Government-Church Foundation may face EU probe over ‘affordable housing’ scheme

Brussels is considering opening infringement proceedings against Malta over its controversial ‘affordable housing’ scheme, with sources indicating that the scheme may have breached EU state aid rules from the outset.

The scheme, which involves the transfer of public land at discounted prices to private developers to build and sell housing units below market rates, is now under scrutiny for potentially granting an unlawful economic advantage without proper regulatory oversight.

The scheme was launched last year by Prime Minister Robert Abela and Archbishop Charles Scicluna, with the stated aim of converting four large tracts of public land into affordable housing projects. A Foundation was established between the government and the Church to administer the initiative and issue tenders to private developers.

The Shift is informed that the Foundation failed to notify the Board before launching the initiative, an obligatory procedural step under EU competition law.

The omission has drawn attention in Brussels, where authorities are now assessing whether Malta breached its legal obligations.

According to EU rules, any measure involving state resources that could distort competition must be screened and, where necessary, notified prior to implementation. In this case, the Foundation appears to have bypassed this requirement entirely.

It appears that SAMB, the national authority responsible for vetting such schemes, was not consulted at any stage. This lack of notification would mean that no assessment was carried out to determine whether the scheme complied with state aid rules.

Finance Ministry Permanent Secretary and SAMB Chairman Paul Zahra was asked by The Shift to confirm whether the Board had been informed or had conducted any review before the issuance of tenders. He did not reply.

Political responsibility for the project was assigned to disgraced former minister Roderick Galdes, who appointed Jake Azzopardi, the son of a former Labour Party CEO, as the Foundation’s chief executive.

From the outset, the scheme attracted criticism. Rather than developing social housing units, the Foundation planned to transfer land to private developers at below-market rates. In turn, developers were expected to sell completed units at reduced prices.

While presented as a socially beneficial model, the structure effectively allowed developers to maximise profits. By acquiring land, the most significant cost component in property development, at heavily subsidised prices, developers stand to gain disproportionately, even if final sale prices are marginally reduced.

This would also create unfair competition with other developers competing in the same market.

Concerns intensified when the list of bidders, which was revealed by The Shift, emerged.

The involvement of major industry players, including some of the country’s largest development groups, such as Anton Camilleri, known as Tal-Franċiz, Vassallo Builders and Bonnici Brothers, further fuelled suspicion about the scheme’s true intent.

Such developers are not typically associated with social housing or philanthropic projects, raising questions about whether the project was genuinely designed to address affordability or to benefit selected private interests and politicians.

The Malta Developers Association (MDA), responding to mounting concerns from within the industry, publicly criticised the scheme and called on the Prime Minister to halt its implementation. Despite the pressure, the government pressed ahead, even after removing Galdes from his ministerial portfolio.

In response, the MDA filed a formal complaint with the European Commission, triggering the current assessment that could lead to infringement proceedings.

If the scheme is ultimately found to violate EU state aid rules, the consequences could be significant.

Beneficiaries, including developers who acquire land under the scheme, may be required to repay the value of any unlawful aid received, along with interest. Additional financial penalties could also be imposed.