Thursday, March 25, 2010

Economics students needed to educate NUS

This is from a couple of days ago: Rents are soaring for student accommodation. What is the NUS's response to this? There should be rent caps.

Sound like a good plan? I'm sure it does, keeping rents low.

But you've studied economics this year, the market for accommodation is like any other market: There's a demand, and there's a supply.

I suspect the NUS has missed the fact that there are more students than ever at university now. So the demand for housing has gone up, and hence it's not surprising prices (rents) are up too.

What kind of a solution would capping rent be? If rent was capped at some below market equilibrium price, then there would be an excess demand for accommodation, as landlords would be unwilling to provide accommodation at the lower prices, and would instead offer their housing to others - immigrants, families, etc.

Rent caps have been tried, and have failed, around the world over the years (New York is an often touted example). All they do is cap the quality of accommodation. If a landlord can't raise his rent, he has no incentive to improve the accommodation, and the shabby state of student accommodation will only get worse.

It's a hard truth, but it's the truth sadly. Capping rents are not the solution, so if you're in the NUS and study economics, do try and educate your Union on the economics you've learnt this year.

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