Owen Jones tells us that more MPs should live in council housing. This is incorrect for the obvious reason that we taxpayers out here shouldn’t be subsidising the housing arrangements of someone on four times the average wage plus perks – and they’re substantial perks too. Young Owen will try to claim that council or association housing doesn’t cost us anything but that is to ignore opportunity costs. And that’s an important point, for if you cannot get to grips with opportunity costs you’re never going to be able to say anything interesting about economics.
There are two things you’ve got to know about economics:
1) Incentives matter.
2) Opportunity costs – and there are always opportunity costs.
Actually, it’s so important that if you cannot identify the opportunity costs around any specific economic proposal then you’re never going to be able to get that decision correct.
But, you know, Owen and economics:[perfectpullquote align=”full” bordertop=”false” cite=”” link=”” color=”” class=”” size=””]More MPs should live in council housing. It’s not meant to be a poor ghetto
Well, actually, yes, it is supposed to be a poor ghetto. Because if it’s anything other than that then we taxpayers are subsidising the housing of people who may well be – in fact, if they’re not poor, are – richer than we are. Which is nice if you’re on the committee that allocates reduced rent housing but an obscenity otherwise.[perfectpullquote align=”full” bordertop=”false” cite=”” link=”” color=”” class=”” size=””]We are supposed to live in a representative democracy, and parliament should look like the nation it serves. Accordingly, we should bemoan the fact that there are too few MPs who are social tenants, not that there are too many. Increasing the number would mean that the rights and needs of social tenants would be more likely to be championed, and that council housing would be forced higher up the political agenda. It would also mean that MPs were closer to the communities they represent.[/perfectpullquote]
Note the logic underlying that drivel. MPs should be like us. Therefore MPs should earn like we do. £22,000 a year average wage and £25,000 a year median household income. Try taking that to Jezza would you Owen?
But think through that thing that rich people should live in council housing too. Why should we subsidise them? To which the usual answer is that council housing makes a profit therefore there is no subsidy. But that is to ignore opportunity costs and as we’ve said you can’t do that and get your economics right.
Opportunity costs are what you give up to get something. That is, the true price, as the true price of something is what you’ve got to give up to gain whatever it is. For the average woman the price of having a husband is not having three boyfriends – not that hubby knows about at least.
OK, let’s say that council housing produces a surplus of cash over its costs. Just to make this argument simple. Some will say that’s a profit but it ain’t. For what have we given up to gain it? Well, we’re charging below market rents. Therefore we’re giving up the difference between council and market rents.
OK. Now, for poor people, who cannot afford market rents, that’s fine. Because if it weren’t council or association housing then we’d be paying housing benefit anyway. But for richer people? Those who wouldn’t get HB? That loss of rent is a loss, isn’t it, an opportunity cost? And as we’ve got less rent coming in then that means we taxpayers have less in the tax pot kitty – it’s a subsidy from us to those richer people.
It’s even possible that having mixed status communities is worthwhile – but we’re still providing a subsidy to those people entirely capable of paying for their own damn house.
All of which means that yes, council housing is supposed to be a ghetto for the poor. Because there’s really no bloody point in us taxpayers subsidising the housing of people richer than we are, is there?