Could tenancy be a real alternative to homeownership as far as housing
access is concerned?
A comparison (Maltese, Spanish and Portuguese legal systems)
Tartu, TENLAW Meeting 8-5-15
Percentage of tenure; which are the underlying reasons?
Table A. Evolution of the percentage of tenure in Spain
Year
1948
1957
1967
1985
1995
2005
2011
Owner
occupied
23.1%
26.1%
32%
53.9%
68%
75.2%
76.5%
Rented
76.9%
73.9%
68%
46.1%
23%
20.7%
17%
Table B. Trends of Owner Occupied and Rented dwellings in Malta
Year
1948
1957
1967
1985
1995
2005
2011
Owner
occupied
23.1%
26.1%
32%
53.9%
68%
75.2%
76.5%
Rented
76.9%
73.9%
68%
46.1%
23%
20.7%
19.9%
Could tenancy be a real alternative to homeownership as far as
housing access is concerned?
Tartu, TENLAW Meeting 8-5-15
Preferences under a lease contract of a dwelling
Could tenancy be a real alternative to homeownership as far as
housing access is concerned?
Tartu, TENLAW Meeting 8-5-15
Common elements in relation to tenancy (I)
Spain
Portugal
Malta
Lack of reliable housing There is no single definition
data (how many
of dwelling; or common
dwellings are actually
requirements to declare it
empty, number
vacant (3,5 million); evictions
evictions, etc.)
data are not reliable, etc.
More accurate data (eg. 2011
735,000 empty dwellings
census) in relation to housing,
(most are over 50 years old). although data on evictions only
125,000 are new homes
take into account those seeking
social housing
Relevant black market
rate (tax evasion,
unprotected tenants,
etc.)
There are no statistics, but
common among students and
foreigners
Recent reforms in
tenancy eviction
procedure making it
more efficient
Reforms reducing the
mandatory duration of
tenancies
55% in 2008
A significant amount
2000
2009
2011
2013
1990
2006
2012
In 2010 a summary procedure
allowing the court to decide
the issues in a single hearing
was introduced
From 5 (1994) to 3 (2013)
years
In 2012 disappeared the
compulsory duration of 5
years
From a lifelong duration until
1995 to the absence of a
minimum since that year
Could tenancy be a real alternative to homeownership as far as
housing access is concerned?
Tartu, TENLAW Meeting 8-5-15
Common elements in relation to tenancy (II)
Spain
Portugal
Malta
Tenancy is socially
perceived as inferior
land tenure
Yes
Yes
Homeownership is regarded as
the only guarantee against the
social risks
High rate of vacant
dwellings (various
reasons)
13,7%
12%
According to the census 2011,
18.4%, while only 13.3% is
seasonal.
Pendulum
legislation: old
controlled tenancy
vs recent
liberalization
1889, 1920, 1946, 1956,
1964, 1985, 1994, 2013
1990
2006
2012
1925 (subsequently
extended indefinitely
in 1931), 1944, 1959,
1979, 1995, 2010
Absence of strong
tenants associations
There are not significant
Tenants Association
Lisbonense
Nonexistent both locally and
nationally. The most vulnerable
tenants rely on the government
intervention
Could tenancy be a real alternative to homeownership as far as
housing access is concerned?
Tartu, TENLAW Meeting 8-5-15
The property and tenancy markets in Spain (I)
Homeownership
Tenancy
Traditional tax incentives in homeownership.
Tax benefits are more recent (2010 and 2011, essentially).
Housing plans and policies oriented towards the
construction and acquisition (subsidization) of
homeownership
The Housing Plan 2013-2016 is the first purely dedicated to
the promotion of tenancy
Structured finance market, supervised by a public
authority, at least since 1981
Lack of a structured market, poorly professionalized. The
Law has never paid attention to this issue. REITs have also
been amended, in key aspects, by Law 16/2012.
Certainty of the rights of the buyer and the lender
The bundle of rights of landlord and tenant has been
changed since the civil war, without finding, for now, the
right balance so as to make tenancy more attractive
Quick mortgage enforcement procedure
Inefficient eviction system, in constant reform
(the latter, Law 4/2013).
The transfer of the ownership passes all the risks and costs The landlord transfer all possible expenses to the tenant
of the property
Property transactions and related financing are controlled 55% black rental market; many undocumented transactions.
by notaries and registrars (gatekeepers)
Unstructured and uncontrolled market. Some improvement
in this regard by Law 4/2013.
Could tenancy be a real alternative to homeownership as far as
housing access is concerned?
Tartu, TENLAW Meeting 8-5-15
The property and tenancy markets in Spain (II)
Certainty of the market
•
•
•
•
•
Transparency, security and stability of the market
(ownership; land register; enforcement procedure; gatekeeper…);
REITs are not relevant so far. Inefficient market
Since the 60's housing policy in Spain has promoted homeownership
Recent changes has decreased tenant’s protection.
Affordability and Stability
• 27,2% homeownership; 33,3% tenancy.
• Recent changes has decreased tenant’s protection.
Subsidies
• Main objective in decades: homeownership
Conclusion -> tenancy is not a real alternative.
Could tenancy be a real alternative to homeownership as far as
housing access is concerned?
Tartu, TENLAW Meeting 8-5-15
The property and tenancy markets in Malta (I)
Homeownership
Tenancy
Tax incentives, e.g. tax breaks for residential dwellings for first-time
homebuyers between 05/11/2013 and 31/12/2014 in the first €
150,000
Landlords have the option to pay a final rate of 15% in relation to the
revenues of urban leases. Tenants are not subject to taxation.
The Housing Authority has promoted homeownership, even in
housing with public task; there are also measures so as to incentive
construction and maintenance works
The Housing Authority has in mind subsidies for rents and maintenance
works
Financial and credit institutions are supervised by the Banking
Real estate funds are regulated by the MFSA Property Funds Policy.
Supervision Unit of the Malta Financial Services Authority. Domestic Possible securitization of rental income, although most landlords
banks have a traditional business model, funded by deposits of
operate with complete autonomy from each other
residents
Certainty; the rules on sale and the guarantees remain essentially
unchanged since the Civil Code 1868.
Legislation has ranged from a lifetime tenure to a liberalized system in
which landlords are not subject to any restriction
Banks are slow to execute eviction titles, so contact debtors
amicably before starting the standard procedure
Landlords can evict tenants through the summary procedure
established in 2010
The transfer of the property involves the transfer of risks and costs
related to the domain
Landlords are not legally required to provide nothing but structural
repairs in the building; tenants can be taxed with the costs associated
with the maintenance of the common parts
Real estate transactions, such as sale or mortgage, must be
registered in the Public Registry
There is no register for leases; thriving black market among the most
vulnerable classes
Could tenancy be a real alternative to homeownership as far as
housing access is concerned?
Tartu, TENLAW Meeting 8-5-15
The property and tenancy markets in Malta (II)
Certainty of the market
• Frezee of rents and long-term tenancy contracts in the 1970s
• No limit in the initial diposit; problems with subletting, transmission or withdrawn
• Trend towards liberalisation
Affordability
• A special bank was established to promote homeownership.
• Mortgage loan more affordable than tenancy rents
Subsidies
• Main function of the Housing Authority Act = promote homeownership
Conclusion -> tenancy is not perceived as a real alternative.
Could tenancy be a real alternative to homeownership as far as
housing access is concerned?
Tartu, TENLAW Meeting 8-5-15
The property and tenancy markets in Portugal
Certainty of the market
• Impact of the crisis -> TROIKA imposed liberalisation
• New tenancy law in 2012: no compulsory extension; eviction through the BNA; no legal protection...
• New mortgage loan in 2012 -> help borrowers in difficulties
Flexibility
• Problem to withdrawn from the tenancy contract.
Tax Incentives
• They are not a key factor any more
Conclusion -> the current legislation does not give the tenant the necessary
stability and flexibility
Could tenancy be a real alternative to homeownership as far as
housing access is concerned?
Tartu, TENLAW Meeting 8-5-15
3. Conclusions
-> They have opted clearly to promote home ownership and to reformed the
existing legal framework to boost the tenancy market.
-> Landlords are encouraged to put their homes on the market (e.g. due to fast
eviction process); but less stability and affordability for tenants.
-> While limited or referenced income (Malta, Spain) or tenancy contracts with
complusory minimum duration for years (Portugal, Spain) have historically been
perceived as causes for the stagnation or decline of tenancy, protectionist measures seem
to be key to the success of tenancy in the three countries with the highest tenancy rate in
Europe (Switzerland, Germany and Austria).
-> Next step?