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A certain failure to grasp the basics here

Summary:
That there is a long line of people desirous of social rentals is taken to be evidence that there’s a shortage of social rentals. Demand far outstrips supply that is. Well, yes, but that is to miss that very basic point about the trifecta of demand, supply and price. Of course there are many people desirous of something at half market price:Yet, according to housing charity Shelter, there are there are more than 1.1 million households on social housing waiting lists in England. Fewer than 273,000 homes at social rents, which are typically half of market rents, were made available in 2017/18 – a difference of more than 840,000 homes.That market rent is the price of providing that housing. Including opportunity costs of course and if we’re not going to consider opportunity costs then

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That there is a long line of people desirous of social rentals is taken to be evidence that there’s a shortage of social rentals. Demand far outstrips supply that is. Well, yes, but that is to miss that very basic point about the trifecta of demand, supply and price. Of course there are many people desirous of something at half market price:

Yet, according to housing charity Shelter, there are there are more than 1.1 million households on social housing waiting lists in England. Fewer than 273,000 homes at social rents, which are typically half of market rents, were made available in 2017/18 – a difference of more than 840,000 homes.

That market rent is the price of providing that housing. Including opportunity costs of course and if we’re not going to consider opportunity costs then whatever it is we’re doing it’s not economics. Provision of anything at half that market price will create queues. That’s just how those supply and demand curves work, price being the variable here they’ll meet. Move the price and they’ll not meet - there will be queues either side. Raise it and properties will wait for tenants, reduce it and tenants for properties.

This is not some neoliberalism, a result of neoclassical or even classical economics. There is no heterodox deus ex machina to get us out of this corner. This is just reality.

The question being what do we do about it? We’d all, quite obviously, prefer that the poor be well housed, none are into the idea of recreating Victorian or even Georgian rookeries.

So, yes, build more housing so as to increase the supply and thus reduce prices. As we’ve been saying for decades, issue more planning permissions so that the supply increases.

Which leaves only the social or market provision? There being only one of the two which does indeed aid us in taking account of those opportunity costs. Below market rents - whatever that level of market rent - come with said opportunity costs. Exactly and precisely the amount by which they are below market. We are adamant that such costs - subsidies to the poor if you wish - be openly visible in our taxation, expenditure and national accounting systems. Quite apart from anything else we need to be able to see it so that we can work out how well or how much we’re raising the living standards of those poor so we can decide to do more, less, the same.

So, market provision of houses. Many, many, more houses. With housing benefit being used for those who cannot take the strain even of the more reasonable rents brought about by greater supply. That is, don’t bury the reduction in inequality in the unrecorded opportunity costs of social housing but make it all open and explicit in the HB bill.

In the meantime, just marvel and wonder at that discovery by Shelter. Something on offer at half market price has a long queue to gain access to it. Well, yes?

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Tim Worstall
Tim Worstall is a British-born writer and Senior Fellow of the Adam Smith Institute. Worstall is a regular contributor to Forbes and the Register. He has also written for the Guardian, the New York Times, PandoDaily, the Daily Telegraph blogs, the Times, and The Wall Street Journal. In 2010 his blog was listed as one of the top 100 UK political blogs by Total Politics.

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