In 2018, the government published a White Paper to reform the private rental market for rental properties after June 1995, which until then was almost completely unregulated except for the basic provisions contained in the Civil Code.

The objective of the reform was to introduce basic standards, including a compulsory registration system accompanied by a signed inventory and a declared security deposit, tax incentives to promote long-term rental contracts, clear legal mechanisms to facilitate the renewal or termination of contracts, a minimum duration of one year for long-term contracts and a quasi-judicial body to resolve small disputes quickly.

The reform therefore aimed to provide a level playing field for both owners and tenants. Tenants have gained more certainty about their rights to where they live for the duration of the lease. On the other hand, the owners had a mechanism to protect their investment, which allowed them to enjoy a more stable and predictable income stream.

The registration process also allows the government to gain visibility into this sector, meaning that policymakers as well as stakeholders can now base their decisions on real data, rather than perceptions of market strength. or economic indicators. Measures to address the element of affordability were introduced simultaneously.

The proposed reform was implemented after wide consultation and the legislation entered into force on January 1, 2020.

The Housing Authority, which until then had been associated with the provision of social and affordable housing and financial assistance to improve the accessibility and quality of housing, was given the role of regulator of the private rental sector. In its new capacity, the authority receives, examines and validates leases filed on a secure blockchain portal and hosts a dispute tribunal between the parties for certain categories of disputes with a value not exceeding € 5,000.

The authority has sincerely assumed its role of ensuring that the data collected during this process is anonymized, collated and disseminated in a meaningful way. In addition, being aware that data collection is meaningless without subsequent analysis, the authority has set up a Residential Rental Observatory made up of academics published in the field to rigorously examine the data. With the establishment of this observatory, the Régie du logement has opened up to constructive criticism and a continuous evaluation of its mechanisms from the start of its new role of regulator of this specific housing market.

More than a year and a half has passed since the legislation entered into force and the first set of significant data is now available. The registration of 30,483 leases in the first year of operation is an exceptional achievement considering that the registration of leases that expired in 2020 was not mandatory.

To date, data collection has so far been largely left to the initiative of private companies, which however rely on their specific clientele. Since public information should be part of an open data set, it seems that official authorities are putting more effort into this area. The first edition of Malta Residential Rental Annual Study provides an in-depth analysis of all data on the Maltese residential rental market in 2020.

31% of contracts in Northern Harbor exceed € 1,000 per month– Leonid McKay

The results indicate a significant divergence between the markets of the islands of Malta and Gozo; rents in Malta are higher than those prevailing in Gozo. In Malta, the most expensive rents are in the Northern Harbor area, which includes the towns of Sliema and St Julian’s. Up to 31% of contracts in the Northern Harbor area exceed € 1,000 per month, while in other areas this price range has only resulted in 5-15% of contracts. As expected, the rent for a three-bedroom unit commands a higher median rent than a two-bedroom unit; the latter being the most common type of rental property.

The five localities with the highest number of registered contracts are St Paul’s Bay, Sliema, Msida, St Julian’s and Gżira. Birkirkara, Marsascala, Mellieħa and Swieqi are other popular localities in the Maltese rental market. It is evident that the market in 2020 was mainly made up of foreign residents living in Malta in the short to medium term.

It is relevant to point out that most of the registered contracts were concluded for a period of one year, which reflects the same trend before the enactment of the law in 2020.

Observatory members also critically analyzed and made recommendations on various aspects of the legislation, such as tax provisions for longer-term leases and the notice period tenants and landlords must provide upon termination. of a lease. There is no doubt that the rental market does not operate in isolation from other segments of the housing market.

The observatory also assessed the impact of two very specific developments that occurred last year: on the one hand, a discussion on the protected rents regime before 1995, excluded from the 2020 rents reform, and, d ” on the other hand, the outbreak of a global pandemic, including the departure of a number of foreign residents, which had a significant impact on the rental market, in fact, 14% of leases registered in 2020 were terminated prematurely .

Introducing the Private Residential Leases Act as a regulatory framework has been a bold and challenging task. Its first year of regulation must be evaluated with great caution, especially given the accompanying pandemic. It would also be wrong to rest on one’s laurels and assume that the task of registering every lease agreement has been accomplished.

However, I firmly believe that the results indicate that the first year of regulation is an overwhelmingly positive attempt to introduce a set of basic and minimum standards into a market which was, until then, characterized by an almost complete regulatory vacuum. The results also indicate that regulation and the market are not hostile enemies. Rather than seen as opposing forces, regulation facilitates a stable and more sustainable market in the best interests of both parties.

Leonid McKay, CEO, Housing Office

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