Alongside Tax Freedom Day, we at the Adam Smith Institute have decided to highlight one of the other equally pernicious ways that poor policy choices are eating into our pay packets; namely, the objectively insane prices that many of us are paying monthly just to keep a roof over our heads.
Sunday marked Cost of Rent Day – the day on which, on average, a renter in England ceases to hand over their hard-earned money solely to their landlords and instead, begins to use that money for themselves. Clearly, this day arrives far later in the year than is conducive to a vibrant, dynamic market economy – and the situation is even worse when you consider that Cost of Rent Days in our capital and other major cities and in the South East are much later. The professional opportunities afforded to those who move to the most productive parts of the country are, quite literally, no longer worth the higher rental costs.
This day is not only indicative of personal financial liberation, it also serves as a barometer for the overall health of our economy. Just as an increasing tax burden and higher prices of essential goods reduces our purchasing power, our ability to save, and potential business investments, so too does higher rent costs. Worse still, if young people can’t afford to put aside money every month to save up for a housing deposit, the dream of homeownership (which already feels nigh-on impossible) will be even further out of reach.
Some will of course seize upon the idea that we’re spending 125 days working just to pay our landlords as an excuse to punish them, or further control the markets, whether this be through the imposition of rent controls, the theft of vacant properties from their owners, or obstructions for Airbnbs. This must be resisted. The majority of landlords behave legitimately and are a vital part of the housing market and provide a necessary service to renters. Rent controls, however, have been demonstrably proven to be a total disaster in every city in which they have been tried. In fact, as seen in Dublin, Berlin and Edinburgh, they have often pushed prices up – the very opposite of what was meant to be achieved.
Instead, Cost of Rent Day should be a call to arms to address the real problem: supply. Over the years, the ASI, alongside the Centre for Policy Studies and many other Yimby organisations, have put forward multiple proposals to get shovels in the ground in areas where people want to live, to make housebuilding popular, and to incentivise development where it is most economically beneficial. Our own ideas range from extending the government’s ‘full expensing’ scheme to brownfield land, to developing metropolitan green belt land and paying local residents for the inconvenience. The government only has to enact a few of these and we could see the boom in the housebuilding this country desperately needs.
Until it does, Cost of Rent Day provides a useful and easily digestible way of holding our politicians to account. The later this key indicator is reached, the less healthy our economy becomes. Waiting just four and a bit months to achieve financial freedom from your landlord, before you even take the taxman into account should be taken as a clear signal of trouble. We can only hope that the government starts to listen.
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