, familial support, especially through property concessions as gifts, is on the rise.
It is not uncommon for people from that generation to say ‘we built this house ourselves’- Jake Azzopardi
Longer cohabitation and other monetary donations are other coping mechanisms that families are adopting to curb the increase in property prices.
This reflects the cultural preference that the Maltese have towards homeownership, mirrored by the high rates of homeownership in Malta.
So much so that Malta’s homeownership rate is significantly higher than that of our European counterparts. Between 2005 and 2022, it also saw an uptick, despite the EU trend doing the opposite over the same time period.
This statistic reflects the contribution of support schemes of the past years in enabling younger generations to buy their home. At the same time, it does not necessarily mean that these families or individuals are finding housing that fits their needs, nor that this is being done in a reasonably affordable manner.
While the role of family support will remain crucial, modern challenges require modern solutions. The roles that used to be played by different institutions, primarily of public nature, may be better served by new solutions. We are no longer in the rebuilding phase of our development as a country. Arable land needs to be protected and our construction methods have advanced since then.
For Malta to effectively tackle the affordability challenge, we must look beyond demand-side interventions and focus on increasing the availability of affordable housing. The foundation, with its unique position as an entity within the third sector, meaning that it has non-profit objectives but must remain sustainable, proposes innovative solutions tailored to modern realities.
LoanUp, for example, is our first response to this effect but by no means it is our final end goal. It is just an example of how products that work with a social goal in mind can be both sustainable and profitable.
Beyond supplying future homeowners with better financial products, there is also significant potential in the financial sector to support those that want to increase affordable housing stock. The current gap in the market, if addressed, could offer investors untapped opportunities for socially responsible investment. This would diversify the investment landscape while also meeting modern needs, ensuring a permanent fresh and high-quality supply of affordable accommodation.
To complement this strategy, planning policy should also be revised. Across Europe, we have seen examples that tackle similar challenges, with dedicated use-classes for affordable housing being instrumental in ensuring that new developments include units that are accessible to lower-income families. This would not only provide immediate relief but also contribute to a more balanced housing market in the long term.
The path towards this vision necessitates the appropriate platforms for collaboration with private and public players to make sure that the potential of available land is maximised to yield the highest possible social gain.
Jake Azzopardi is CEO of the Foundation for Affordable Housing.