Thursday, 13 October 2011

Expensive? Yes. Unaffordable? That depends on the definition…

In the case of Shelter the definition with regard to house rents, is more than 35% the median local take-home pay, which may indeed signify many people are paying more than they would like, but it is not unaffordable. That word has a meaning in English. If you say something is unaffordable it means you cannot pay. If that were the case the homes would be vacant.

Charities in general seem to suffer from a poor understanding of economic matters and usually seem locked into an etatistic mindset, whereby the only solution that occurs to them is that the state will step in and spend money it doesn’t have. A proper comprehension of the economy leads to the recognition that the state is either causing or exacerbating the problem under consideration, either through action or through enforcing laws which mainly benefit vested interests.

In calling for rent caps, Shelter reveals that however much its heart is in the right place, its economic head is stuck up its proverbial. A market price is the key indicator to the market of how well supply is matching demand, and by demand we mean ‘effective demand’ i.e. demand that is matched by an ability to pay.

The housing market is, no doubt, dysfunctional, and the degree of its dysfunctionality will depend on what is hampering it from performing its job, i.e. matching supply to demand.

As ever, we run slap bang into the monetary elephant, i.e. the centrally-planned government monopoly, run for the benefit of the banking aristocracy. By using the cocaine of cheap credit, and thus keeping interest rates artificially low, the Keynesoids blew up a bubble. By keeping housing prices out of any consideration of price inflation (or ‘inflation’ as its called these days), this was represented as a benefit, as people saw the paper value of their one main asset increasing. With low interest rates and easy money, prices soared.

Added to this central problem are the other areas where the state has hampered the market: planning permission difficulties, the distortions of social housing, which operates in a fenced-off section of the market, the influence of housing benefits on rents, and, dare I say, the remnants of the Norman Yoke, whereby huge tracts of land are still in possession of the oligarchs and off-limits to the rest of us landless peasants.

Social housing and the socialist mindset

As Mises explained, the problem with socialism is that they have no means to make economic calculation, without a market to inform them. This becomes evident when they talk about need or demand, with scant consideration of how such limitless desires will be supplied, but always holding to the idea that, if only we could get those rich bastards, we'd all have a fair share. This same lack of economic sense makes them generally in favour of inflating the money supply. In both errors we see the malevolent influence of the Cambridge Apostle.

Now, when it comes to housing, I must confess certain urges within myself which are not strictly libertarian. I am something of a Prince Charles with regard to architecture, and I much prefer the sight of the rolling countryside over a modern housing development of the ‘little boxes’ variety. Nevertheless, a balance must be struck between preservation, conservation and progress. If more houses are needed, then they must be built, with all due regard to the contentious issues which invariably arise, but not by the state.

Cross-posted at Orphans

No comments: