Press Release: Rent caps could devastate British cities and clobber renters

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Commenting on Labour’s pledge to cap above-inflation rent rises for three years, Deputy Director of the Adam Smith Institute Sam Bowman said:

Rent control is a stunningly bad idea that could clobber renters.

Rent caps come in two forms. The ‘first generation’ kind, which simply puts a ceiling on rents, can utterly destroy entire districts as landlords have no incentive to maintain their properties. These have been deemed by the Swedish (socialist) economist Assar Lindbeck to be “the most efficient technique presently known to destroy a city except for bombing”.

‘Second generation’ rent controls are what Labour seem to be proposing, and are less harmful, but shift risks from landlords to tenants. They incentivize landlords to price in expected rent rises at the beginning of the tenancy, so if rents fail to rise as quickly as expected, the tenant is left paying more than they would need to.

Labour has unwittingly announced a policy that could devastate Britain’s cities and exacerbate the housing crisis. If Labour want to reduce housing costs for renters, it should advocate planning reform to increase supply so that the price of housing drops in real terms.

Notes to editors:

The Adam Smith Institute is an free-market, libertarian think tank based in London. It advocates classically liberal public policies to create a richer, freer world.

If Eurogroup meetings fail, is a Greek default inevitable? – Sam Bowman leans YES in CityAM

Deputy Director of the Adam Smith Institute Sam Bowman took part in the CityAM debate, arguing that failed Eurogroup meetings would make a Greek default more likely:

No country has pulled back from a peacetime debt-to-GDP ratio as high as Greece’s 175 per cent without defaulting. Its options are to grow out of debt, default unilaterally, or restructure its debt in cooperation with the Eurogroup. With the last of these off the cards, it may push for growth. But the country is in a state of near-perpetual deflation, which means that, even if it did have growth, it would still not be enough to boost its nominal GDP growth to the 4.9 per cent the Eurogroup believes is needed to start paying down its debts. Big supply-side liberalisations seem unlikely under Syriza, and certainly not on the scale necessary to deliver the growth a deflationary Greece would need to change its borrowing trajectory. However, absent debt servicing costs, it is running a budget surplus. If it defaulted, it may not need to worry about borrowing for now. If debt restructuring is truly off the table, a unilateral default may look very tempting.

Read the full debate here.

Is Google’s dominance actually dangerous? – Charlotte Bowyer argues NO in City AM

Head of Digital Policy at the Adam Smith Institute, Charlotte Bowyer, argues that Google’s online prominence isn’t something to worry about in the CityAM Forum Debate:

There’s no denying that Google’s empire is vast. But the question is whether the prioritisation of its own services within search is actually bad for consumers. Many rival facilities exist, yet despite heavy investment and the promotion of services like Yahoo’s Bing, EU consumers just aren’t that interested. This suggests that people simply find Google’s search function superior, or enjoy the efficiency of its integrated services. But the way in which we access information and entertainment is evolving. Personal Assistant services like Siri are designed to compete with traditional search, while consumers are increasingly turning “in-app” to services like Facebook, Instagram and even Snapchat for news and recommendations. Many once-popular services and tech companies fall out of favour with time. With so many alternatives out there, there’s no reason to assume that Google’s current dominance is anti-competitive, or even guaranteed to continue.

Read the full article here.