An agreement was reached in the past days between Minister Michael Falzon and BOV to help individuals, who normally cannot borrow money from banks to become owners of their own home. A similar agreement was reached in the past with APS Bank. What made news this time round was a comment by Minister Falzon during the press conference at the launch of this scheme. Falzon stated that properties beyond the price of €120,000 are a luxury.

I tend to agree with Minister Falzon on this point. In the sense, that there should be a maximum price limit on what should constitute social housing. By capping the amount, the Government is avoiding speculation and this is a good point. Falzon is making sure that this scheme reaches those who truly cannot afford to buy a property through normal channels. This is a good sign.

But still, there will be a section of the population, that still will not be able to acquire a property. I think that this section needs to be addressed. In part, the minister is pointing the way forward by suggesting that there should be a maximum price tag on the property that falls under the heading of social housing. This price limit can be used to address the issue of empty properties in Malta in favour of those who cannot afford to buy a property.

At the moment, there are a number of empty properties in our urban centres. These properties constitute an urban challenge. In one of my past blogs, I already had the opportunity to suggest that one solution for Government would be to turn these threats into an opportunity by setting up a Land Bank.

The fact that there is empty property lying around Malta means that the country has a dormant capital. At the same time, the number of individuals looking for property is at the moment exceeding demand. The basic rule of demand and supply can explain why the rental property market is spiralling. Government is trying to circumnavigate this problem by committing itself to building a number of housing units. That is fine. However, until these units are built, those living at the margin of society are the ones  most likely to suffer until they find a decent property.

From my studies and research, I am becoming more convinced that a number of properties in Malta are lying empty not for economic reasons but mainly for cultural ones. Despite the fact that the Rent Laws have been changed, a number of properties have remained empty and have not come on the open market. This type of vacant property falls under different categories.

I am sure that owners would be more than willing to start renting these properties if they are offered  the right cultural and political assurances. But for some reason, they do not feel confident to take this step because they still think that the political right does not put their mind at rest. They have been bitten in the past by government, and therefore, they are reluctant to take risks. Perhaps, some would be prepared to even rent below market prices if they had the right cultural assurances. By keeping their property vacant, they are getting no financial return. On the contrary, in some cases, they have to fork out and pay bills for utility bills.  

One category of people to whom these type of properties could  appeal is itself problematic when it comes to honouring  rent commitments. This is another reason why one cannot blame the owners for being diffident. Owners know perfectly well that if their tenants default on their rents, they have very few assurances as to how they can get their money. In fact there is practically no way the owner can retrieve his rent particularly when the tenant is on the dole.  

Social Services Laws are worded in such a way as to protect the tenant but never the owners. Therefore, it is far more worthwhile for owners to keep their property empty.

We need to stop being idealistic when it comes to discussing rents. There are individuals who are abusing the system. Landlords are powerless to do anything when facing such abuse as the tenants are penniless and the owners have no means of obtaining their rent. Owners cannot even take part of the money forked out to these individuals who are on the dole. This is an injustice. In the eyes of the owners, the Government system is supporting abuse. Furthermore when these tenants refuse to hand in the keys after failing to pay their rent, the owners have to resort to going to court,  at great expense, to obtain a declaration that the renting agreement is terminated.

There are other issues that prevent individuals on a low income  from renting property. I know of  cases where tenants could not pay or cover the ARMS guarantee to have the water and electric services transferred onto their name. If an owner accepts to rent without the transfer of services, the owner becomes liable for any unpaid electricity and water bills incurred by the tenant.

I think that there is a simple and feasible solution. Government could  start acting as a guarantee for those owners who would like to rent to people on low income. What I am suggesting goes beyond the current system where Government covers part of the rent. What I am suggesting is a scheme which could cover properties that are currently empty and whose market value is below the established limit of €120,000. This ceiling would guarantee that this scheme truly covers houses earmarked for social housing.

For this scheme to succeed, the key is that it must address only abandoned or empty properties. Should these properties need restoring, this is where the concept of a Land Bank steps in. It  can undertake  to finance  necessary repairs and  the expenses and interest will be recovered from the rents. Part of the money goes to the owner and part  to the bank. The Government will act as a guarantor that the tenant will pay the established rent. Should this fail then - and this is the innovative aspect -  Government will have the right to recover the money through Social Services who are paying the tenant State benefits.

A mechanism can be created to  determine the equitable distribution and the right rent that should be paid in particular where expenses are incurred by Land Banks to render such property habitable.  Moreover, again Government can act as a guarantor for any damages caused to the property by the tenant and where damage is deliberate the tenant will end up having to pay and there where he/she refuses the amount in question will be deducted from their social income. Thus those renting out their property know that they are going to get paid and trust starts building up between these owners and Government.

Moreover, Land Banks can even enter into agreements that property is rented for a fixed period of time, even for short durations. This would  guarantee that properties are not left empty and owners will have no problem to recover their property once the contractual period expires.

Readers should be reminded that Government started seriously fighting absenteeism in schools when it started deducting sums of money from the Children's Allowance for those kids who absconded from school. This goes to show that  it is a great fallacy to argue that Social Services cannot be touched for any debts incurred by those receiving benefits.

This system should also be tied to income. Once those benefitting from this system start receiving a better wage or moving up the social scale, there can be a revision of rent and the tenant can be asked to pay more. This would ensure that this system is truly helping those who are really in need. Once such tenants can stand on their own feet, they can find alternative accommodation on the open market. Should they refuse, the Land Bank will have the power to impose ongoing commercial rates.

This brings me to one last point. To be attractive, this system should be tax free. I am here referring to property that has been vacant for a number of months, if not years.  Even now the rental income has been simplified, Government must still offer this incentive. First to strengthen the argument and say thank you to owners willing to rent to people with social problems. Usually nobody wants to lease property to these people. Secondly, since this system is looking at  those who have vacant property in our urban centres, one does not need to burden owners, who in many cases are not young any more, with lots of bureaucratic paper work.