Comment by jazzyjackson
2 days ago
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.
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> 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.
> They don’t create supply in any way, the only ones who do that are builders.
For a house to be available for me to rent, both things need to happen.
Someone had to build it, obviously. But just as necessary, someone needs to offer it up for a rental.
One of these things precedes the other in time, however, which may be significant.
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> 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.
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Of course landlords create supply.
A renter is someone looking to rent. If someone buys a home then rents it out they just +1 the supply of rental units.
Only if that home wasn't already rented out by the previous owner.
A high proportion of real estate sales are owner churn, not the purchase of brand new never used before properties.
"Rent seeking" has nothing to do with landlords and tenants. It's about buying legislation that forces people to give you money for nothing.
https://en.wikipedia.org/wiki/Rent-seeking
Tenants who rent property get something tangible in exchange for their cash - exclusive use of the property.
Just because the word "rent" is common to both, doesn't mean they are connected in any way.
gp used "rent seeking" correctly.
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".
You should read the wiki article.
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.
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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.
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> "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].
[1] https://en.wikipedia.org/wiki/Economic_rent
> exclusive use of the property.
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.
Exclusive does not mean unrestricted.
> 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.)
> This is basically a maximum wage for landlords
Well sure, but it's good to incentivize looking for sources of wages other than (literally) rent-seeking.
Renting out property isn't rent seeking.
Ok. I'll bite. Why is the thing thats literallly the basis for the term rent seeking not rent seeking?
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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.
I feel like a lot of politicians get exposed making these “accidents” that just fortunately happen to be beneficial to them.
Perhaps they ought to be more careful when filling out paperwork. Or perhaps they’re not accidents.
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 .
> landlords are rent seeking and nothing else
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.
<< A healthy economy is geared towards creating an added value.
I am trying to read this charitably, but it is hard to read as anything but: 'landlords do not add value'.
Rephrasing my original point -- landlords do add value, but not as much to offset the negatives of locking down the resources.
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> they do create supply and maintain housing.
Clearly you have never interacted with most land lords
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.
Back when I was a renter mine just created slums and maintained misery, but maybe he was special.
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.
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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.
If you would like, I'll explain why you should care and value starter homes.
Speaking from experience, that is miles ahead of living on the street.
I've lived in studio apartments smaller than the homes that are allowed to be built, and a tiny home has a yard you can grow produce in ...
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.
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it would seem so, at least in the west perhaps... but i wonder what the cause is; is it culture? or just organic growth is becoming harder and harder?
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.
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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.