With the absurd increases of rent globally, record profits for landlords, and massive amount of empty properties have these laws worked?
If properties are seen as an investment, as they currently are, they must always increase in value at a greater rate than inflation. This means that, in order for investment properties to work, housing must always become more expensive. This increases rent and makes buying a home more impossible yearly. If they lower in price, then the investment fails. The cost of making housing accessible is the economy.
The issue isn’t simply increasing rent arbitrarily this is a marathon. They’ll raise rent at a higher rate than workers accrue money as they currently are. This makes housing unaffordable. UBI is a band-aid solution that doesn’t fix the root issue.
Even Adam Smith agreed landlordship was a poor idea in a capitalist market. Renters should accrue equity, or housing should become public.
This means that, in order for investment properties to work, housing must always become more expensive.
This is true of everything. For income to keep pace with inflation, it must always be increasing. In fact, to keep pace with inflation, prices must rise by the amount of inflation.
To clarify, in order for investment properties to work the value of a property must increase quicker than inflation in order to profit. Otherwise, you’re not investing, you’re simply retaining current buying power. This is true of all investments. You want your buying power to increase, not stagnate. This means that the cost of housing must increase at a higher rate than general inflation, and thus the cost of mortgage and rent must take up a larger portion of a persons salary otherwise the investors (landlords, investment property owners) will not profit.
Along with that income has not kept pace with inflation and hasn’t for more than 50 years. Both these issues have compounded to create the issue we see today. This is a closed system, and in order for one piece of the economy to be more profitable other pieces must decline. Otherwise, you are stagnating. Stagnation under capitalism is death.
I agree though that the prices of housing should be tied to inflation (or, better, to a percentage of average wage) but that would, necessarily, mean that the property does not accrue profit, it only sticks to inflation. This is not profitable, this is not an investment. This would, essentially, abolish landlords but in a much more economically violent way as their investment portfolio is now worthless (as an investment).
In other industries the cost of each product can decrease as efficiancy increases, and volume increased through incremental changes and diversification. This allows for profit to increase while the cost of goods matches inflation (or, like with computers, they get cheaper). Now, I’d argue this is unsustainable as eventually you’ll hit a wall where it’s not possible to decrease cost to manufacture, and you must now increase cost to purchase quicker than inflation, but there are ways to mitigate this and in it’s whole that is another conversation.
Apologies for novel, thank you for your kind argument though. You seem like a chill person
If your method of investing in housing is just buying and selling the same house, then yes it’s not going to work. That’s also a good thing because someone who just buys low and sells high isn’t producing any value.
But people can invest in properties by improving them before selling, and also by renting them out. And neither of those situations requires a housing market whose average price is outpacing inflation. In those situations, it’s the production of actual value that is the source of the profit.
Profiting from arbitrage requires a fucked up market, and a lack of information. Profiting from producing value just requires clear communication and competency. Two very different kinds of profit seeking.
If you improve the building, thus increasing it’s value, you’ve increased the proportional value of this house compared to the market. Now, since this house has increased in value, the average price of housing goes up and this house is less affordable. If everyone does this then the same effect takes place of average housing increasing in cost but now there’s a large quantity of very nice unaffordable housing. You no-longer increase it’s proportional value and the average price still goes up. Your house is in the same class as other housing bought at the same time.
If all landowners continually improve their housing in order to increase profits the profits must increase to a point where the cost to improve is matched and exceeded. This means that all property one wants to profit off of must still increase in price quicker than inflation. Under your proposed solution this only means the housing is nicer.
The outcome is the same, less affordable housing. If more, cheaper, housing is created then the value of these improved properties must decrease as well (supply and demand) and these cheaper houses if the price stays tied to inflation the profit gained is stagnant. There is no incentive to increase housing.
Currently though this is not happening. Most investment properties increase in value without improvement. Most landlords simply profit off of ownership of this land and housing not in their added value. If all landlords were to improve housing instead of simply raising price then that would increase investment price while not increasing overall profit. They’d make the same amount of money they would if they simply didn’t improve it. There is no incentive to improve as this adds risk for no reward. This is only possible on a small scale, and why we see few companies making profit off of buying housing, improving, and selling.
On rentals, even if they did cause value to be added, it would be through the money of the tenents and the labor of the workers. They are simply a middle man who adds no inherit value to this process. They produce no value, they simply take money from one hand, pocket some, and place some into another who adds value for them.
I’m going to respond by parts. Let’s see how this goes:
If you improve the building, thus increasing it’s value, you’ve increased the proportional value of this house compared to the market.
Yes
Now, since this house has increased in value, the average price of housing goes up and this house is less affordable.
No: the demand for housing stays the same, thus the amount of money to be had for housing stays the same, and hence if the same number of units exist then the average unit does not change in price by one unit improving. It’s only that this unit moves up within the mass of units, while all the others move down a little.
But also some yes: There is the fact that the improvement could be so good as to convince someone to switch a portion of their spending from some other luxury to the housing feature, like someone might decide to go for the house with the pool instead of the corvette. Then overall housing demand goes up, and hence average housing price goes up.
If everyone does this then the same effect takes place of average housing increasing in cost but now there’s a large quantity of very nice unaffordable housing. You no-longer increase it’s proportional value and the average price still goes up. Your house is in the same class as other housing bought at the same time.
No, because this stuff all follows from the previous sentence which I NOed too. The sum of a lot of average zero changes is zero. It doesn’t cause contagion to the rest of the market.
Except for rich people’s luxury money coming into the housing market, but that’s going to affect pricing of housing full of luxuries, because that demand is targeted to a different market tier than the one you’re worried about which is the cheapest housing for the people with the least money.
If all landowners continually improve their housing in order to increase profits the profits must increase to a point where the cost to improve is matched and exceeded. This means that all property one wants to profit off of must still increase in price quicker than inflation. Under your proposed solution this only means the housing is nicer.
Well, this is one way in which people with money can decide to invest it in housing: improving the housing. But they can also invest by building new housing. You do cover this here:
The outcome is the same, less affordable housing. If more, cheaper, housing is created then the value of these improved properties must decrease as well (supply and demand) and these cheaper houses if the price stays tied to inflation the profit gained is stagnant. There is no incentive to increase housing.
Well, if the set of players in the market stays the same this is true. But if new players can enter, then it’s not. I’ll try to demonstrate with the simplest scenario: one player controls all housing. Big Boss Casamio owns all housing and he’s the only guy who can build new housing. What are his incentives? Well, it’s like you said. If he builds new housing it just dilutes the value of his existing housing and he’s just spent money for nothing.
But what are someone else’s incentives? What if there are two big property owners in town? Then they gain something when they get more of the town’s population living in their houses: a higher portion of that housing demand becomes cash to them. That’s an incentive to build new housing. Yes, ALL housing’s earning potential drops, but you get 100% of the new property and only lose say 50% of the existing housing value to dilution.
And that’s when there’s two players.
If there’s 100 players, and someone owns 1% of the housing, they can build a new house and get the value of that house in terms of earning potential, while their other houses only lose 1% of their value to market-wide devaluation.
This is why free markets are important. The incentives are different for monopolies than they are for market players. A free market is like a market without strict border control. Each person is allowed to come and go, to bring their money into or out of the market, if and when they see fit.
Big Boss Casamio’s crackdown on housing construction is a corruption of the free market into a controlled market, a suppressed market.
Currently though this is not happening. Most investment properties increase in value without improvement.
I agree, and that’s a serious problem. Even the increase in quality witthout increase in number would be a problem, though slightly less. Only increase in number can bring prices down.
Incidentally, this steady increase in price is because of population increase, not property improvement. The improvement of properties isn’t pushing average pricing; only individual pricing up and the whole thing balances due to demand being finite. But the demand itself increases with population (I mean, with money in the system, and each person anywhere is going to be pushing a certain amount of cash toward housing, by necessity).
As the number of empty houses dwindles toward zero, the amount each person has to pay rises super fast. The result of supply and demand ratio shifts are nonlinear; population doesn’t have to double for the price of housing prices to double.
Most landlords simply profit off of ownership of this land and housing not in their added value.
True. I think that happens because we subsidize that by using government force to slow the building of new housing. I think that the government is taking the profit away from those who work to make new construction happen, and is giving it to the people who simply own existing buildings. I think this happens through building code enforcement.
And I think that’s okay. Building codes are important. If they skew the market so as to produce non-consensual homelessness, that’s a serious cost. But the thing they avoid is scenarios like the Chicago fire, where 1/3 of the city died.
I also don’t think that’s entirely a bad thing. If we have to suffer the existence of homelessness as a possibility in human life, in order to avoid some kind of Chicago fire scenario where shit safety planning led to 1/3 of the population dying, maybe it’s worth it. Anyway.
If all landlords were to improve housing instead of simply raising price then that would increase investment price while not increasing overall profit. They’d make the same amount of money they would if they simply didn’t improve it. There is no incentive to improve as this adds risk for no reward. This is only possible on a small scale, and why we see few companies making profit off of buying housing, improving, and selling.
Yeah we do have the Big Boss Casamio scenario, to a degree, due to both totally valid building codes, and totally invalid straight-up corruption and NIMBYist gerrymandering of building codes to protect certain wealthy people’s property values.
On rentals, even if they did cause value to be added, it would be through the money of the tenents and the labor of the workers. They are simply a middle man who adds no inherit value to this process. They produce no value, they simply take money from one hand, pocket some, and place some into another who adds value for them.
There are many types of valuable things.
Like, imagine if a worker wanted a house, but didn’t have time to build one himself. He works all day driving a bus. Another worker happens to build houses for a living. So the bus driver hires the house builder.
Even if the bus driver makes way more than the house builder per paycheck, he’s going to be in a tough situation to have to pay the house builder’s income during the time it takes to build the house.
Even so, I think they can figure out how to make a deal that works. Maybe the house builder is taking his time, doing an hour or two a day on multiple houses. So his living is spread out among the others’.
I hope you can see where I’m going with this because I don’t. I think it was something about how it’s valuable to have the opportunity to just rent a place instead of investing all that energy to build a house, just to have a place to live. Houses are costly even if there’s no capitalist middleman taking a cut, and it’s nice if there’s an option to pay for a place that isn’t going to be your house, just to get a roof over your head.
Rentals are a value to the renter, by virtue of being rentals, and it’s a value that houses don’t have when you own them. It’s simply the lower cost of entry to the living situation.
Like having a cabin for new villagers to live in while they get their own cabin constructed. It’s a source of value to have a building where people stay, but they don’t have to take ownership of it just to sleep there. Maybe the ownership in the village is the entire village. Like, nobody lays claim and everyone just pitches in to fix it when needed, because it’s valuable. The owner is the village, not the villager staying there.
Obviously, our current situation is fucked up and way too skewed toward being trapped. I personally think that would get better if we cut back with the suppression of new construction. Some building codes are good, but ours are bloated and that’s economically inflaming the homelessness crisis AND the declining mental health of the entire lower and middle classes.
I hope that didn’t get too incoherent toward the end. I’m quite tired.
There are many different categories of landlord, residential housing, and rent agreements, and also lots of states and countries on Earth. It’s not accurate to say
which limits the height of the rent they can charge and the maximum yearly increase.
Depends on where you live. In my country there are basically 2 classes: social housing and free market. Which one your home is is based on one thing: the rent you paid when you initially started living there. For each year, a threshold is set for social housing. Anything that is rented out under that threshold in that year will be considered social housing for however long the tenants stay there. Everything above it is free market.
For social housing, there is a point system that determines the maximum rent. Points are awarded based on the house itself. For example: each bedroom adds certain number of points, same for bathrooms and other features. Once you have the total number of points, you can look up the maximum rent in a table.
For both social and free market properties, there is a maximum annual rent increase.
It depends on local regulations. There’s no federal law that limits the rent increase, if given notice. Like I’m pretty sure NYC has some kind of rent control, but at least here in Oklahoma it’s not common.
Edit:
I found this, and I now feel worse
the state has rules that prevent local governments from creating their own rent control laws. In simpler terms, landlords in Oklahoma have the power to decide how much rent they want to charge without any legal limitations from the state or local authorities.
That’s insane! The law of the land is that you can’t ban things that limit profit for those with capital. It reminds me of a law that preventsgun bans in Atlanta, GA.
You can’t just arbitrarily raise the rent to whatever you like.
Yeah, I agree, we should abolish landlords
Landlords also have to comply with the law, which limits the height of the rent they can charge and the maximum yearly increase.
With the absurd increases of rent globally, record profits for landlords, and massive amount of empty properties have these laws worked?
If properties are seen as an investment, as they currently are, they must always increase in value at a greater rate than inflation. This means that, in order for investment properties to work, housing must always become more expensive. This increases rent and makes buying a home more impossible yearly. If they lower in price, then the investment fails. The cost of making housing accessible is the economy.
The issue isn’t simply increasing rent arbitrarily this is a marathon. They’ll raise rent at a higher rate than workers accrue money as they currently are. This makes housing unaffordable. UBI is a band-aid solution that doesn’t fix the root issue.
Even Adam Smith agreed landlordship was a poor idea in a capitalist market. Renters should accrue equity, or housing should become public.
This is true of everything. For income to keep pace with inflation, it must always be increasing. In fact, to keep pace with inflation, prices must rise by the amount of inflation.
To clarify, in order for investment properties to work the value of a property must increase quicker than inflation in order to profit. Otherwise, you’re not investing, you’re simply retaining current buying power. This is true of all investments. You want your buying power to increase, not stagnate. This means that the cost of housing must increase at a higher rate than general inflation, and thus the cost of mortgage and rent must take up a larger portion of a persons salary otherwise the investors (landlords, investment property owners) will not profit.
Along with that income has not kept pace with inflation and hasn’t for more than 50 years. Both these issues have compounded to create the issue we see today. This is a closed system, and in order for one piece of the economy to be more profitable other pieces must decline. Otherwise, you are stagnating. Stagnation under capitalism is death.
I agree though that the prices of housing should be tied to inflation (or, better, to a percentage of average wage) but that would, necessarily, mean that the property does not accrue profit, it only sticks to inflation. This is not profitable, this is not an investment. This would, essentially, abolish landlords but in a much more economically violent way as their investment portfolio is now worthless (as an investment).
In other industries the cost of each product can decrease as efficiancy increases, and volume increased through incremental changes and diversification. This allows for profit to increase while the cost of goods matches inflation (or, like with computers, they get cheaper). Now, I’d argue this is unsustainable as eventually you’ll hit a wall where it’s not possible to decrease cost to manufacture, and you must now increase cost to purchase quicker than inflation, but there are ways to mitigate this and in it’s whole that is another conversation.
Apologies for novel, thank you for your kind argument though. You seem like a chill person
If your method of investing in housing is just buying and selling the same house, then yes it’s not going to work. That’s also a good thing because someone who just buys low and sells high isn’t producing any value.
But people can invest in properties by improving them before selling, and also by renting them out. And neither of those situations requires a housing market whose average price is outpacing inflation. In those situations, it’s the production of actual value that is the source of the profit.
Profiting from arbitrage requires a fucked up market, and a lack of information. Profiting from producing value just requires clear communication and competency. Two very different kinds of profit seeking.
If you improve the building, thus increasing it’s value, you’ve increased the proportional value of this house compared to the market. Now, since this house has increased in value, the average price of housing goes up and this house is less affordable. If everyone does this then the same effect takes place of average housing increasing in cost but now there’s a large quantity of very nice unaffordable housing. You no-longer increase it’s proportional value and the average price still goes up. Your house is in the same class as other housing bought at the same time.
If all landowners continually improve their housing in order to increase profits the profits must increase to a point where the cost to improve is matched and exceeded. This means that all property one wants to profit off of must still increase in price quicker than inflation. Under your proposed solution this only means the housing is nicer.
The outcome is the same, less affordable housing. If more, cheaper, housing is created then the value of these improved properties must decrease as well (supply and demand) and these cheaper houses if the price stays tied to inflation the profit gained is stagnant. There is no incentive to increase housing.
Currently though this is not happening. Most investment properties increase in value without improvement. Most landlords simply profit off of ownership of this land and housing not in their added value. If all landlords were to improve housing instead of simply raising price then that would increase investment price while not increasing overall profit. They’d make the same amount of money they would if they simply didn’t improve it. There is no incentive to improve as this adds risk for no reward. This is only possible on a small scale, and why we see few companies making profit off of buying housing, improving, and selling.
On rentals, even if they did cause value to be added, it would be through the money of the tenents and the labor of the workers. They are simply a middle man who adds no inherit value to this process. They produce no value, they simply take money from one hand, pocket some, and place some into another who adds value for them.
I’m going to respond by parts. Let’s see how this goes:
Yes
No: the demand for housing stays the same, thus the amount of money to be had for housing stays the same, and hence if the same number of units exist then the average unit does not change in price by one unit improving. It’s only that this unit moves up within the mass of units, while all the others move down a little.
But also some yes: There is the fact that the improvement could be so good as to convince someone to switch a portion of their spending from some other luxury to the housing feature, like someone might decide to go for the house with the pool instead of the corvette. Then overall housing demand goes up, and hence average housing price goes up.
No, because this stuff all follows from the previous sentence which I NOed too. The sum of a lot of average zero changes is zero. It doesn’t cause contagion to the rest of the market.
Except for rich people’s luxury money coming into the housing market, but that’s going to affect pricing of housing full of luxuries, because that demand is targeted to a different market tier than the one you’re worried about which is the cheapest housing for the people with the least money.
Well, this is one way in which people with money can decide to invest it in housing: improving the housing. But they can also invest by building new housing. You do cover this here:
Well, if the set of players in the market stays the same this is true. But if new players can enter, then it’s not. I’ll try to demonstrate with the simplest scenario: one player controls all housing. Big Boss Casamio owns all housing and he’s the only guy who can build new housing. What are his incentives? Well, it’s like you said. If he builds new housing it just dilutes the value of his existing housing and he’s just spent money for nothing.
But what are someone else’s incentives? What if there are two big property owners in town? Then they gain something when they get more of the town’s population living in their houses: a higher portion of that housing demand becomes cash to them. That’s an incentive to build new housing. Yes, ALL housing’s earning potential drops, but you get 100% of the new property and only lose say 50% of the existing housing value to dilution.
And that’s when there’s two players.
If there’s 100 players, and someone owns 1% of the housing, they can build a new house and get the value of that house in terms of earning potential, while their other houses only lose 1% of their value to market-wide devaluation.
This is why free markets are important. The incentives are different for monopolies than they are for market players. A free market is like a market without strict border control. Each person is allowed to come and go, to bring their money into or out of the market, if and when they see fit.
Big Boss Casamio’s crackdown on housing construction is a corruption of the free market into a controlled market, a suppressed market.
I agree, and that’s a serious problem. Even the increase in quality witthout increase in number would be a problem, though slightly less. Only increase in number can bring prices down.
Incidentally, this steady increase in price is because of population increase, not property improvement. The improvement of properties isn’t pushing average pricing; only individual pricing up and the whole thing balances due to demand being finite. But the demand itself increases with population (I mean, with money in the system, and each person anywhere is going to be pushing a certain amount of cash toward housing, by necessity).
As the number of empty houses dwindles toward zero, the amount each person has to pay rises super fast. The result of supply and demand ratio shifts are nonlinear; population doesn’t have to double for the price of housing prices to double.
True. I think that happens because we subsidize that by using government force to slow the building of new housing. I think that the government is taking the profit away from those who work to make new construction happen, and is giving it to the people who simply own existing buildings. I think this happens through building code enforcement.
And I think that’s okay. Building codes are important. If they skew the market so as to produce non-consensual homelessness, that’s a serious cost. But the thing they avoid is scenarios like the Chicago fire, where 1/3 of the city died.
I also don’t think that’s entirely a bad thing. If we have to suffer the existence of homelessness as a possibility in human life, in order to avoid some kind of Chicago fire scenario where shit safety planning led to 1/3 of the population dying, maybe it’s worth it. Anyway.
Yeah we do have the Big Boss Casamio scenario, to a degree, due to both totally valid building codes, and totally invalid straight-up corruption and NIMBYist gerrymandering of building codes to protect certain wealthy people’s property values.
There are many types of valuable things.
Like, imagine if a worker wanted a house, but didn’t have time to build one himself. He works all day driving a bus. Another worker happens to build houses for a living. So the bus driver hires the house builder.
Even if the bus driver makes way more than the house builder per paycheck, he’s going to be in a tough situation to have to pay the house builder’s income during the time it takes to build the house.
Even so, I think they can figure out how to make a deal that works. Maybe the house builder is taking his time, doing an hour or two a day on multiple houses. So his living is spread out among the others’.
I hope you can see where I’m going with this because I don’t. I think it was something about how it’s valuable to have the opportunity to just rent a place instead of investing all that energy to build a house, just to have a place to live. Houses are costly even if there’s no capitalist middleman taking a cut, and it’s nice if there’s an option to pay for a place that isn’t going to be your house, just to get a roof over your head.
Rentals are a value to the renter, by virtue of being rentals, and it’s a value that houses don’t have when you own them. It’s simply the lower cost of entry to the living situation.
Like having a cabin for new villagers to live in while they get their own cabin constructed. It’s a source of value to have a building where people stay, but they don’t have to take ownership of it just to sleep there. Maybe the ownership in the village is the entire village. Like, nobody lays claim and everyone just pitches in to fix it when needed, because it’s valuable. The owner is the village, not the villager staying there.
Obviously, our current situation is fucked up and way too skewed toward being trapped. I personally think that would get better if we cut back with the suppression of new construction. Some building codes are good, but ours are bloated and that’s economically inflaming the homelessness crisis AND the declining mental health of the entire lower and middle classes.
I hope that didn’t get too incoherent toward the end. I’m quite tired.
There are many different categories of landlord, residential housing, and rent agreements, and also lots of states and countries on Earth. It’s not accurate to say
for rental housing in general.
Depends on where you live. In my country there are basically 2 classes: social housing and free market. Which one your home is is based on one thing: the rent you paid when you initially started living there. For each year, a threshold is set for social housing. Anything that is rented out under that threshold in that year will be considered social housing for however long the tenants stay there. Everything above it is free market.
For social housing, there is a point system that determines the maximum rent. Points are awarded based on the house itself. For example: each bedroom adds certain number of points, same for bathrooms and other features. Once you have the total number of points, you can look up the maximum rent in a table.
For both social and free market properties, there is a maximum annual rent increase.
You must live in VENEZUELA or some other SOCIAMIST HELLHOLE!
Americans have the freedom to literally arbitrarily raise the rent to whatever they like YEEEEEEHAW!
Yeah, the socialist hellhole that is the Netherlands. Ranked 8 in the Index of economic freedom (USA is #25)
Okay let’s say I own a condo and I’m renting it out. I raise the rent to a million dollars a month.
What happens next?
Depends on the location but most likely demand will be zero.
So I don’t get my million dollars a month??
It depends on local regulations. There’s no federal law that limits the rent increase, if given notice. Like I’m pretty sure NYC has some kind of rent control, but at least here in Oklahoma it’s not common.
Edit: I found this, and I now feel worse
That’s insane! The law of the land is that you can’t ban things that limit profit for those with capital. It reminds me of a law that prevents gun bans in Atlanta, GA.
We have law in the entire USA making gun bans illegal, actually.
So you’re telling me rent in OK is off the charts? Or could there be some mechanism other than government limiting how high rents can go?
There’s another mechanism, it’s just competition. They can’t go too high or else they’ll price themselves out. Minimum wage here is still $7.25/hr