At the beginning of this year, Momentum called for a tax on the second vacant property onwards to address Malta's housing affordability crisis. This renewed call came about in light of the fact that young people and those beginning their careers face extreme difficulty in renting or owning property.
A vacant property tax falls into the category of something that sounds good, something that will play well politically, but ultimately something that will deliver next to nothing.
Don't get me wrong, it's galling to have so many empty homes in the midst of such chronic housing shortages. But vacancy is a complex phenomenon, one that won't simply be magicked away by a tax.
At the moment, countries with vacant property tax legislation, which is often at municipal or regional levels, include Canada, France, Ireland, Spain, South Korea, and the United States.
Eleven countries, including China, Monaco and the UAE, do not levy such a tax.
In theory, a vacant property tax aims to increase housing supply and penalise speculation by taxing empty homes, generating revenue and encouraging owners to rent or sell, but it may potentially impact affordability, as it can't solve it alone. Furthermore, it might face legal challenges, as policies must be carefully crafted to avoid being deemed unconstitutional "takings" and encounter difficulties in their fair implementation, especially for genuinely unavailable properties, with effectiveness varying by market.
Local investors have been accused of hoarding properties as speculative assets, leaving them unoccupied and contributing to skyrocketing real estate prices. In the meantime, the high cost of living and the influx of foreign investment continue to push up property prices.
While vacancy taxes might theoretically help, in reality, they can only be seen as just one piece of a much larger puzzle. They would probably only have a slight impact, as many property owners could still find ways to avoid the tax by claiming exemptions, such as renovation projects or temporary stays by family members.
In a small country like ours, where the primary problem is a lack of housing supply rather than vacant properties, vacancy taxes would seem less effective. Their effectiveness would have to be dependent on the local context and must be part of a broader housing strategy aimed at achieving long-term affordability and reducing housing inequality.
According to the Malta National Statistics Office (NSO), the 2021 Census identified that 81,613 dwellings were categorised as secondary, seasonally used, or vacant properties. This figure represents 27.5% of the total private dwelling stock of 297,304 homes recorded at the time, which is high by international standards, the fifth highest in the world.
Before introducing such a tax, it would be vital to have a sound understanding of the quantity, locations and characteristics of long-term vacant properties and the reasons why they are vacant. In this sense, local councils would need to have a well-designed and up-to-date index of the type and amount of vacant housing they have.
There may be genuine and acceptable reasons for vacancy, such as refurbishment work, the temporary absence of the owner for medical reasons, or pending the granting of probate for a deceased person's estate.
On the other hand, there are many abandoned properties around our islands, being a subset of vacant properties in which the owner has walked away from responsibility for maintaining the property. This includes allowing the building or land to deteriorate or otherwise eschewing responsibility for property maintenance.
Structures can become public health hazards that require demolition. Long-term vacant properties have also been linked with higher violent and property crime rates and cycles of neighbourhood abandonment in which neighbours leave rather than continue to live or work next to long-term vacant and abandoned properties.
The most important consideration to be kept in mind is that generating revenue from vacant units and reducing the number of vacant units are at cross-purposes. There is an inherent tradeoff that means owners who choose to rent or sell a housing unit will not pay the tax, and, alternatively, that an owner will choose to pay the tax instead of renting or selling it. It is healthy for the market to have some temporary vacancy in it to accommodate people who are moving, so the target vacancy rate should never be zero.
If a vacant property tax is introduced in Malta, it is a moot point whether vacant homes in outlying villages would be hit by the same rate of tax as vacant properties in places like Valletta or Sliema, where the housing need is greater. Are derelict residences, for instance, to be taxed? This is another potential anomaly that would have to be worked through.
Even so, the concept of taxing empty homes - as a part solution to the housing problem - is being taken up by policymakers the world over.
Los Angeles successfully put a vacant homes tax to the vote in 2022 amid a resurgence in homelessness there. Hong Kong, one of the priciest property markets in the world, is taxing apartment developers to deter them from hoarding. Barcelona has gone a step further, telling landlords to rent out their vacant homes within 30 days or risk having them repossessed for half their market value.
Governments around the globe are struggling to rein in housing costs and struggling politically as a result, and taxing empty homes is the latest in a long line of solutions that, unfortunately, haven't made a blind bit of difference.