Politicians still don’t get housing markets

Another quick note on the Irish property market. The fact that the nation has had a proper crash doesn’t make the government there any happier than ours would be,  should their sterling efforts to prevent one fail. A piece in the Sunday Business Post notes that, while of course the credit bubble was the main cause of the Irish property bubble, the state didn’t exactly help matters. Wherever possible, it chucked in an extra incentive for people to buy and then to buy bigger. And guess what? They are still at it, says the paper.

The social protection minister, Joan Burton, has just announced an increase to the rent supplement. “In other words, Burton is using the social welfare budget to help landlords to maintain the rising prices they are charging to tenants. No doubt this will help many buy-to-let landlords meet their mortgage payments and stay out of arrears, but at the cost of anyone entering the rental market or trying to buy a house… have we learnt nothing?”

Looking at the policy here in The Irish Times, it isn’t quite as bad as it seems. The supplement is only going up in urban areas – it is going down in some rural areas. But it is the kind of thing that backs up David Stockton’s call for a stop to targeted welfare across the West.

A negative income tax (where low earners just get given more money) would be better, he says. It would redistribute a nation’s wealth from rich to poor without distorting pretty much every market in that nation along the way. Subscribers can read the full interview with David in this week’s magazine (out tomorrow) and you can also watch John and I chatting to him on Moneyweek TV (which should be on the website soon).