Unintended consequences of good intentions

A good-intentioned number of newcomers to the village decided ‘affordable housing’ was necessary. They seemed not well-versed in market economics which awards an immediate premium to those who acquire assets at below market prices.

Having contemplated ‘affordable housing,’ they then switched to the idea of providing ‘social housing’, rental properties at below the prevailing market rates. Of course, such provision provides the recipients a benefit that would not accrue to those not fortunate enough to be allocated a house.

The well-intentioned group would not accept the arguments that there were flaws in their reasoning, particularly that the cost of finance, the cost of providing services to the sites, and the cost of building materials, would require a level of rent that would make the houses little cheaper than market rates.

There was a lecturer during my undergraduate years at the LSE who would reiterate to students, ‘you cannot buck the market.’ Anyone who might have disagreed with the assertion would have needed only to look at everyday situations to have understood the point. Interventions in markets can sometimes have consequences that were not intended.

Thus it is that the planning application for six units of social housing that would forever destroy the view of the windmill as it appears in the photograph at the top of this page has brought unexpected dividends for local landowners.

A piece of land a little closer to the windmill, on the opposite side of the road was put up for sale. A family member inquired about the potential cost of the two acres of grazing. ‘£8,000-£10,000 per acre?’ he asked.

An uncle, a farmer all his life, thought about it and was umabiguous in his response. ‘It could go for £100,000.’ he said.

The figure seemed absurd. Who would pay such a price?

It transpired that my uncle’s estimate was £4,000 out – the two acres sold for £96,000.

The prospect of the council permitting a development in an undeveloped area has brought speculation that once one application has been granted, others cannot be refused. The intention of providing housing at a lower price has brought a sharp increase in the price of land.

A schoolboy economist would tell you that in a market economy, prices will always be determined by supply and demand. If prices are to be reduced, supply must be increased or demand must be reduced. The demand for housing will not reduce, the only way to make it affordable is for a wide scale building programme to be undertaken by local authorities. Local interventions can have the effect of making things worse.

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2 Responses to Unintended consequences of good intentions

  1. Chris says:

    I have long held the view that there is a shadowy agency that, rather like the Child Catcher in Chitty Chitty Bang Bang, identifies those in society that lack common sense, are incapable of original thought, cannot create anything useful and are completely unable to contribute any meaningful function to a team objective.

    Once identified, they are rounded up and made to work in Local and Regional governments and HR departments where they can create reams of useless paper, make a lot of noise, do nothing of benefit and can never be sacked for incompetence.

    Bureaucrats; love ‘um.

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