Housing affordability in Malta Budget bridges the gap, but does not change the game

The Budget for 2026 leans heavily on demand-side help for buyers and tenants, with modest additions on the supply side and some useful transparency and energy-efficiency moves. As we have now become accustomed to, the government’s headline measures expand deposit support, extend buyer grants, and scale up social leasing. The deposit scheme now covers loans up to €250,000, with the state guaranteeing 10 percent and covering interest through the Housing Authority. First-time buyers will continue to receive a €1,000 annual grant for ten years, while social leasing, currently assisting around 1,300 families at a cost exceeding €12 million last year, will be expanded further. Collectively, these initiatives relax liquidity constraints, allowing younger and lower-wealth households to access credit and housing that would otherwise be out of reach. Yet in a tight market, such measures risk feeding into higher property prices and rents, as sellers and landlords capture part of the subsidy. 

On the supply side, progress remains incremental. The government–Church partnership will deliver 260 homes priced 30 per cent below market rates, a welcome step, though minor compared to annual household formation. Legal changes are planned to facilitate the rehabilitation of vacant properties for use under the social leasing scheme, a potentially faster way to increase available stock without new construction. A Property Price Register will be launched by Property Malta, providing contract-level data to improve transparency, valuations and policy design. At the same time, the continuation of energy-efficiency grants for PVs, batteries, insulation and double glazing should marginally lower household running costs, improving affordability through reduced utility bills rather than asset prices.

These measures make it easier to reach today’s prices, but they do little to bend the trend. The underlying problem is that demand remains too high to suitably supply. The result is that every euro of public subsidy ends up chasing the same limited pool of homes, pushing up valuations and rents rather than expanding real access.

Demand from Tourism

Part of this pressure stems from tourism. The rapid growth of short-let platforms has transformed residential buildings into micro-hotels, hollowing out the long-term rental market. In high-stress localities, the competition between residents and visitors has become the defining feature of the affordability crisis. At the same time, population growth has outpaced the delivery of new homes, while low holding costs and limited vacancy penalties encourage speculative hoarding. The combination keeps supply rigid and expectations high.

The Budget offered few quick wins on this front. A tax on short-lets, coupled with a cap on permits by locality and automatic delisting for non-compliant hosts, would have softened tourism-driven demand in residential zones and redirected units back to long-term rentals or home purchases. Earmarking the proceeds for an Affordable Housing Fund could have turned a source of distortion into a source of relief. Likewise, a harsher increase in eco-contributions for short-stay visitors in saturated areas, or minimum-stay rules during peak months, would have nudged the market away from low-cost, high-volume tourism, a segment that strains housing without necessarily increasing value-added.

A more direct intervention could come through a credible vacancy charge. By taxing habitable dwellings left idle without a renovation or sale plan, the government could create an incentive for owners to either improve, sell, or lease their properties. Pairing this with a standard lease template and quality inspection framework would ensure that rehabilitated units contribute meaningfully to supply rather than underperform on standards.

Based on the latest Census, Malta had around 81,613 dwellings classified as secondary or seasonal homes and vacant dwellings which is the equivalent to 27.5% of all dwellings in the country. Many of these vacant properties are found within village cores, where traditional homes have struggled to sell in today’s heated property market. Their dilapidated state and the high costs of restoration to meet modern living standards are major barriers to reuse.

Another challenge is practicality. Village cores were designed in a time before cars, yet today, the car is essential to daily life. Unsurprisingly, most villages now suffer from severe parking shortages. As traffic congestion worsens, commuters often divert through village streets to avoid busy bypasses. These narrow roads quickly become choked with cars, creating noise, pollution, and general disruption further reducing the appeal of living in such areas.

The vision for Malta’s villages should be one of calm, livable spaces, free from idle cars and congestion. Villages need to adapt by investing in accessible, multi-storey car parks. Beyond solving parking issues, these facilities would act as garage-like amenities for prospective buyers looking to restore or live in traditional townhouses.

Moreover, as the Government explores mass transit options, the introduction of village-specific Controlled Vehicular Access (CVA) systems could help reclaim village streets for residents and pedestrians, transforming them from mere traffic corridors into truly habitable spaces once again.

Together, these two measures improved parking infrastructure and CVA systems have the potential to unlock a significant portion of Malta’s underused housing stock, boost supply, and ease property prices in an organic way.

Malta Budget 2026 Verdict

However, the main driver of housing unaffordability remains the strong demand created by a rapidly growing population. Addressing this will require a deeper national rethink on how, in the Minister’s words, Malta can do more with less. The Malta Budget 2026, in its current form, builds bridges across today’s affordability gap. But bridging is not the same as solving. Without dampening speculative demand and building a durable, cost-based supply system, Malta’s housing policy will continue to chase its own shadow, offering help to reach prices that its own demand policies keep lifting.