A study issued this week by the tenant’s association Solidarjetà has found a complete lack of affordability in the private rental market sector, with those on minimum wage having no hope whatsoever of finding an affordable place to rent, and those on even median wages likely to struggle.
The study, penned by economist Calvin Vella, measured affordability in accordance with the Housing Authority’s own benchmark that housing costs should not exceed 25% of disposable income. It considered four categories of property: Affordable (which costs less than 25% of the household’s disposable income), Marginally Affordable (25-30%), Stressed (30-40%), and Overburdened (over 40%).
The study came up with 38 different household scenarios, such as sole tenants, single parents, couples with children and couples without, different income ranges, and different property sizes.
Out of these 38 scenarios, only three of them allowed tenants to properly afford the median rental property.
The study lays bare the issues with affordability in the rental market.
“Even households earning a gross salary of €35,000 or €40,000 cannot afford the median rent in the majority of localities. For example, a single person earning €35,000 could not afford the median rent of a one, two or three-bedroom apartment in any locality,” Solidarjetà said.
A single parent earning €35,000 would be overburdened in 27 from the 44 localities, and there is just one locality in the country – in Gozo – which would be affordable for a single parent on a minimum wage.
The study also highlighted a significant non-linearity in affordability created by the Housing Benefit Scheme (HBS) which mean that some households earning just above the limit face a total collapse in affordability, effectively having a smaller housing budget than those earning less who qualify for the benefit.
This essentially means that those who qualify for benefits because they earn less actually have a lesser chance of being overburdened than those who earn just above the threshold where they are eligible for the said benefits.
These people are caught in something of a catch 22: they earn too much money to be considered for benefits which would make housing more affordable – but they don’t earn enough money to actually make housing affordable.
The rental market in Malta is clearly broken. This is an affordability crisis which is a direct consequence of several factors, not least then country’s population increase and the subsequent splitting of rental units by landlords to deal with this.
It is commonplace nowadays to hop onto Facebook Marketplace or other real estate agency websites and see a single bedroom be advertised at something along the lines of €600 per month – meaning that a landlord would make €1,800 per month from a distinctly average three-bedroom apartment.
These are absurd prices to have to pay for rentals and they have the consequence making it near-enough impossible to actually get onto the property ladder.
People who, for whatever reason, need to move into rental accommodation find themselves stuck: they struggle to save up enough money to be able to afford a deposit to purchase a property, particularly as the prices to purchase property is also on the rise.
The government has introduced reforms when it comes to the rental market which were positive. Legislation to stop over-crowding for instance was much-needed, as was legislation to make it a legal obligation for rental contracts to be registered with the Housing Authority with a capping on how much the rental price can be increased per year.
Solidarjetà’s report recommends stronger rent regulations including limits on the maximum allowable rent hikes, broadening eligibility for the Housing Benefit Scheme and implementing a gradual tapering of benefits to eliminate the subsidy trap.
It’s clear that the government has made legislative advances in this sector in recent years: but it’s equally clear that more needs to be done.