Why is the market for allotments in disequilibrium, given the facts below?
From Wrexham to Eastbourne and in virtually every part of the country, the demand for allotment space is rising much faster than local councils can supply. The economics of having your own allotment land have changed significantly in the last few years. Allotments peaked in popularity in the immediate post-war years as people looked to grow their own food and drag themselves out of the restrictions of rationing. But gradually the number of allotments declined as the food availabilty improved, real prices fell and the number of supermarketsexpanded. By the 1980s using an allotment was widely regarded as the preserve of the ‘Good Life’ crowd and those in retirement wanting a way to pass the time.
But now the combined effect of rising food prices, growing concerns over the environmental effecs of food miles and demand for locally-grown organic produce has prompted a fresh wave of demand for scarce allotment space.
Sadly the supply of plots is inelastic and long and lengthy waiting lists have remained the method of choice for balancing supply and demand. In some parts of our major towns and cities there are no allotments at all as land has been sold to private property developers by local councils strapped for cash. Councils are legally obliged to provide 15 allotments per 1,000 households and under current rules, no more than six people are allowed to be waiting for a plot at any one time.
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In economic terms, the market for allotments is in disequilibrium because the government has effectively set a price floor for the allotments.
In recent years, the demand for allotments has gone up. At the same time, the supply of allotments has remained steady or has even dropped due to the fact that land is very scarce and local governments have sometimes needed to sell allotment land. If this market were allowed to adapt on its own, a rise in demand and a steady or decreasing supply would lead to increases in prices. The market would then be in equilibrium.
But the local governments do not allow prices to rise as they (economically speaking) should. The governments do not want to raise prices because doing so would look bad politically. Therefore, they maintain what is, in essence, a price floor, leading to a shortage in the market.
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