Mediaboss Marketing

Another day, another anti-market measure from our Conservative Government. Yesterdays White Paper on the private rented sector is another instalment in the familiar story: the Government deserts Conservative principles; the Opposition criticises it for not going far enough; and politics moves further to the Left.

To understand the problem, you have to go back 150 years to Frdric Bastiat, the great French economist yes, there are some and his 1850 essay What is seen and what is not seen. In his parable of the broken window, he notes that if a shopkeeper gets in a glazier to fix a broken window,the glazier is paid and is better off. That is what is seen. But thatdoes not make it logical to smash windows to make glaziers better off.What is not seen is what the shopkeeper might have preferred todowith the money and how that might have been better overall.

So far, so obvious. But this logic is ignored every day in practice by governments and yesterdays White Paper is a good example.

Its centrepiece is to abolish Section 21 that is, no-fault evictions. But there is much more. For example, it will end arbitrary rent review clauses, control who you can rent to, and radically change the existing tenancy system so that tenants have much greater rights to leave when they wish.

These provisions all deal with admitted problems. Sometimes tenants are asked to leave when they dont want to, are required to stay when they would rather not, or must pay more rent when the market requires it.

But these problems dont arise because there are suddenly lots of bad landlords. There are some, but there always were. They arise because our housing market if it can be called a market at all is such a mess, and in particular because there is a huge shortage of housing. We dont build enough houses for the population we have, that population is going up by a million people every three years, and housing is gummed up by a high transaction tax (stamp duty) and property taxes which disincentivise efficient use of what stock there is.

The White Paper deals with the symptoms not these causes, and so will make the problems worse. What is seen, in Bastiats words, is that some tenants will get to keep their tenancies when their landlord wants to end them, and everyone will applaud the Government for its social conscience. What is not seen is that housing supply will decline further, pressure on the housing stock and rents will increase, productivity will continue to fall as people cant get housing where they need it in forms that suit them, and the underlying problems will grow, not decline.

This is inevitable. If you cant be sure you can get your house back, why rent it out? If you dont know youll be able to charge rent to cover the cost, why make improvements? You might think your reasonable circumstances allow you to end a tenancy or increase the rent, but unless the Government ora court agrees, thats tough. And forthose who take the risk anyway, theextra paperwork will make renting less worthwhile. Profits will decline and the quality of the housing stock will follow.

Yes, ending no-fault evictions was inthe manifesto, so the Government has every right to proceed with that, ifnot with everything in the White Paper. But it doesnt make it sensible. The manifesto also promised planning reform and building more houses. Doing that would limit the damage caused by the White Paper. But planning reform has been scrapped, while the rented sector changes go ahead. The result will be higher rents,less choice, and worse conditions for everyone.

This is how collectivism spreads. Wherever there is a problem, instead of dealing with the causes, alleviate the symptoms. Unhappy tenants? Dont try to fix the housing market, but limit rent increases and make evictions impossible instead. Energy prices too high? Dont reform the market just tax and distribute the proceeds to deserving recipients.

Then in turn the new measures produce further unintended consequences, which themselves need fixing, and so the cycle continues. I confidently predict the next step, sooner than you think, will be a ban on leaving houses vacant for more than a few months.

These restrictions on property rights dont just hit productivity and growth. By limiting freedom to choose, they gradually change the kind of society we live in. Every step on this road may seem reasonable in isolation. The measures seem justified, the costs seem limited. But there is only one end to the journey: you dont live in a free society. Instead, you live in one where you cant use your property as you wish, only as government says you can. That is collectivism that is socialism.

Were not as far down the collectivist road as many others in Europe but we are gaining fast. We have to realise we cant buy off the collectivists with a little of what they want. If you pay them Danegeld, they come back for more. The end of that game is oppression and shame, and the nation that plays it is lost.

More here:
The Tory assault on buy-to-let is another step on the road to socialism - The Telegraph