One of the persistent problems in the Irish media is that political parties – almost always of the left, but then they all are – are regularly allowed to make proposals that are fundamentally idiotic and escape without anyone pointing out the reasons that their proposals are idiotic.
There are several reasons for this. The most important one is that there are very few journalists left in Ireland – and certainly very few working as political correspondents – with training in anything other than journalism. They know how to ask a question and construct an opening paragraph and how to protect sources, but they have absolutely zero understanding of economics, or law, or administrative policy. So for example, when somebody like People before Profit announces that they would like to cap rents at 25% of household income, there is hardly ever any journalist there with the competence to recognise instantaneously that such a proposal would be economically ruinous.
So instead we get faithful stenography:
PBP seek to reduce rents to 25% of a household’s net income. pic.twitter.com/FA34reY4IQ
— Mícheál Lehane (@MichealLehane) April 25, 2023
Why is it such a bad idea? The clue for why this one is a particularly awful idea lies in the word “net”.
“Net” income is what you have left after you pay all your taxes. Therefore, setting a rent at a value of 25% of net income amounts to increasing your taxes on all future additional income by an additional 25%: Because for every extra euro you earn, your rent would automatically increase by 25 cents. That is on top of the tax you would already pay on that euro.
If you, then, are in the top rate of tax, that would mean that after income taxes and USC and the extra money flowing to your landlord, every extra euro would end up netting you about 20 cents, if you were lucky.
There is another obvious problem here, one so basic as to make the proposal immediately catastrophic: When you set rents to 25% of net household income, you actively incentivise landlords to discriminate in favour of high earners.
Rents are not, obviously, always going to be 25% of net income – the market has a natural ceiling, as well as a floor. Somebody on 500,000 net is never going to have to pay 10,000 per month just because that is a quarter of their earnings. What the proposal does do, though, is set a floor for acceptable household earnings for many landlords. Landlords are able to access this information already by asking for references from employers, or for proof of ability to pay the rent. If the rent is set at 25% of net income, then a rational landlord will pick the higher earner every time.
What then about those tenants already in situ? Well, they’ll suffer too: A landlord who sees his monthly rent collapse because of a Government imposed cut in what he can be paid is immediately economically incentivised to sell up on the open market. In fact, they would sell long before such a Government ever got their law passed.
This proposal will, obviously, never become law. In the first instance, People before Profit will never enter Government, under any circumstances, because they believe that to do so would involve making compromises that undermine the long term viability of the socialist revolution to which they remain committed. In the second instance, politicians in most other parties may have bad ideas, but the ideas are not insane, like this one.
The purpose of this idea, by the way, is not that it ever become a law. People before Profit are a political movement that is not in the business of making laws, but in making sure that there is never any room to their political left. This proposal is a preview of what Sinn Fein can expect when it takes power, either at the next election or at some subsequent one. With a Sinn Fein Government, People before Profit’s objective will be to paint them as “right wing sell outs” within a few months of taking office. One of the ways they will do that is to put nonsense like this up for a vote, in the knowledge that sane people will reject it, and desperate people will fall for it.
This idea, like many others produced by PbP, is not only bad but cynical. And the worst thing about it is that they get away with it, because the media lacks the critical thinking skills to point out even the most basic flaws in their proposals.
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