Last week, I came across this statement made by a Spaniard and reported in a section of the UK press. “If health and education are a social service in Spain, why not housing?”. This same statement can be made about Malta as well. Why should housing not be viewed as a social service in this country?
To be fair, there have been times when housing was viewed as a social service in Malta. This does not mean that housing was provided for free. It meant that successive governments aggressively pursued policies that encouraged people to be the owners of their home and provided housing at subsidised rates to those who could prove that they could not afford the market price.
We have had governments build housing estates and pass on the properties to persons at below market prices. We also had governments who provided land at a very low price and on which persons could build their own home. There were also a number of schemes whereby
the government provided cash subsidies of sorts to persons to encourage them to own their own home.
We also had a financial institution dedicated completely to home loans and this provided the possibility to persons to access credit facilities at a rate of interest which was below the commercial rate. We also had situations where the government would requisition property and dish it out as social housing. This last initiative drew a great deal of justified criticism, but the other initiatives were all seen as positive.
The fact that we have always had a minister or a parliamentary secretary specifically responsible for housing shows that we have considered housing as a social service.
Today, the situation is totally different, and we do need to reassess the situation. We still have a minister responsible for social accommodation. We also have a Housing Authority whose mission is, “to provide decent and sustain social housing opportunities, promoting stability and supporting social mobility”. They are probably doing a very decent job. Thankfully, I have never needed their services and so I cannot judge their work.
Housing should not be provided for free but it should be made truly accessible to all segments of the population
When I argue that today the situation is different, what I mean is that the general feeling among people I meet is that the housing market should be allowed to operate without any form of control, and the government should assist those who cannot provide housing for themselves. If housing is seen to be what economists call a merit good, like health and education, then it should be treated as a social service.
In the case of health and education, the state intervened in the market to ensure that we all have access to such services. If the state had not intervened and allowed the free market to supply health and education services at the prices it wanted, we would have ended up with a very socially inefficient level of consumption.
This is what happened in the case of housing. Today, we have a very evident market failure in the housing market in our country. The suppliers of accommodation possess a power to set prices that is leading to inefficiencies in the market. The prices charged for housing are not justified by the benefits that buyers derive from such a product, leading to a distortion in the market in favour of the sellers.
If we consider housing a merit good like health and education, and hence is to be considered as a social service, then the state needs to intervene to correct this market distortion. This distortion may not be affecting those supported by the Housing Authority and the Ministry for Social Accommodation. It will also not be affecting those with high incomes.
It is impacting those who need to indebt themselves significantly to be able to buy their own home. It is also impacting those who will be evicted from their homes following the changes in rent laws. It is mainly impacting the middle class. Talking with young couples and with senior citizens would show up the market distortion in the housing market in a most transparent way.
Housing should not be provided for free but it should be made truly accessible to all segments of the population in a manner that would not lead to further inequalities in our society and would not lead to the creation of a disadvantaged class. As such housing is a social service.