MDA presents concrete proposals to address housing affordability

The Malta Developers Association (MDA) today proposed the establishment of an Affordable Housing Board, along with seven concrete proposals it presented to Transport Minister Ian Borg and Property Market Parliamentary Secretary Chris Agius.

The new board, composed of members of the MDA, the Housing Authority, the Planning Authority and other agencies, will set targets and policies to provide affordable housing units (AHUs) to meet current and future market demand either for purchase or rental.

Primarily, the MDA is suggesting the development and implementation of planning policies specifically targeted towards encouraging developers to provide a percentage of AHUs within a larger development. Developers would be bound to provide this agreed percentage of AHUs as part of the permit condition if the development adheres to a set of affordable housing planning policies.

These are the seven high-level subject areas where planning policies can be implemented to encourage developers to provide affordable housing units:

  1.     Revise down the space standard requirements for one-, two- and three-bedroom units in a bid to increase the number of units on a site with the condition that a percentage of units are sold within the affordable price bracket range;
  2.     Introduce positive planning measures for medium to large developments which provide 20% of the project for affordable and accessible housing units;
  3.     Introduce positive planning measures for regeneration projects in a bid to allow for the development of AHUs;
  4.     Introduce positive planning measures to address existing zoning anomalies in a bid to generate extra AHUs, ensuring that the ecological and archaeological aspects are respected;
  5.     Re-examine the introduction of sensitive internal development with the scope of providing a percentage of AHUs;
  6.     Waive the condition for the 75% of the ownership of the land that has been approved during the Rationalisation process in question, provided the development includes a percentage of AHUs; and
  7.     Waive part of the Development Planning Fees and Planning Gain Fees for projects that include a minimum of 20% AHUs.

MDA recognises that, given the recent upward trend in the value of property when compared to the values of average salaries, the need has arisen for providing dwelling units that can be referred to as AHUs.

It defines an AHU as “a property with a market value that is not more than four to five times the salaries of individuals/couples (generally first-time or middle-income buyers)”. This multiplier is related to the maximum value of loan generally offered by local banks for the purchase of property.

In the present scenario, this equates to properties having a maximum value of around €120,000 for the property to be called an AHU, which should be rented for €500/month for the first ten years and/or at a cost price of €120,000 with the size of 80 m2, that is, €1,500/m2.

Since the lower price of a two- and three-bedroom unit, depending on size and location, is typically €160,000, the difference between €120,000 and €160,000 is known as the affordability gap.

The rental market, which traditionally was always seen as a bridge towards affordability is itself overheating, creating its own pressures and hitting hardest at the low-income sector of society (as can be verified in the KPMG study, commissioned by MDA and published in October 2017).

MDA is pleased to note that Government has launched several initiatives to address these issues, in particular the recent White Paper on the rental market.

In addition, the MDA believes that, although long-term solutions are required to achieve a sustainable property market, which among others includes a significant percentage of AHUs, immediate measures can be adopted by the authorities to provide a reasonable number of AHUs within the shortest possible timeframe.

In his comments to Minister Borg and Parliamentary Secretary Agius, MDA President Sandro Chetcuti said that, in making these proposals, the MDA’s sole focus is to ensure that those caught in the affordability gap – first-time buyers, single parents and those who were recently separated – will be the sole beneficiaries.

“We do not wish to put a drag on an otherwise healthy property market and, through these proposals, we want to promote a win-win outcome,” he said.

8 November 2018