A study has found that there is a lack of affordability in the private rental market sector that leaves tenants in a state of substantial financial strain, Solidarjetà has said.

Solidarjetà has published a study titled "An Analysis of Affordability in the Private Rental Market in Malta," authored by economist Calvin Vella.

"This is due to rising rents which have outpaced wage growth and cost-of-living adjustments."

The study employed a quantitative analysis using the Housing Authority's own data to evaluate 38 household scenarios against median market rents, Solidarjetà said.

"While the study primarily adopts the Housing Authority's benchmark that housing costs should not exceed 25% of disposable income it includes a sensitivity analysis to test against alternative standards. This analysis evaluated 38 household scenarios across four categories: Affordable (<25%), Marginally Affordable (25-30%), Stressed (30-40%), and Overburdened (>40%)."

The results show that only three out of the 38 scenarios could afford the median rental property, and even then, only due to government subsidies, it said. "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.

"The study found that adjusting the affordability benchmark from 25% to a more lenient 30% does not meaningfully improve outcomes. For instance, a single person at the subsidy limit could only afford a one-bedroom apartment in 3 out of 20 localities at the 25% level; extending this limit to 30% only added three more localities."

According to Eurostat, households are overburdened when housing costs exceed 40% of disposable income, Solidarjetà said. "The study found that the vast majority of scenarios fall into this category. For example, a single parent earning €35,000 would be overburdened in 27 from the 44 localities. This does not include other costs that tenants have to incur such as utilities."

The study highlights a significant non-linearity in affordability created by the Housing Benefit Scheme (HBS), Solidarjetà added.

"Because of the rigid eligibility thresholds, 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 is clearly shown for a couple with two children who would afford the median locality if they earn between €27,000 and €33,362.92 (the subsidy limit), but once they exceed the limit, they would become overburdened by their rent."

"Malta's renters are overburdened, even by the loosest definitions of affordability" it said. "It is only the exception, not the rule, that a tenant can afford the property they inhabit."

The 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, Solidarjetà said.