So Ritchie’s against rent control then

Ritchie says:

His point is that the conventions of much of economics can be ignored because they are merely conventions and judgement has to be used as to when they apply, or not. The mess we’re in is the result of failing to use that judgement. The logic of micro-economics has been used when it has been wholly inappropriate to do so.

Labour has to offer credible economic policies. That means it must apply judgment and not seek to pander to conventional economic thinking.

OK. But now we need some sort of system to decide when these methods are indeed appropriate. And in the source document that Ritchie is commenting upon we find:

There are many situations where the assumptions Prof Becker describes provide useful conclusions, though family life and suicide are probably not among them. If rents are controlled, tenants still have much the same preferences in housing and potential landlords will still be looking for investment returns. Maximising tenants will maintain or increase demand, while maximising landlords will reduce supply. A new equilibrium in the housing market would leave fewer houses available to let, and a queue of people wanting to occupy houses at prevailing rents but unable to do so. And there is a good deal of empirical evidence that this is indeed what has happened.

Excellent. We now have Ritchie agreeing that rent control is a very bad idea indeed. For it’s counterproductive.

9 thoughts on “So Ritchie’s against rent control then”

  1. Maximising tenants will maintain or increase demand, while maximising landlords will reduce supply

    I don’t understand the second half of this proposition – is there a transcription error or am I just being thick?

  2. We already have rent controls in the UK. You need to pay a higher-than-usual deposit, the minimum contract length is at least two years, and if you want to move out you have to find another tenant to take over the lease. The rent level is strictly regulated by a branch of government (the MPC), who have actually reduced rents for existing tenants over the past six years. The best part is that after 20-25 years of living in a rent-controlled home, your rent automatically falls to zero!

    Yes it’s called “buying”, not “renting”, but let’s not quibble over semantics.

  3. @ Meissen Bison
    One of the Labour Part’s biggest donors in the 1970s actually left Centre Point empty for several years in order to push up rental levels by restricting supply of office space in a period of rising demand. Murphy is *pretending* (or maybe just letting readers infer) that similar tactics are employed by residential landlords. This would not make economic sense for any private sector landlord as one needs a large enough market share for the *rise* in rents on the property that one does let to make up for the total absence of rents on the unlet properties.,

  4. Maximising landlords reduce supply by flogging their property off, rather than rent it out at artifically low rents.

  5. Thanks, folks. I’m still befuddled though and probably because I don’t get what’s being ‘maximised’. I took the meaning to be encouraging the greatest number of landlords into the market which ought to increase rental properties’ availability, no?

  6. It’s just the rotten sort of English that economists write, TMB. He is referring to landlords who maximise their “utility”, which is (roughly) their financial advantage. In other words, “maximising” was used as an adjective, not as a verb.

    At least in the Tox-Dadger they’d avoid this beating about the bush and refer to greedy, rapacious landlords. Though, of course, they’d also suppress the first hint that any tenant could be less than an angel.

  7. So Much For Subtlety

    I think the question really is whether Ritchie is against rent control for aging has-been Trade Unionists. Especially in places like the Barbican Centre.

    I am guessing …. not.

    Anyone asked him?

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