Employers have welcomed the government’s proposed rent reform as a step in the right direction, amid concern over spiralling rent prices unsustainably driving up wages.

The Malta Employers' Association met with housing parliamentary secretary Roderick Galdes to discuss the new White Paper on Rental Reform, which seeks to encourage longer lease periods and stabilise the market through limitations on rent price increases.

MEA director general Joseph Farrugia told Times of Malta businesses were facing increasing problems due to employees - both Maltese and foreign - demanding higher salaries to cope with increasing rent costs.

He also noted that some foreign employees had left Malta due to these issues.

“There is clearly a relationship between salary demands and rent and property prices. Employers want contented employees, but when you have salaries increasing because of this, it’s not necessarily reflecting productivity,” Mr Farrugia said.

READ: Rent reform: minimum lease periods but no fixed prices

While the consultation document does not propose any caps on initial rents, Mr Farrugia said these prices had to be subject to market forces, and pointed to the proposal of linking rent increases to the Property Price Index, with the government imposing additional caps to prevent sudden hikes.

“The White Paper is trying to stabilise the market. We know that over-regulation in this sector doesn’t work, but we need clear parameters to create a balance between tenants and landlords,” he said.

He added that the association, which was one of several stakeholders involved in focus groups before the White Paper was drawn up, would be studying the consultation document in greater detail before offering its detailed assessment.

When salaries increase because of rent, it’s not reflecting productivity

The White Paper, published on Tuesday, has the stated aim of ensuring stability and predictability for the growing number of long-term tenants and landlords.

It proposes to tackle the uncertainty of short-term leases, either through mandatory minimum leases or financial incentives for contracts longer than a year.

It will also make mandatory the registration of the rental contract, together with an inventory of the property together with the security deposit, and set notice periods before landlord or tenant can end the lease, as well as a compulsory period for the tenant at the start of the lease.

The changes would be regulated by a new department within the Housing Authority, which will oversee the market and become responsible for registration and enforcement issues.

The White Paper also includes measures aimed at increasing the availability of affordable rental properties within the €400 to €700 per month range, primarily through partnerships with the private sector.

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