I live in Malta (expat), where the rental prices have exploded over the last 5-6 years due to a heavy influx of expats in finance and online gaming, that have higher disposable income and want to rent short term, as they might be there for just a few years. However, the businesses in that sector are starting to look elsewhere, due in part to rental prices and cost of living - which makes it more difficult to attract the right kind of expats needed in the businesses. It also makes it very difficult for young people to move away from home (or couples splitting etc).

Key considerations

  • A lot of old properties are vacant (there is virtually no tax on owning a vacant property)
  • Income from a lot of rental properties is not declared/taxed. The tax rate is only 15% for income on rental property.
  • It is virtually free to have a vacant property (extremely low/no tax on real-estate)


What are some political instruments that have been used try to keep rental prices under control and prevent it from driving up cost of living => leading to less growth?

Possible instruments

  • Adding a sort of property tax on vacant properties (giving the incentive to rent it out, even at slightly lower prices)
  • ??

Among others

  1. Increasing taxes, especially on empty flats
  2. Forced renting of empty flats
  3. Some form of rent control
  4. Some form of subsidized housing
  5. Buying houses
    1. At market price
    2. Below market price by using some kind of right of first refusal
  6. Compulsory purchase of houses
  • 1
    Do not forget stringent bank financing terms like only giving loan maximum 70% of the housing price. This will prevent speculator "leverage" cheap financing.
    – mootmoot
    Mar 11 '19 at 18:12

What are some political instruments that have been used try to keep rental prices under control and prevent it from driving up cost of living => leading to less growth?

It's worth noting that rent control tends also to lead to less growth, as it makes landlords less interested in renting. This is also true of increased taxes, particularly on empty flats, forced renting of empty flats, and first refusal policies. Regions that have tried these have tended to get the opposite results of their intents.

If your goal is to encourage growth, consider easier development permission. I.e. less zoning and other restrictions on development. Make it easier for a landlord to terminate a relationship with a renter (a vacant flat often means that the landlord is hoping for a better renter than is currently available--make it easier for the landlord to take temporary renters).

Now, removing terms that artificially favor vacant properties, like an artificially low valuation, can encourage owners to sell. But care should be taken not to reverse things and make it impossible for a landlord who loses a tenant to afford the time without a tenant. Otherwise, you lose the landlord.

In this particular example, you might consider ways for the "wrong" kind of expat to get the advantages of a Maltese residence without actually residing in Malta. Of course, you have to take care to balance that with disincentives for the "right" kind of expat. That works best if such incentives are easily targeted.

One option would be for the potential employers to buy empty flats and renovate them for employees and guests. But that's not really a political instrument. You might ask employers why they are not doing this in case there are obstacles that could be fixed politically. A general property tax can help with this, as it encourages owners of empty flats to sell them and helps keep property prices down (at the expense of property taxes). You might find that reducing other taxes at the same time as increasing property taxes keeps the overall impact on cost of living the same while shifting the burden to landholders.

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