Bad Economics

From today, Madrileños under the age of 30 can get special help when renting a flat. Called the ‘Renta Basica de Emancipación’, it is available to those between 22 and 30 years whose annual gross earnings come to less than 22,000 euroweenies per year. It can amount up to 210 euroweenies a month for the rent, plus 600e a year for the deposit (‘fianza’) and another 120e a year for the guarantee (‘aval’).

Housing, or at least the cost of it, is one of the main political issues in Spain and is particularly acute in Madrid, where prices have sky-rocketed in line with the UK and Ireland. Rarely a week goes by without the media reporting on a demo from economically illiterate students demanding cheaper accommodation or a political press conference on the subject and each month the breakdowns by district (barrio) of average rents is scrutinised in bewildering depth by commentators from all sides of the political spectrum. This ‘Renta Basica’ was a response by the ruling socialist party (PSOE) to a perceived weakness in its support from this demographic of the electorate. Or, to put it more simply, it was a bribe to make ’em vote PSOE.

However, landlords are no fools and, as always happens when you artificially distort a market, the providers (the house owners) have surreptitiously started to raise costs (rents) prior to today’s deadline – thus making it harder for those not in the target age-bracket but looking for similar types of accommodation to rent. Thus we are getting artificial inflation plus more tax impositions for the general working public.