Posts Tagged ‘council housing’

The importance of council houses

Monday, April 13th, 2015 | Religion & Politics, Thoughts

I am a proponent on the free market. That doesn’t mean I am a hardcore economic libertarian that thinks the state should keep its nose out. Far from it. I think the free market works best well in a strongly regulated environment that forces companies to provide a high level of service and prevents them from gaining a monopoly.

Housing is a tough one though. House prices continue to go up. Why? One answer is, that people keep buying them. Getting into more and more debt. Which, as we saw in 2008, can only go so far. Yet the property market continues. While the rest of the world burned, house prices never really dropped that much.

Another reason is that the government know that home-owners vote, and so continue to push out policies that prop up house prices. As I have written about before, any consideration of the help to buy scheme quickly reveals it as a trick to help the middle class. Rather than forcing home-owners to lower prices to those affordable to first-time buyers, it forces young people to take on even more government-sponsored debt while allowing the home-owning class to extract their silver.

The problem with the housing market though, is that there is no opt-out. With consumer goods, if they are ludicrously expensive, you just buy something else with your money. Housing is not like that. You need somewhere to live. While house prices may be irrationally high but we face the same problem that those who said they knew the 2008 financial crash was coming. Just because you know it to be the case, does not mean you can stay solvent longer than the market can remain irrational.

Another reason that the free market fails with regards to house prices is that people have stronger non-financial considerations. They want to live near their friends and families for example and have jobs tying them down to locations. In a free market, everyone would move to Darlington to enjoy cheap, spacious houses. Yet people continue to rent hovels in London for £2,000 a month because their connections keep them there. They are trapped in a restricted market.

In contrast, an increased investment in council houses could help fix the market. Having council houses with reasonable rents could provide a genuine alternative to buying or renting from private landlords, forcing the private housing market to compete for customers on a truly free market.