NGOs welcome rent reform proposals but warn they ‘will not solve all the problems’

A coalition of NGOs has welcomed the rent reform White Paper as “a positive step forward” but warned that government’s proposals “will not solve all the problems associated with the private rental market in Malta.”

While recognising that a number of proposals put forward by the coalition have been taken on board by government, the NGOs said the White Paper focuses on the issue of stability through the provision of longer contracts meaning that “it only marginally addresses the concern relating to exorbitant rent prices.”

On a positive note, the NGOs said the White Paper recognises that currently the unregulated private rental sector is simply not working and is leading to widespread insecurities and hardships that are destined to worsen if government does not intervene through a regulatory framework.

“Regulation is needed in order to bring about contracts of longer duration and to establish rights and obligations of tenants and landlords, leading to more stability and peace of mind for both,” the NGOs said.

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Among the recommendations put forward, the NGOs said rent contracts should have a minimum threshold attached to them in terms of their duration, together with incentives for landlords offering leases of a longer duration.

“The White Paper recognises that the current practice of providing very short-term contracts (usually 6 to 12 months) leads to people having to live precariously. It also outlines two possible frameworks in order to have longer-term contracts for residential leases: either a minimum contract term, or tax incentives. We suggest a framework that combines these two options: a minimum contract period of three years, and tax incentives connected to contract-length then onwards.”

The NGOs said this system would see landlords providing a lease of seven years would pay less tax on rental income than a landlord providing a lease of four years. And in the case of short-term tenants, such as students, temporary workers and locals carrying out work on their main residence, the NGOs said contracts would be exempt from the three-year minimum term, on provision of valid evidence that would not be too burdensome or unreasonable to provide.

The coalition of NGO also said that landlords should have the possibility to annually increase the rent via a mechanism established in the contract, however, “we believe that the maximum increase allowed should be pegged to the cost-of-living increase”, and not the Property Price Index as proposed in the White Paper, “through a clear and accessible formula to be published by the authorities on a regular basis.”

Moreover, the NGOs called for the introduction of a Rent Value Index to enhance public knowledge on the private rental market and lead to a degree of rent-price stabilisation.

The Rent Value Index would list rent-value in different areas and for different classes of property according to their size and quality. There would be a rule stating that an initial price should not exceed 10% of the price listed for that particular category within the Rent Value Index.

“This would still give landowners ample leeway in setting prices, since the Rent Value Index would in itself reflect market prices, and the price can even be 10% higher. Such a rule would simply reduce the risk of having landlords setting unrealistically high prices.”

The NGOs added that there should be strong dissuasive measures and sanctions deterring landlords from renting without a valid contract.

“Tenants who report landowners for not providing a contract, or for contract irregularities, should be protected from eviction. In such cases a tenant should be guaranteed, at least, a three-year lease at a favourable rate set by a public authority. It is very unlikely that tenants will report abuse if effective protection is not provided. This would render the whole regulatory framework useless since landlords would find it very easy to lease their property without registering the contract, or without a contract at all.”

The coalition is made up of Moviment Graffitti, Alleanza Kontra il-Faqar, Malta Tenant Support, Women’s Rights Foundation, Forum Komunita’ Bormliża, Malta Humanists Association, The Millennium Chapel, Żminijietna – Voice of the Left, aditus Foundation, Platform of Human Rights Organisations in Malta (PHROM), Malta Gay Rights Movement, The Critical Institute, Spark 15, Mid-Dlam għad-Dawl, Kummissjoni Ġustizzja u Paċi, SOS Malta, African Media Association Malta, Koperattiva Kummerċ Ġust, Integra Foundation and Third World Group Malta.