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December 1, 2006
Get A Piece Of The Rock

The British have a crisis in prison capacity, as their Treasury has refused to finance construction of badly-needed new facilities. Their prison population topped 80,000 in England and Wales, and they have no more cells in which to put new prisoners. Instead of levying new taxes to pay for new prisons, the Labour government has proposed an investment scheme for citizens looking to build a rental-property portfolio that has little risk of extended vacancies:

The public may be able to purchase shares in new prisons under a "buy to let" scheme being considered by the Home Office.

With the prison system in crisis and inmates being held in police stations as jails overflow, Home Office finance directors hope to persuade private investors to pay for the urgently needed cells. The new jails would then be rented out to private prison operators, providing a guaranteed return from the rental income. ...

"We are looking at many means of funding", a spokeswoman said. "We have not ruled in or ruled out Real Estate Investment Trusts and we are still evaluating many options."

A Home Office source told Building magazine: "The public could buy a share in a prison REIT, taking advantage of the steady rental income." The government and contractor could then sell on their stakes in the REIT to recover some of the costs of building the prison.

Perhaps for some Britons, it could be sold as a time-share. Stuck for a vacation idea? Instead of a B&B, take a week off in the Big House.

All kidding aside, the idea has some merit. Forming corporations to provide the funding for new prison construction could eliminate some of the NIMBY considerations that often delays such projects. Instead of being seen as a liability for communities, it could become a profit center. Private investment could also guarantee better civil oversight of prison management.

However, it does seem a little unsettling that rental rates could become a factor in how the public addresses crime and punishment. Would prison investors work harder to limit parole and for longer mandatory sentences, not for public benefit but to bolster their rental income? Would the public be more inclined to increase the reach of criminal law if the occupancy rates did not meet expectations? It would certainly introduce a profit motive to those aspects of incarceration that did not exist beforehand.

It's an interesting proposal, one that merits some serious thought, and plenty of caution before it's attempted.

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Posted by Ed Morrissey at December 1, 2006 5:26 AM

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