Wednesday, 21 November 2012

First it was price gouging now its rent gouging

New Zealand First shows off its level of economic understanding by saying:
More Evidence Of Rent Gouging In Christchurch

New Zealand First says more evidence of rent gouging has emerged with a Christchurch family with nine young children landed with a rent increase of $100 a week to take their weekly rental from $460 to $560.

Christchurch Earthquake Issues spokesperson Denis O'Rourke says this vindicates repeated calls from New Zealand First for a short term rent freeze in the city.

“This is irrefutable evidence that rent gouging is continuing as a result of the housing shortage in Christchurch in the aftermath of the earthquakes.
No "rent gouging" is part of the solution to the housing shortage in Christchurch. Does Denis O'Rourke not realise that supply curves slope upwards. Yes as price (rent in this case) increases so does quantity supplied. If you want people to build more houses in Christchurch, or to supply more of the existing houses as rentals, the best incentive they can get in an increase in what they can rent those houses for. Letting the price system work for the best thing that can be done to fix the housing shortage. A rent freeze would just slow the rate of new house building and stop people from adjusting their living arrangements. A rent increase could mean, for example, that someone in a house that is too big for them would have an increase to sublease part of the house or move into a smaller home thereby freeing up their former house for someone who needs a larger home.

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