The regulation of residential rent increases in Malta : the next step after Act X of 2009?

Abstract

The Maltese residential rental market is currently going through a stage of reinvigoraton after successive regimes had gradually engendered its decline. The process of liberalisation that was initiated in 1995 means that at the moment we have two parallel regimes regulating residential leases: a hard rent control that, despite the amendments contained in Act X of 2009, has maintained rents significantly below market prices and an ultraliberal regime that leaves post-1995 contracts at the complete mercy of the market. Those reflect the two major periods of recent Maltese history: that of socialisation and subsequently that of free market liberalisation. It results that although Maltese legislation has left tenants completely exposed to any sudden fluctuations; leaving as a matter of fact no means of redress to the tenant in the case of excessive rent, the nature of the Maltese rental contract has an inherent element of protection constituted by its 'definite' nature i.e. for a contract of letting to be valid, the parties have to agree on a set period of duration and as well as a set amount of rent. Despite the reassuring signals emanating from current figures of the local private rental market, schemes for the regulation of rent have been already suggested by the Rent Reform Working Group (RRWG) commissioned by the Ministry for Social Policy prior to the latest reforms. After an analysis of the various systems of rent control employed in the Netherlands, Germany, Belgium and Austria the present study concludes that the ideal model would be based on the German solution that manages to set maximum rates without deterring landlords and affecting property supply in the long run. The German rent index is in fact both easily accessible and dynamic whilst helping to ensu Each national housing market, however, has its own characteristics and in assessing any new schemes Maltese policy makers should take into account local phenomena, such as the landlords' diffidence of any Governmental action due to the excessively rigorous measures enacted in the past. A proper comprehensive index would also require a prior assessment of the market, particularly tenant demands which make one type of property more attractive than another. This study also underlines the absence of a rent register as well as a tenants' union that may both represent essential building blocks for future developments in this area. In the end all these measures aiming to grant added certainty to the contracting parties would serve to make letting more attractive, thereby rendering it a true alternative to home ownership