RENTALS AND ECONOMICS

It is on the news these days the controversial 210€ subsidy that help cerain groups of populatiton for rent a flat. I will not enter into discussion whether the measure is an unfulfilled promise of 2004 or if it is a new policy. I think that the issue deserves to be analyzed fram an economic ponit of view, in order to know if this is really a reight answer or not.

The first thing to note is that both the unpopular taxes as well as the popular subsidies, in spite of sometimes are really necessary, usually generate a loss of efficiency in the markets. So politicians have to take care before establish them.

Provide a grant to rents could generate, apart from an increase in public expenditure, an increase on the demand, which inevitably rise the price, especially if the supply is not growing (making useless this public expenditure).

The economist should try to find a more efficient solution, in othe worlds, that situation in which (at least) one part be better off, without worsening the other. I propose to Minister Chacón, with the same money they had intended to employ to that extent (and after negotiations with the major companies in the real estate sector) to finance the establishment of a Housing Institute depending on the Ministry, directed by good advisors and creating sites in different provinces. Thus the owners as well as potential buyers and tenants can register both local supply and demand, that help them to sign contracts.

This is not a kind of statal monopoly of real estate. Is rather a kind housing ´INEM, where the sellers (or renters) impose their conditions of contract to the demand that, by this way, has a much clearer picture that the thousands of newspaper advertisements that they could cut.

This will channel all the market movements, which would facilitate further agreements between the two groups, thereby helping to lower prices and avoiding the much hated paperwork, something that discourages many people to put a house on rent, preferring expect the best time to sell and forget about it (the institute could facilitate the rental of these empty buildings to their future purchases, for example).