this post was submitted on 23 Aug 2023
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Oh, the hard, hard life of the rent-seeker who is stupidly greedy and unwilling to lose a little bit of profit to pay somebody else - like an agency - to take care of all the work and manage their assets, so instead of making money purely from having money without lifting a finger, they have to suffer the indignity of actually working a few hours a week like poor people.
The pain and suffering must be unbearable...
If there's something that landlords and tenants can agree on, I think it's that real estate agencies are the absolute fucking worst.
Indeed!
"Rent-seeking" as an economic concept is not when you collect rent, as a landlord does.
In Economics "rent-seeking" is seeking to receive a "rent", but the concept of "rent" here is broader than merelly the kind of rent paid for a property (for example, when banks place themselves in the position to get a commission out of every small financial transaction out there, through "Touch To Pay" schemes, they are "rent-seeking").
So whilst not all rent-seekers are landlords (probably not even most rent-seekers), all landlords are rent-seekers, which is exactly how I handled those definitions in my post.
Your post is like saying "'Apple' is not the same as 'fruit'" when somebody else I pointed at apples and called them "fruit".
Landlords aren't necessarily rent-seekers (though some individuals conceivable could be) as economists use the term, and your lack of understanding of economic rent-seeking is something you can fix.
Providing a home is a benefit to the society.
Credit processors (what you're calling "banks") provide a service to merchants. They are also not rent-seeking.
A builder provides the "home", not the landlord.
The landlord just takes advantage of a superior financial position to sit between the builder and the person who actually needs a home, and get a periodic payment for that.
As you seem to be having trouble with that, I've done the google search for you, so here's Wikipedia's definition of Rent-Seeking.
One would assume they would list... You know... rent, if it applied
You seem to have missed the whole part of that article (most of it) about how the expression had its origin in describing the activities of those using land ownership to extract rents.
You know, getting a "rent" for "land", also known as being a "landlord".
All that your quote does is confirm the point I made two comments above that "rent-seeker" is group that includes all of "landlord" like "fruit" is group that includes all "apples" - I suppose when you're willfully blind it's normal to run around in circles.
What you're missing is they were literally lords, who literally owned land, and extracted rents from shit like charging to harvest kelp on their shoreline, or charging a toll to navigate down a stream, etc.
Ie. not contributing any benefit (preventing access to a natural resource/mode of travel otherwise possible)
It has nothing to do with providing homes, which is a distinct economic benefit.
This all comes from this very long bit of Adam Smith's work, which I will link in its entirety and encourage you to read, with the above definition of a literal landlord in mind.
https://www.adamsmithworks.org/documents/chapter-xi-of-the-rent-of-land
As a similar confusing distinction, though a modern toll road may seem similar to extracting rent to navigate a stream, a modern toll road explicitly addresses the externalities of using the road (ie. Damage to the road), and is a non-negative use of rent seeking.
Now you're just making shit up and whatabouting in every direction you can think of to see if it sticks...
I'm literally quoting Adam Smith
You can believe whatever imaginary economics you want, but these terms have actual meaning
Which has absolutelly nothing at all to do with the definition of rent-seeking including landlords, hence it's simply whataboutism.
Landlords don't necessarily rent-seek. If I just rent a room in my house out, I'm not a rent-seekers, by any sane economic definition.
That's the discussion, and I'm quoting the person who invented the term.
Genuinely can't believe you people let this hatred make you so dumb.
I see.
The core of being a landlord is rent-seeking, or in other words monetising a superior economic position to extract a payment from those who do not have such a superior economic position.
You wouldn't be able to rent that room if other people had a choice to just easilly buy a small dwelling in that area for as much as you charge for that room - the market is tight, there is a natural barrier to entry and you entered that market at a more favorable time that now so your present day tenants have to pay you for the priviledge of living there because they have no other reasonable options.
That said, landlords can create at least some value and some do - for example my first landlord bought a large house and divided it into 1 bedroom apartments, in effect taking a dwelling from a market with lower demand and making from it 4 dwellings serving a market with higher demand, which is a way to create value, especially as he spent money on the conversion.
However the rents charged by landlords at present are almost always significantly higher than the value they create (if any), which is why in many places they actually exceed the cost of servicing a mortgage, so the landlord is really just exploiting having a better financial position (or even just better creditworthiness) than the tenant, as if there was no such advantage tenants would simply choose the cheaper mortgage over the more expensive rent.
(Even the mortgages themselves are much higher than they should be, as Price-To-Income ratios of realestate are 4+ times higher than the historical average all over the World, but that's a different discussion though I wanted to point it out because it shows the imperfections of said market: a highly competitive market would't stay so long above the historical relation between its prices and people's average income)
Also in my personal experience of 25 years and 4 countries, most landlords create little value: even good ones charge rents far above the little service they provide (basically maintenance, and often only because they're forced to by law) and the depreciation over time of the dwelling they're renting (which in the last couple of decades has actually been negative as even those houses getting older have gone up in price faster than inflation) plus a little profit.
Mind you, I've had mostly good landlords (sometimes both as persons and as landlords) and very few really bad ones, but that doesn't alter the fact that their profit from that business only comes courtesy of the low liquididity and natural high barriers to entry of the housing market and either a superior financial position or first mover advantage - their quality as persons and fairness as landlords don't change the inherent nature of the business they're in.
How many fucking times do I have to teach you people that "rent-seeking" is not "charging rent"
Fuck man
I do not give a shit about your opinion about landlords. Love them. Hate them. I don't care. Stick to words you know.
How many times and in how many different ways do we need to tell you that you've misunderstood what economic rent is.
Be wrong all ya want. This is dumb
All I see in this thread is vitriol towards real estate rental from people who don't have a strong understanding of finance and economics. The dumb hatred you speak of is going the other direction.
That's the hatred I'm calling out
Modern landlords to not "provide housing". They extract rent from the use of a house that would otherwise be available to purchase by the renter if not for the landlord holding it for rent extraction. Worse still, since rent seekers compete with homeowners for housing they end up driving up the price, which prices out homeowners and creates the demand for renting to begin with.
Any other "service" a landlord provides would otherwise be levied as those services are provided (like a handyman or contractor being paid for work done to your house). In the case of the landlord, the rent extracted is maximally realized by providing the least amount of service (even none) for the most amount of rent. Rent is completely detached from any actual labor or addition of value.
Misplaced vitriol. What if you don't want to own? I don't. I don't wanna deal with any of that shit like broken ac, leaky roof, mowing the lawn etc. How do I rent if nobody can or will rent to me?
Rent and prices are directly correlated to the same things. Local economy, future outlook, interest rates, the usual stuff.
If you're pissed off about housing costs that's another story. If you're pissed off because a landlord didn't fix your ac or hot water then that's another story too. But you just sound like an uneducated crazy person when you go around ranting like a lunatic about rent extraction.
There are other, communally-owned options that would fit that exact function. Housing co-ops are a perfect example and avoid the tempting coercive relationships with private landlords. You can live an apartment that isn't owned by a landlord. Your inability to see beyond your own direct experience isn't my responsibility, except as to slap you in the face with it when you decide you don't want to think about it.
Huh, weird, that sounds like two, contradicting statements to me. Yup, rent and market price are absolutely tied together. You buy a house to rent out? That's one less available to purchase to live in from the housing stock. You buy a bunch of land and build apartments on it? Sure, you just created a bunch of homes to live in! Congratulations. Too bad they aren't for sale, and now that person owns all the stock in that location, allowing them to lord over those in need of a home.
Funny, because from my perspective you're the one in need of an education, otherwise I wouldn't be ranting about something you don't understand. If you're gonna simp for capitalism, at least fuckin' read something written by the guy who first described it.
Ah yes the famous houses of apartment blocks that the mean old renters built and then... owned.
Also labor has nothing to do with value whatsoever.
I'm not sure what you're going on about, but my point is exactly Adam Smith's. In other commodities (according to smith), high or low wages+profit cause a high or low commodity price, because they are what is required to bring a commodity to market, but with rent it is exactly the opposite. The rent that is extracted is measured by how much higher it is than what it actually takes to produce and maintain it. In Adam Smith's view (and in mine), the rent extracted from a dwelling bears no relationship with the cost of producing and maintaining it. It is exactly defined by how much more they extract than what it takes to maintain it.
Landlords are leaches even to the godfather of western capitalism.
Again you do not understand the term as it is meant here.
Seems more like you don't understand the core issue being discussed here.
Except I've acknowledged both the false interpretation ("landlords bad") being your own belief I don't care about and am not arguing with, and the real interpretation ("economic rent" is not your rent) for clarification to all the wrong people.
You've not argued the case for your interpretation of Smith, you've just stated I was wrong without justification. I think maybe you are confused by smith's use of "rent" in this passage. He is not referring to the total charged to a tenant, he's referring to economic rent.
Economic rent is contained within what a landlord charges for total rent. That's why smith says it "affords a high rent, or a low rent, or no rent at all", it's because "rent" in this passage is exactly how much more than what is sufficient to pay those wages and profit for its production and maintenance. Sometimes a landlord with charge exactly what it costs to maintain and produce the property, and in that case he is charging NO rent.
Smith's critique is of the surplus charged by a lord, by nature of their ownership over the property, where otherwise that cost of economic rent would not be necessary.
Rent is economic rent, or maybe more precisely, what the landlord extracts for themselves from the renting of their property is economic rent.
So a company builds a house. Instead of selling to the person who will live in that house, a Landlord purchases it at a higher rate (preventing acess to land + shelter) and then rents it to the person who will live there.
The Landlord in this scenario has provided nothing of economic value, and is restricting access to shelter necessary for survival.
People who rent are not generally people who can purchase houses
Is the landlord profiting of the rent? Then the person who is paying the rent could afford the costs of the house if they didn't have to pay rent.
Not if they can't get a loan they can't. Not if it's a fucking apartment building.
Seriously you guys are gonna have a weird time in the real world.
You're so concerned about people using a term incortectly, but you're failing to follow the conversation. What was said was:
So I don't know why you're bringing up apartment buildings. Looks like you're the one that needs to work on comprehension.
Please suggest a solution.
Landlords fulfill their contract and do the work? I thought that was clear
That isn't clear at all because it seems like all the vitriol in this thread is about the very concept of owning real property and renting it to someone who wants to rent. This thread is not at all about landlords not fulfilling their contractual obligations. All I'm seeing here is "fuck landlords and big bad mean rich people" and it's really childish and immature. Nobody has suggested a viable alternative yet to that, including you.
I want responding to the entire thread, only to you
So out of context and irrelevant to the discussion at hand, got it.
Don't be so hard on yourself. Your post had value.
I don't know if this is the right place for it, but an idea I've had:
Charge a high tax penalty on home ownership if the home is fully functional and livable, but spends over a certain percentage of the year unoccupied by any person as their primary residence (and a steadily accumulating tax for any home that spends too many years in an unlivable state)
This might put pressure back on landlords to put their homes on market for reasonable prices, instead of inflating their rents based on MBA recommendations long past what people can pay simply to "keep the property value high". It would severely devalue the idea of owning homes the same way you would own piles of gold, as long-term investments people are hesitant to actually use.
Would the tax be federal, state, or local level?
How does one prove occupancy to show they aren't subject to this tax?
How would the tax authority determine the same in order to prove noncompliance?
Does this effectively prohibit second and third homes? Am I allowed to put real property in a holding company?
I'm not trying to start a ruckus here, just asking questions. It's a big problem but I'm not sure if tax is the solution. Usually when people suggest solving problems with taxes it isn't fully thought through and doesn't hold up to scrutiny.
I can't claim to know the benefits of state, local, or fed taxes. Like a lot of things, I imagine it's better trialed on a local then state level, and might never reach federal.
Like a lot of tax claims, it may just be reliant on claims, and would not always require proof. You file for taxes, you report 3 homes, you state which one you occupied; or you state that you had a tenant in that home. If you're audited on your taxes, they may find you falsely reported a tenant, which would be tax fraud. The IRS could find reason to audit someone if, for instance, they're freely posting on Facebook "Yeah, just say you have tenants who do not wish to be named, they can't do anything about it". Many tax rules already work by self-reporting, and/or finding conflicts in prior documentation.
It would not prohibit third homes, but you'd have to pay a hefty property tax to hold onto an extra home and require it to stay empty while people are out there homeless. So, you'd have to be rich and not care that simply owning these properties bleeds you money (which is the opposite of how being rich usually works - your properties generate so much value by "existing" that you can simply persist a high quality of life just off residual income)
Pretty sure a tax like that at the federal level would be unconstitutional. The 16th amendment authorizes an income tax, not a real estate tax on empty houses. State and local level attempts to do that would be a prieoners dilemma situation. Good for everyone overall if everybody cooperated, but too much incentive to be the one county or state that doesn't tax the shit out of rich people for their third home, thus attracting the wealthy there.
Again I agree in principle but idk if tax is a feasible solution. (I'm a cpa btw for whatever that's worth.)