t’s all getting a bit Latin American in Britain and not in a good way. Inflation is stuck stubbornly in the double digits, the current account deficit is at record levels, our new Prime Minister is preparing to spend the annual budget of the NHS on subsidising energy purchases, and regional separatists are tightening their grip on the Scottish economy by introducing price controls. At least the weather’s still good.
Nicola Sturgeon’s plan to freeze all rents in Scotland would be a disaster for Scots. Economists almost universally agree that rent control is one of the worst possible ways the government can intervene in a housing market. The short-term consequences are predictable; the policy freezes the price of renting and puts a moratorium on evictions. This makes people who have a property to rent better off; it makes people looking for somewhere to rent worse off.
When rents are held below market prices, two things happen. The first is that landlords start to withdraw their properties from the market; if you can’t evict a tenant who won’t pay and aren’t earning enough profit after covering your mortgage and upkeep, it doesn’t make a great deal of sense to rent a property out. Far better to wait for prices to go up again, or convert it into owner-occupied housing and sell it. This preserves the total stock of housing but results in misallocation between short-term rentals – ideal for people who don’t really want to live in an area for more than a few years and long-term purchases.
Want to see more SNP fails? – Politics Matters
