American landlords derive more profit from renters in low-income neighborhoods

And this is not inequality?

Honestly though, its been far more clear to me living and working in a country with much better income inequality how much the state of some places having rampant poverty and other places in the same country having massive profits. It seems like a cliché to say, but how is it that in the country with the highest average salary in the world there is so much poverty?

It's because there is a much sharper distribution: the wealthy few make far far more in america than they ever do in europe, but everybody else is better off.

The sharpness of this curve is what indecates inequality to me. I'm sure there are all sorts of fancy ways economists have quantified this, along with economic mobility (also shockingly low in the supposed land where anyone can make it)

I am not saying that this is a terrible goal, but it is wildly unrealistic for people that are not billionaires.

Sadly, however, this ends up in accusations of exploitation, both because of these (imo unreasonable) thoughts, but also because there is a wild lack of economic literacy.

Rent is set by supply and demand. There's no law - economic or otherwise - saying that it is necessary for landlords or anybody else to yield a return on capital.

In reality if the value of a home is falling or flat landlords do often try to raise rents in order to recoup losses and sometimes this leads to even greater losses as tenants leave and it goes unrented. It's a psychological trap caused by a feeling of entitlement to profit.

This "nightmare" has kind of faded in to distant memory as most governments around the world have decided to provide indirect wealth transfers to property owners via QE and low interest rates. In the last 10 years even an idiot could probably have made capital gains in most housing markets thanks to the government assistance lavished on them.

>Rental units that appreciate fast enough are just held vacant in some markets, so much so that Vancouver had to abundantly tax it to try to stop it.

Vancouver is as much about foreign money trying to find a home as it is about capital investments. A Chinese investor is often okay with a depreciation in capital provided they have A) assurances that their capital is not at risk of confiscation by the Chinese state and B) that they have a place to run away to in case some shit goes down in China.

The headache of renting out the apartment along with the instinctive desire to own something "brand new and untouched" means that they often leave these gold bar proxies/emergency safe houses empty.

1) you must destroy people on occasion, make them homeless

2) crime, violence and cleaning up

So, don't kick out people who don't pay their rent immediately?

Sounds like a recipe for achieving all of the "acclaim" for being a slumlord with none of the actual profit...

Not a landlord, but know a few - all who do it as a side gig or who started out that way. Everyone tries to be nice up to the point that it makes financial sense.

Say I get into the landlording business as a side. I have a simple equation: I need to make X amount of profit to make the time investment worth it. The alternative is I invest that time in my regular career and try to climb the ladder. If I make less than X a year as a landlord, I should just sell the property and focus on my career.

For people with well paying jobs (e.g. engineers, SW, etc - and I don't mean SV salary - just the usual for, say, a Mechanical engineer in any major city), many/most of the higher income neighborhoods are pointless - they simply cannot make that X amount from them. That leaves the lower income neighborhoods.

Now if they do their work well and pick the right places, they may be making 1.2X (you'll always target making higher than X). Then at times they decide to be "less evil" in the way you think. They're willing to lower their profit down to X. But often that's still not "nice enough" in the eyes of many, and you'll still need to evict, etc.

So they face two choices: Be viewed as somewhat evil in other's eyes and keep the property, or sell it and just stick to the career. In both cases, the tenant suffers.

Landlords can't fix this problem. Legislation can shift the market dynamics. If you want change, don't waste time shaming landlords.

I also didn't mention the obvious other factor: Landlords want to spend Y hours a month on this business. Trying to help tenants who are in trouble suddenly increases the number of hours they spend. That automatically increases the threshold X, pushing their existing business into a zone where it isn't worth the time. And after all that, many/most of those tenants will never really recover.

I have a few coworkers who got into the landlord business and quit after some years. Hearing their complaints, some of them were nice.

A local radio show did a really nice piece where they followed a low income semi-homeless family around for a year and learned their history. The family was fine for a number of years, but as it happens when you are low income, you cannot afford to have a safety net. They had some stressful events, and things cascaded, and they became homeless on and off. After a number of years of this, they managed to get really good housing assistance (state/city - don't recall) - I think almost a 2000 square foot house to live in, albeit in a crappy neighborhood. But their lives changed greatly for the better.

While I was listening to the show, I couldn't think of anything landlords could do to help them. The tenants weren't irresponsible people - they just had life events. Government helped them out, but that has its own problems - for every one they properly help out, many can't get help - not enough tax dollars to go round.

Years ago, before I started thinking of business, I would express sentiments like yours to businessmen - that life isn't all about profits, and they could still have a good life with a lower margin. A common response was they're trying to make a living, and not give charity. When I finally analyzed it from the math above, I see the point. If I can make more money by quitting the business and working in industry, then insisting I stay in the business and make less really is charity. It's pretty much always the case that the person who is suggesting a lower profit margin does not run a business and has a relatively secure, decent job. A lot of businesses, even when making high margins, are suffering existential crises. Yes, the money is good now, but 2 years from now I may be out of business. There's less volatility in a regular job.

tldr: No easy solution, and the current situation is mostly a result of ordinary people doing ordinary (and not greedy) things. I can only see legislation helping.

>Since losses are rare, landlords typically realize the surplus risk charge as higher profits

The author of this study appears to be confused as to what risk is.

Behind a paywall unfortunately, so it's difficult to tell if he's just made two contradictory assumptions in his abstract or if there's something deeper going on.

I suspect slumlords actually yield higher profits because of basic supply and demand - slumlording is a market, after all, that most would find it distasteful to get in to (who wants to evict somebody who lost their job at walmart on to the streets?).

It's sort of like the "low salaries for teachers/charity workers" effect in reverse - there are certain kinds of work (or investments) that people can be proud of and certain kinds that they aren't.

"Risk" sounds more laudable than "there's a restricted supply of investors who are prepared to be assholes to protect their investments, though.

I'm curious where they get their data from. Do you know?

Perhaps these sites require the landlord to advertise their properties on it (like Craigslist), and there is no public database.

I don't doubt, however, that being really thick-skinned is a necessary trait for surviving in that business. Soft-hearted types also don't last long as drug dealers, surprisingly.

Conversely, assuming that every businessman is about equally greedy forces you to look elsewhere. Their loans are almost by definition high-risk, that's why they are expensive. Low-risk borrowers are a different market.

The fact that we can learn something by thinking about their business does not mean anything like "defending". It's just that sometimes the lessons are clearest with extreme examples. We can learn interesting things from studying drug gangs, pirates, kidnapping schemes, too.

We can also ask questions about whether the world would be made better by prohibiting loansharking, and I actually don't know enough to have an opinion. But it's clear to many that prohibiting drug-dealing has had some nasty side-effects.

That's the whole reason I used the example of loansharks, as I thought everyone understood by now that even if the angels ran that trade, such loans would be very expensive. But see below for other arguments against this bad-morals argument.

I've never seen numbers, but given the abundance of competing outfits, I'd expect that it looks roughly like any other business, once you account for all the costs. It could be a little more profitable if distaste drives some potential competitors to stay out. It also seems like a great front business for laundering, but I wouldn't guess that's a large proportion.

How is it that people don't know this?