Some further thoughts on economics and housing

  I was watching an interview with Angela Rayner in which we asked about building houses. Everyone seems to believe we lots more houses.  She realises that unless we get councils building more we are not going to tackle the crisis in housing and the huge size of the waiting list. The interviewer then asked about the sale of council houses and the governments plans to cut access to these.

  It is at this point I begin to lose faith in the abilities of our politicians and our press. The problem is the shortage of housing, selling council houses does not increase the stock of houses and currently reduces the stock of affordable housing. So in what way does selling council houses to existing tenants do anything to solve the crisis of affordable housing, In fact it probably does the complete opposite. 

  If there is to be a valid argument that because someone has paid rent for 5 years they are entitled to buy the property and that was a good thing why not extend it to all rented housing or farms etc.  There would be an outcry that this was unfair, it always amazed me that the high court agreed that the government was able to do this to property owned by the ratepayers. Norwich city council tried to stop the sale but some judge decided it was OK. It does make one wonder about the integrity of the judiciary.

  However there are other implications of the thinking about the shortage of housing. It would seem likely that "free market" economists would assume that the market would somehow adjust and deal with the shortage. One way would be to reduce the demand by increasing prices or even by increasing production.The first of these proposals would create a huge increase in homelessness which as a society we have decided is a "bad thing", though perhaps those who are devoted to the "free market" would not be concerned. As a consequence we have the current dilemma. The only solution that I can see is to create council housing and ban the sale until the waiting lists have become essentially trivial. Let me emphasise that I mean council housing and not housing association which appear to be a throw back to the Victorian era where support for the poor was in the hands of the "Great and Good". 

  In this situation it is clear the market does not provide for a stable and happy society, controlling demand by pricing things out of people grasp does not work. Now consider the ways of central banks and inflation. Their only solution to inflation is to increase interest rates, that is drive up the cost of money in the hope this will cut demand and so reduce inflation This very crude and hits those with low incomes and little savings much more severely that anyone else. But the present cause of inflation is not high demand but a lack of production, perhaps a little like housing, most of which has nothing to do with any actions taken by the UK or its citizens. The question is how will increasing interest rates help to cut inflation in these circumstances? I have no idea but the consequences will be to make life much harder for the poorest.