Property investors facing ‘unfair competition’ from affordable housing scheme – MDA

The Malta Development Association (MDA) has expressed “serious concern” about a new affordable housing scheme that aims to provide 260 units at prices substantially lower than the market rate.

The scheme, launched by the Foundation for Affordable Housing (FAH) – a collaboration between the Government and Archdiocese of Malta – is aimed at individuals with low to middle incomes who do not qualify for Housing Authority assistance but still require support to become homeowners.

How the scheme works

The new units will be built on land transferred from the Government to the Foundation, some of which had originally been passed from the Church to the State in previous years.

The title over the sites in St Julian’s, Fgura, Marsaskala and Kirkop will be given to the winning bidders of four separate calls for expressions of interest, at no cost.

The contractor will then need to get the permit, build and sell the apartments at the affordable prices stipulated in their bid. Buyers will be individuals screened by the Foundation, which will be party to the contract.

Buyers, who will be individuals earning up to €33,000 per annum and couples earning up to €38,000, will need to pay an annual ground rent.

Importantly, the ground rent is not redeemable –and the property not transferrable – until 20 years have passed from the date of purchase, a measure the FAH says will act as an effective safeguard against speculation.

The MDA’s objection

The MDA, however, lambasted the scheme with a strongly-worded statement on Wednesday (today).

“The MDA expresses its serious concern at how, in the middle of summer, an expression of interest was issued with only a few weeks’ notice, proposing that public land be granted for free under the pretext of affordable housing,” it said.

The association warned that the scheme will serve as a “gateway to speculation”, although it declined to give any further information when asked for further information, in light of the provisions guarding against such speculation.

The MDA’s statement referenced other ways to assist those struggling to get on the property ladder, “such as fiscal incentives and public-private partnerships for developers, which allow part of their projects to be offered for sale or rent at below-market rates.”

It added that it “disagrees with the idea that developers – whoever they may be – should be granted public land for free to build affordable housing and profit from it.”

Calling out Minister for Affordable Roderick Galdes, the MDA said that if he “has given up on executing such projects through public contracts awarded in an open and transparent process, then he should reform the system — not open the door to abuse by giving away public land.”

A potentially more fundamental concern, said the MDA, is that the scheme “will undermine the trust of those willing to invest their money in the property sector, as they will face unfair competition – including advantages from economies of scale and negotiating power — afforded only to a select few.”

It warned that the affordable housing scheme “is destabilising the value of properties already purchased by families who had no option but to choose their price and had to pay the full cost of the land.”

The MDA said the Minister “is thinking only in the very short term, without considering the consequences for the industry as a whole or the risks to the banking sector.”

It concluded by encouraging the Government to “continue strengthening existing schemes that are functioning well and to abandon this project, which is being launched without consultation and will open the floodgates to abuse – both from sellers and buyers.”