Several recent announcements in Spain provide for some amusing and saddening analysis:
- The Government of Spanish PM RodrÃguez Zapatero announced state aid for young people (under certain income level) to pay the rent on their house or apartment.
- Some time ago, they announced that landlords would be protected against defaulting tenants, by a state agency that would pay the landlord the amount owed by the tenant.
- The Andalusian regional government (ruled by the same party as RodrÃguez Zapateroâ€™s) has also recently announced they would â€œgive awayâ€ flats for free to people earning less than â‚¬3,000 per month.
Aside from the fact that these are purely populist announcements, just in time for upcoming elections, they are yet another proof of the downright ineptitude of RodrÃguez Zapatero:
1) and 2): The Prime Minister is a coward, covering up the housing problem in Spain with free money, rather than tackling the real problem. If rental prices are high and unaffordable for some, the solution is not for the Government to pay part of peopleâ€™s rent.
The solution is quite simple: Itâ€™s a matter of supply and demand. Rental prices rise if supply of rental housing is low. The Government should take steps to reduce prices as a consequence of increased supply of rental apartments. How to increase supply? The answer: by making it attractive for apartment owners to feel inclined to rent their apartments out to people (many flats are unoccupied). How to persuade them? Simply, owners will feel confident to rent their property if they have the guarantee and assurance that defaulting tenants can be evicted immediately, in a matter of hours if necessary, and that any damage to their property will be paid for by the tenant.
Currently, tenants cannot be kicked out of an apartment even if they owe several months of rent. Spanish law sides with the defaulting party of the contract, rather than with the compliant party. The flat owner is unprotected and feels not compelled at all to rent out their property thus reducing the supply of rental housing in the market.
Subsidizing housing will not solve any problems; Its price is not affected. Sadly, the Spanish Government is unwilling to take the really necessary steps to avoid unaffordable prices, which are much harder to implement than a simple populist subsidy.
Government-paid rent for defaulting tenants is equally wrong: It is public money, given to the defaulting party of the rental contract, while the compliant party sees their property forcibly occupied by non-paying residents.
Finally, idea 3) is also utterly immoral, for it uses public money to pay for the housing of some people, for them to enjoy free housing, while others have to pay full price. Moreover, the group of people earning less than â‚¬3,000 per month is quite likely the vast majority of the population. Where will the Andalusian government obtain the funds to pay for housing to give away to over 70% of the population?
In summary, the three initiatives by RodrÃguez Zapatero described above will only lead to:
- Increased dependency of people on the Government (people get accustomed to getting monetary help from the Government)
- Promoting irresponsible behavior (people get used to being bailed out by the Government when they do not pay their rent)
- Fattening of the Government, increased public spending, and increased tax collection, resulting from the Government’s very failure to face the real problems.