The Market for Dickensian Dystopia

Red TapeThe regulations currently governing rented accommodation are an unnecessary imposition on the freedom of individuals to make decisions for themselves. If people want to subsist in ‘Dickensian’ conditions, they should be allowed to do so.

The price mechanism does a pretty good job of making sure that people get what they want. If they don’t like the product, they’ll move somewhere else and the land-lord will go out of business. When the government fights battles for consumers, the outcome can be a lot worse.

The laws introduced last year stipulate minimum standards of quality in rented accommodation, from heating to sanitation and other facilities. For example, there are requirements that hot water be available at all hours. They are supposed to protect vulnerable people from unscrupulous land-lords, by forcing them to provide a decent standard of accommodation.

The market for rented accommodation is pretty competitive on both sides. If people weren’t happy with poor-quality accommodation like bed-sits, that would have bid up the price of similar-but-improved rooms; up until the point where it was profitable for land-lords to improve their properties and reap the rewards.

There’s no reason to think this couldn’t have happened. Rental markets are pretty transparent, and land-lords could have gotten their hands on capital fairly easily (perhaps too easily). But they didn’t.

That was because there is a market for cheap, well-located, no-frills accommodation for young workers and immigrants. If those consumers had been willing to foot the bill for conversion to better accommodation, it would have happened. That’s the beauty of the market mechanism. These consumers were happier paying less money for a poorer quality.

Unfortunately, government bureaucrats are now forcing land-owners to update their property. The cost will be passed onto consumers. It might even constrain supply, as these rooms are converted into apartments with smaller capacity for greater profits.

The result is that the inhabitants of the aforementioned Dickensian hovel is paying for renovations they don’t want with money they don’t have. They will be spending more money on rent and less on everything else, to the detriment of their welfare. Big government at its best.

© The Free Marketeer 2009

 

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