This is basically a maximum wage for landlords, bound to start a secret society.
IMO it's a crooked notion that landlords are rent seeking and nothing else - they do create supply and maintain housing.
Issue is when they want to politically and artificially raise the value of their property by preventing more housing from being built, so, if you're going to ban something, ban artificial regulations on construction!
North Carolina has done some good by loosening up code around tiny homes, but, a lot of municipalities want to enforce big homes only because they like the property tax of high value houses, 4 bedroom and all. Small town I'm in basically won't allow expansion of housing because the people that live here don't want the village to get any bigger, but if it's democratic like that I'm mostly OK with it, it's when there's demand for housing and someone with a perverse incentive to block it that we should want to solve for.
No, the real problem is that the vast majority of their income does not come from their role in creating supply or maintaining housing.
Proof: Propose a 100% land value tax, which definitionally only removes that part of income that is generated by the community around their property, and see if they go for it.
The actual value of a landlord is insulating the tenant from financial risk, charging a predictable rent and absorbing the costs of repairs and maintenance. That's a lot of value for some people, but it also comes with problematic incentives and obvious bad outcomes when combined with other aspects of housing markets.
In a perfect world, but rent is often less significantly predictable than mortgage payments. Of course the cost of repairs and maintenance isn’t absorbed, it is paid in full by the renter in the cost of rent.
> IMO it's a crooked notion that landlords are rent seeking and nothing else - they do create supply and maintain housing.
They don’t create supply in any way, the only ones who do that are builders. But sure they maintain houses. Although just the bare minimum, they will never fix it nicely - just enough to rent it out.
But not in the causal chain. The building happened because someone was willing to pay for a fungible asset. An asset is only fungible if there are buyers.
> The building happened because someone was willing to pay for a fungible asset.
Building often happens because a developer believes someone will buy the homes they build. A lot of the time, they are right; some of the time they are wrong. Some developers will get buyers lined up first, to minimize the risks of being wrong; many do not. In the latter case, there's no inherent connection between the building and subsequent buyers.
> But sure they maintain houses. Although just the bare minimum, they will never fix it nicely - just enough to rent it out.
Depends a lot on the landlord. Many will fix it up nicely because they can charge a higher rent. Much of my work is repairing rental properties and I've seen all types of landlords. I try not to work for the cheap ones if I can help it because I don't want my name associated with the crap they want me to do.
How does one propose to supply the market for temporary housing without landlords? Students, travelers, new residents to an area, people early in their careers switching jobs frequently, all of these people have a need for temporary housing. If the only people who own buildings live in them, where do these people find their housing?
I spent over a decade living in various rentals after I moved to a new state. I didn't have the money to buy when I first moved, and even if I had, I didn't know the area well enough to know whether I would want to buy where I first lived. And having the ability to just pick up and move meant I had a lot of flexibility for chasing job opportunities. Don't get me wrong, there's plenty to love about the home I own now, but it absolutely ties me down and anchors me in ways that renting never did. I for one am glad to have had people willing to rent property to me.
All fair and valid points. I agree. In today’s age with a career in the tech field and a newly first time home owner, I do feel the aspect of being tied down. But I never really got to avail of moving to chase job opportunities since the Bay Area is where they’re the densest. That being said during Covid times I had to move to the PNW due to layoffs (got a great offer, but I didn’t have to accept it and could afford to keep looking). So I really do understand the benefits of renting.
Like I said in another reply, I don’t consider landlords to be inherently bad. But there are a lot who will try to take advantage of you if you let them. You have to be lucky to get a good one - I only had a couple out of the dozen or so and I wish them the best.
The actual value of landlording is offloading financial risk. The tenant pays a stable rent including a premium in exchange for maintenance, repairs, and not having to sell a home in order to move to a new one.
I just can't bring myself to agree with the hard-line socialists who think landlording is fundamentally a bad thing. There are a lot of problems with it, but it does have a legitimate place in the world.
I don’t think it’s fundamentally a bad thing. It has its place. But it’s an industry that’s easily exploited - I rented over a dozen places and like 80% would try to do things that the tenant handbook would not allow. I sued one of them, and settled out of court for another. And surprise surprise a lot of them don’t want to rent in areas that are pro-tenant rights.
Right, it's entirely possible that landlording in practice has so many opportunities for abuse that it's irredeemable despite its potential for benefit in certain cases. I don't know if I agree with that, but at least it's more intelligent than "Marx says landlords bad therefore landlords bad."
The concept of "landlords do nothing while collecting passive income, therefore not creating any value but instead are just exploiting that they own the land" would be correctly described as "rent-seeking behavior".
This equally applies to any investment income wouldn't it? Dividend, loan interest would all be classed as "unearned income" by a certain economic theory I won't name that keeps causing people suffering a century later. Don't do that.
Investment is generally considered profit-seeking behavior (i.e. not rent-seeking). Building an apartment and renting it out is clearly profit-seeking behavior, but if you were continuing to rent it out doing the bare minimum to keep it from falling over 40 years later, that would be pretty clearly rent-seeking.
From this, we can conclude that there must be some point after an investment is made where continuing to benefit from it transitions to rent-seeking behavior.
Predatory loans were maligned as "usury" long before "rent-seeking" or Scary Marxists came along. For good reason. They're bad for society and the economy writ large.
Classing all loans as usury help Europe back for a long time.
I guess you could class some rent as predatory as well, allowing others to use your property for a fee is not necessarily predatory (unless you're of "property is theft" kind).
Criticising landlords is fine, but words (and phrases) have actual meanings, and the term "rent seeking" has literally no place in a discussion about landlords.
I am well aware of what the phrase means, and I re-read the Wikipedia article to be sure. Maybe you read the use of the word in a different way than I did, but I helpfully included my precise interpretation of it in my comment to clarify the meaning.
> the term "rent seeking" has literally no place in a discussion about landlords
Having "literally no place" is certainly a strong choice of words, particularity as it was introduced in this thread as being a inaccurate label to apply to landlords.
Personally, I first learned about the term applying it to Feudalism, in which the (land)lords' only contribution was their ownership of the land. That example alone seems to pretty handily disprove your claim of "literally no place", in fact it's specifically cited in the Wikipedia article as the Georgist interpretation of economic rent.
Your own wiki link disagrees with you, most of the article uses landlordism as the base-level example. You've just discovered how "rent seeking" is used as a more broad term to describe many phenomena, but they're still describing them essentially in the metaphor of landlordism.
> "Rent seeking" has nothing to do with landlords and tenants
They're orthogonal. In a competitive market, landlords earn no economic rent. In a market with supply restrictions, however, landlords will earn a return "in excess of the costs needed to bring that factor into production" [1].
This is almost never true. Leases come with a million stipulations, and they get to decide what you can and cannot do. It’s exclusive in the sense that the landlord can’t force other tenants on the place you’re renting.
> if it's democratic like that I'm mostly OK with it
One thing to keep in mind. It might be that it's "democratic" in that all the homeowners are allowed to vote for or against the zoning policy (or for or against the local leaders who set zoning policy) but ONLY the local homeowners are allowed to vote. Those who rent (or who can't even afford to rent) live in a different district and aren't allowed to participate in the election.
If that's the case, then voting doesn't represent "the will of the people", just the will of those people permitted to participate.
I live in Massachusetts. Maybe I’d like to move to Palo Alto or Malibu. I hear they’re lovely.
To what extent, and by what mechanism, should the government of those two areas weight my preferences on housing policies in those areas? (I think it is properly exactly zero, even I say really, really want to.)
> Rent-seeking is the act of growing one's existing wealth by manipulating public policy or economic conditions without creating new wealth. (https://en.wikipedia.org/wiki/Rent-seeking)
Given that renting out property you own doesn't meet this definition it can categorically not be called rent seeking. I'm always shocked that people apply this definition exclusively to property rentals, and not VHS rentals, without seeing the hypocrisy.
I fail to understand how your quote doesn't describe land lords? It is:
1. An act of growing one's own wealth (no other purpose to land lording)
2. It is accomplished by taking advantage of economic conditions (perhaps not "manipulating")
3. Does not create any new wealth.
And a little further down is this:
> Rent-seeking implies the extraction of uncompensated value from others without making any contribution to productivity.
Which to me certainly sounds like someone who's only contribution is ownership.
Aren’t you exploiting the economic condition that housing supply is extremely low, and a lot of them vote to keep supply low and prevent new builds? I’m not trying to be facetious but I find it hard to believe that landlords don’t exploit economic conditions.
"Normie" and "happens to own one or two extra homes" seem a bit contradictory to me... And doesn't everyone who invests in something that makes them money exploit economic conditions?
Maybe I’m just unlucky but about a third of the places I rented had landlords who owned at least 5 homes. My realtor owns a dozen. I think owning a couple of extra homes is ok… but at some point I feel like it’s a bit excessive. People struggle to own one, let alone a dozen.
If you have 97 flights landing at airport with 1-3 pax each and 3 full jumbo jets and you survey passengers leaving the airport, the average person surveyed will report that their flight was packed.
What? Of course they are. They just produce entertainment instead of housing-days.
I think we're at the bottom of the discussion here. You've got your opinions but each time you've been pressed you don't really have a justification that stands up.
I can’t imagine what you mean by “each time you’ve been pressed.” Are you perhaps confusing me with other people you’re arguing with?
But no, VHS tapes are not factors of production. That’s a term with a widely understood definition, and linguistic tricks like “a VHS tape causes an image to be produced on a television” or “viewing an VHS tape produces a sense of enjoyment” are not valid arguments.
You're trying to side-step the point by not understanding it.
A VHS tape is capital in the same way that a machine or house is capital. They are capitalized goods that produce something of value on the other side. You still haven't been able to demonstrate that renting one is morally questionable while the other is fine except by special pleading.
"Rent" has a few specific meanings in economics, but charging a tenant rent isn't necessarily economic rent. The economic rent is more like the difference between your actual monthly rent and some hypothetical idealized market-clearing monthly rent.
The municipality cares about the taxes, sure but it goes far beyond that. Literally everyone in every department is more convenienced by attracting the well off and being hostile to those who aren't. Those rich people in those big houses with their big assets are much "easier to own" for the town than a bunch of rowdy generally noncompliant trailer trash who crank out a bunch of kids who need services, have poor elderly who need services, don't goose step in line without a bunch of enforcement, can't pay the taxes to pay for the "do we really need this" equipment and facilities government always wants, the working parents can't pick up the slack if the schools slip and scores will show it, etc, etc, etc.
Growing municipalities kind of have to choose if they want to become bedroom communities or industrial/business communities and if they choose the former optimizing for rich people is the easy lazy not sticking their neck out choice and what does government employment optimize for if not retaining people disposed toward that sort of decision making.
I'm not sure if this is what you mean by secret society, but I could well imagine that these kind of limits would be hard to enforce. Like a person creates shell corporations to own their properties on their behalf, or buys them in the name of their kids, or employs randos to "own" pieces of their portfolio.
They already do these things to take advantage of "primary residence" or "first-time home buyer" incentives; see the big hullabaloo over Letitia James doing it by accident.
Check out the origin of freemasons, a originally a secret society of stone masons whose labor was in such high demand after the black plague rolled through Europe and England that London set a maximum wage. I forget exactly what the meetings were for but it was something like a union / underground political resistance / price-fixing agreement club that worked in all the Pythagorean and Egyptian ritual later on .
Noone says it's nothing else. But rent seeking is a big component of it, you just focus on other minor parts.
In general, locking down some limited but critical commodity (e.g. land) is bad for any economic system. It doesn't really matter whether it's "Wall Street" or "your neighbor". A healthy economy is geared towards creating an added value.
I disagree, but I am interested in pulling this thread somewhat. What would be alternative? The role will likely exist in some form regardless, but I suppose there are obviously ways to make it less common just by removing of its incentives. That said, I might be tipping my hand a little.
Germany practices basically rent control, so that 60%+ of population rent and consider it stable. That's another way.
Maybe there are more, I didn't think hard. The basic idea is to prevent formation of an "aristocracy" that holds some limited but necessary (not luxury) resource. Pretty much every revolution happened because of that.
I guess not most, all of mine were fine, mostly individuals with one or two investment properties who were friendly neighbors I happened to pay rent to.
Point is, in choosing to be a landlord and buying property, an ideal world would respond to this demand pressure by building housing, didn't mean to suggest the landlords themselves put on their hard hats and frame a new building. Just that they're also part of the marketplace.
I've had slumlord landlords, landlords who maintained and kept up the property and focused on retaining tenants over increasing rents, and corporate landlords with prices set by a computer. Landlords are a spectrum.
IMO, government owned basic dormitories with high density should exist. Think of something one or two steps above emergency shelters. Call them pods if you like.
Rent and utilities could be positioned at a level that permitted people to survive and have a foundation from which to lift themselves back up and perhaps eventually to a private housing situation with some luxury.
Renting should be viewed is a negative in society. Imagine if car dealerships moved to a rental model instead of ownership..oh wait, they sort of already are, they just call it "financing", they make no money from cash buys because of that economic perversion.
Rent income is not wages, that's the critical part you're mistaken. Income and wages are not the same thing. Rent income is as much wages as Elon Musk selling stocks is to him, or a bank making income on interest payments. Renting is a business, it's income is business revenue, not wages.
There is this terrible view that landlords are "just like you and me, hard working regular people" - not that it's false, but so are the people that own mom & pops shops, or a local subway franchise, they're all business owners making business profits, not wages.
Business practices that harm the public should be regulated and curtailed. With taxis for example, the medallion system was used to limit the number of Taxis in operation. Similarly, not only should an individual be limited to (directly or via an ownership/shareholder interest in a company -- even with them or their family) a reasonable number of properties, but the number of rental properties in an area should itself be limited. Property owners can either sell houses, or sell condos and make income via condo (regulated) condo fees.
Food, shelter, health-care/medicine should be heavily regulated, if private parties take part as intermediaries between individuals and their food, shelter, health-care, they should expect lots of red-tape and limits. Ideally, the government itself would be driving these markets directly by building and selling properties, hospitals, pharmacies, grocery stores, etc.. that's not socialism or communism. That's just common-sense capitalism, everyone, especially the richest make more money this way. not only that their money will spend better this way.
The kind of capitalism we have now is a short-sighted parasitical money-grab. The kind where if fully realized, you'll build your own mansions and sky scrapers but you'd be complaining about the slums and crime nearby, how you can't get good help, skilled labor, and spend a ton of money on bribes instead of paying a fraction of that in taxes.
In theory, reaganism and trickle-down economics could have worked. A rising tide does indeed lift all boats. But in reality, it's more of the "scorpion and the frog" story. In this case, landlords can own a reasonable number of decent homes and make decent income, and then diversify the money in other markets. But currently, it's a race to become the biggest slumlord or until the markets collapse again.
> they make no money from cash buys because of that economic perversion.
This is completely false. This might be surprising to learn, but for normal car dealerships (not buy-here, pay-here or used car dealerships) a huge amount of their compensation rides on receiving holdback payments from manufacturers, as well as per-unit bonuses that often have cliffs.
Cash buyers paying invoice price are welcomed (if they aren't too big of a headache) because they push a dealership over or at least closer to the next sales-volume bonus cliff.
Holdback alone is worth more than any realistic origination fee.
What I heard is that they make no profit. I'm sure they'll make revenue, but if they simply sold all cars at the cash price, they will be losing money, especially dealerships. But if you're certain they do make profit, not just revenue, then you sound like you know more about the industry than myself, so I'll concede that point.
The dealership customarily earns 2-3%+ in quarterly holdback payments from the manufacturer. They sell you a $100k car at invoice, later that quarter they're getting a $3000 payment - this is pure profit, the deal was long-since done and they didn't take a loss at time of sale.
Dealerships are also earning miscellaneous per-car bonuses which are also profit, which go up based on overall volume: if they sell 50 cars, they get $200/car, if they sell 100 units this might jump to $500/car - just a random example.
If a car is in high-demand or really uncommon (in reality, not sales-speak, and a customer has no other options), they can afford to not sell a car at invoice - but this is an exceptional circumstance.
It's the nature of a capitalist society. Perverse incentives are everywhere and our primary measurement of success is wealth. We richly reward grifters and cheaters and folks with integrity often fall behind. The decades of perverse incentives have created a perverse society that no amount of "golden rule" theory taught in kindergarten can stand up against.
I commented elsewhere in more detail, but it is in my opinion caused by a lack of national pride. If I was a billionaire, how would I feel about other Americans living the way they do? Would i be apathetic or would I feel ashamed as an American? Even paying taxes used to be considered a patriotic act a few decades ago.
If nothing else, landlords should be held to much stricter standards for maintenance and the overall state of their properties.
What’d make sense for me is if a rental has a documented history of being poorly maintained, past some threshold the property can be auctioned off, with the proceeds going towards funding public housing. This should help filter slumlords and bare-minimum-effort speculators.
IMO it's a crooked notion that landlords are rent seeking and nothing else - they do create supply and maintain housing.
Issue is when they want to politically and artificially raise the value of their property by preventing more housing from being built, so, if you're going to ban something, ban artificial regulations on construction!
North Carolina has done some good by loosening up code around tiny homes, but, a lot of municipalities want to enforce big homes only because they like the property tax of high value houses, 4 bedroom and all. Small town I'm in basically won't allow expansion of housing because the people that live here don't want the village to get any bigger, but if it's democratic like that I'm mostly OK with it, it's when there's demand for housing and someone with a perverse incentive to block it that we should want to solve for.