Vacant properties: an investment or a launderette?

The publication of the 2021 Census Report on the characteristics of existing residential property once more focuses the spotlight on the urban sprawl and in particular on the substantial number of vacant or under-utilised dwellings available in these islands.

On the day of the Census, the existence of 297,304 dwellings was recorded. Of these 81,613 were grouped as either vacant or else as being dwellings having a seasonal or secondary use. It works out at 27.5 per cent of the housing stock which at a national level is under-utilised. This varies regionally from a 22.1 per cent low in the Western region, to a 45 per cent high in Gozo! From a 15.5 per cent low at Santa Luċija Malta to a 66.8 per cent high at Iż-Zebbuġ Gozo, which locality includes the seaside resort of Marsalforn.

While the Marsalforn numbers are most probably, primarily, a reflection of the predominantly seasonal accommodation in the locality, the overall numbers are still a cause for concern. The situation gets progressively worse.

The total number of vacant or under-utilised dwellings, 81,613, is equivalent to 6 times the size of residential Sliema or 8 times the size of residential Birkirkara or 9 times that of residential Mosta. Given the small size of the country these numbers are substantial. They indicate the strain on both the environment as well as the public purse which is resulting from over-development.  These under-utilised dwellings are served with the required infrastructural services:  roads, electricity, public sewers and water services at a substantial public expense, which could have been more beneficially used in other areas where existing dwellings are actually in use, continuously!

The reasons for existing residential property being vacant or only being used occasionally are various. One cannot generalise. The census itself, in fact, identifies around 6,000 residential units as being in a shell state on the date of the Census.

There are several issues which should be considered and acted upon. Hopefully they will not be once more ignored.

With over 80,000 vacant or under-utilised properties, what sense does it make to continue dishing out development permits for large scale developments which keep adding to the stock of vacant properties? One of the major contributors to the creation of this mess is undoubtedly the land use planning rationalisation exercise, which in 2006 added one million square metres to the development zone. These are currently being developed.

With over 80,000 vacant or partially used properties it makes no sense to have a waiting list at the Housing Authority for those seeking alternative accommodation. The Housing Authority should tap the existing housing stock, rather than add to it, in order to address its waiting list immediately. The current projects of the Housing Authority are a waste of resources when such a large number of properties are available. This is bad governance of the worst kind.

A third consideration is to tax long-term vacant properties. It does not make any environmental sense to develop land (including agricultural land) and subsequently to keep the developed property vacant. Nor does it make economic sense to invest so much without seeking to recover economic benefits in the form of rent. Those who persist in keeping their properties unused in the long term should pay a vacant property tax which would in part compensate the public exchequer for the expenditure incurred in creating the ghost towns made up of these 81,613 vacant or under-utilised properties.

Taxing long-term vacant properties could encourage their being placed on the market, to the benefit of all. As a result, they would possibly avoid the tax altogether! The tax would have achieved its purpose in encouraging the use of all existing properties. It would have achieved its purpose of causing a behavioural change. This is the objective of most environmental taxes.

There is another issue: that of money laundering through property investment. Since Malta made it to the grey list of the Financial Action Task Force (FATF) a number of years ago, some attention is being paid to the property launderette, as both Estate Agents as well as Notaries are carrying out some form of due diligence on property which is being sold. It is not unheard of for a property sale not materialising if there is doubt on the source of funds invested or being invested.  Investigating properly unexplained sources of wealth would contribute substantially not only to cleaning up the country but also in addressing the stock of vacant properties.

The use of property to launder illicit gains is not a new phenomenon. Regulatory initiatives in this respect are however still in their infancy.

The primary conclusion from this Census is a clear message to the Planning Authority to get its house in order. Why build so much to keep the resulting residential units vacant? It is a question we have been asking for years. Unfortunately, they are not bothered to answer!

Carmel Cacopardo
ADPD Deputy Chairperson
Published in The Malta Independent – Sunday 10 September 2023