Covid-19: Landlords will kill our economy | Hacker News Reader

Covid-19: Landlords will kill our economy

smartcompany.com.au

67 pointsdrenginian64 comments

So stop all payments. Nobody pays rent, landowners don’t pay their mortgages, banks don’t pay interest. Companies don’t pay dividends, bonds don’t pay interest. Just stop using money to organize productive activity for a few months until the coronavirus curve flattens.

If all payments are stopped for three months, then it’s simply hitting the “Pause” button on the whole money system. There are no economic data for that quarter. GDP is meaningless, unemployment is meaningless. That quarter is a big fat missing data point.

Three months later everyone comes out of their houses and goes back to work. Paychecks resume, rents resume, landlords resume paying their mortgages, and no one ever catches up on any payments from the missing period. Just pretend we skipped three months ahead via a sci-fi time knot.

As a pragmatist who likes simplicity, this makes total sense.

As a dev, this terrifies me. I can't imagine how many bugs this might cause in financial software.

This is the kind of solution I would like to see. But you just know, there's a number of people with the power and influence to decide whether or not something get's done DESPISE the idea that people are allowed to have a roof over their head, eat food, and be happy without paying them anything.

This doesn't work because not every one has stopped working.

The best solution would be for the government to pay the bottom and have the payments "trickle up".

How does trickle up pay the commercial rent for the example in the article with an events business?

From article: “[businesses have gone] from regular trading to zero revenue in a week. My own sector, events, is literally illegal. Bars, restaurants and lots of others are in the same position or soon will be.”, “Some of our landlords have agreed to push a percentage of our rent back to later in the year, but it still has to be paid back. So we’ll pay double rent as we emerge into what will be a catastrophic recession.”

I agree the government paying his staff helps the staff and helps fix his other issue “My own business is spending every last cent of our cash to keep our 60-odd staff employed in some way, even though we’re not allowed to do what we do.”

Aaaaand where will this money "trickle up"?

Surprise, it's the landlords! And on taxpayers' dime, at that.

Paying the bottom is what needs to be done. But we also need to halt the flow of money around real estate.

The government prints money and sends out those $1000 monthly checks so as to continue using money to organize transactions, and the people working essential jobs continue to get paychecks.

Make the distinction between financial capital and money. Money as medium of exchange continues to be used. Money as financial capital assets is paused for the duration of the crisis.

What’s the function of capital? To allocate labor to the highest-value uses. We can’t be bothered with that during a pandemic.

Capital allocation is important, and it is long-term. The pandemic is about short-term physical survival. Providing food water medicine electricity is straightforward enough that it can be done through command, and through the sheer momentum of our existing systems.

We need to drop back to a simpler version of our physical economy for awhile, where people sit in their houses and only use basic necessities. Once it’s all clear we can come out and resume the previous activities; but how exactly do we effectively pause the non-essential activities?

This article is pointing out, rightly, that landlords and rents are non-essential. So pause them along with the rest of the non-essential activities.

And no one pays for goods either? I suppose it does make things simpler in the long run if everyone just starves. No need to worry about restarting the economy in three months, there won't be anyone left by then to care.

Money can freeze in place, but people still have needs which must be met in a timely manner and by freezing all monetary transactions you've thrown away the best means we have to organize the effort of satisfying those needs.

Not going to happen in the US.

Both Trump and KC properties ( his son in law) are landlords. There is a documentary on Netflix about it ( fyi: it's really bad)

And I'm pretty sure they are not "in the game" to make it better for the average American.

Edit: if downvote, please explain why. I'm 100% sure his self interest isn't seperate of his function. Additionally, the family involvement in the white House and Trump not seperating his business as previous presidents did, IS a perfect example to proof my point.

Nothing indicates the opposite.

This doesn't work. Credit is an essential part of the modern economy and not everything can be shut down. For people to consume even the very basics, lots of intermediate transactions need to be made using credit and if you cease interest payments entirely, no one will lend and the system will freeze. Keep in in mind that no government actually has any authority to do this either, as credit markets are global. To unilaterally cease payments and order ceasing of payments is akin to (but actually worse) national default, which will completely disintegrate the financial markets globally. Even for ordinary people around the world to just survive, we still need international trade.

At a high level, credit and money are simply means to align incentives across a wide variety of actors and ensure cooperation. While theoretically it's not impossible to reorganize the economy as not to need it, it would effectively require a complete command economy and I don't think anyone would be able to do this effectively in the short term without completely destroying any semblance of the market economy in the long run.

The obvious play here is just to pay individuals (not businesses) enough money and access to healthcare in the medium term and to let businesses (that aren't obviously strategic to national interests, those can be considered separately) do what they need to do. There are already legal mechanisms in place for businesses to avoid paying creditors and landlords. This is a strange plea for a handout. If the market changed as to make their rent abnormally low relative to their profits, they wouldn't be paying extra rent.

For residential tenants, rent forgiveness at least makes some sense, though I think direct payments to individuals are fairer and avoid cascading effects. For businesses that during the good times keep all surpluses for themselves as profits, to argue for rent forgiveness during the hard times is comical.

> We need legislation to ban rents for COVID-19-affected businesses.

This only works if the government mandates full moratorium on both rents and mortgages. That also means that no interest on mortgage is accrued during this time.

Otherwise, landlords are screwed in the same way as tenants - they can't pay mortgage and the property may turn into foreclosure. More so, frequently landlords are screwed even more - because it may be hard to get rid of non-paying tenant especially during this time. So tenant may get sort of temporary free pass by just not paying rent.

Bottom line - Landlords are not the right target of this rage. Appeal to Governments, not to Landlords.

But who should the government punish? Everyone equally? The richest X%? The poorest X%? Particular industr[y,ies]?

If everyone says “not us, somebody else!” there will be no redistribution.

To me, under circumstances universal income may be the most sensible solution. Which would also largely avoid questions like this one (btw everyone still going to take a hit - no doubt about that, but at least it could be negotiated between parties then). Governments still need to figure out if they have enough resources though - it's a lot of work if one is willing to take it.

Unfortunately, what I see instead here in Canada is heavy subsidies for large banks who are just passing it as more debt to everyone else. May do even more harm long-term.

Do you own a business?

Why do you think universal income solves the problem of an entertainment company that is legally shutdown, has zero income, and can’t pay it’s bills?

At it’s core, aren’t you just suggesting we become communists (for a while?). Disclaimer: I am from what might be called a liberal socialist capitalist country (I might call myself a capitalist hippy).

The goal is to get organized. Whatever the solution might be I'm sure people will call it communism and they might not be to far off either.

Wait! You just gave me a hilarious idea! If people have to stay home for months we might as well pay them to enroll in some kind of online course. You know, re-education, only without the camp.

The government should punish itself. Issue more debt and backstop unemployment. Otherwise, it will just propagate.

The parent comment is proposing a system where nobody is punished, everything is deferred. Not all landlords are fat cats in a mansion, if you remove the flow of cash to only some people, those people will be crushed if they depend on that flow to send it further upstream.

Deferring payment without interest is punishment. Goods in the future are worth less than the same goods in the present.

And where's someone unemployed going to get 3 month's of rent if they only work in 0 or 1 of the next 3 months?

That's why you're supposed to have savings, but it seems these days people prefer to spend frivolously

Landlords and tenants alike it seems.

But we've increased rent to rule out savings.

I mean, by definition, landlords own more homes than they need. Worst case scenario, the asset doesn't disappear, it just gets put to auction for someone that can afford it to buy it.

Possibly the government could restrict that auction to non-property owners to help sort out the first-sentence problem.

Is ‘punish’ even the right term? We’re all equally screwed one way or another. Everywhere in the world.

You fail to realise that in a lot of cases the landlord is also the one who gave himself the mortgage.

Quite a lot of commercial real-estate is owned by financial institutions and when it isn't the trust fund shareholder is also on the board of directors of the bank.

You fail to realise that in a lot of the cases the landlord is also the tenant. Anyone who owns a house or condo is a landlord... cutting the landlords income for a month is a big problem.

It is to fundamentally misunderstand the notion of what a landlord is when you consider someone who is simultaneously a tenant. You cannot charge yourself to rent space you own. They may occupy a space in the building but that does not make them a tenant. A tenant is someone who rents precisely because they do not own the space

It's really concerning here that so many comments basically amount to let's ban all landlords. It's really dumb, people clearly have not thought it through.

Lets make everyone the owner of the place they live in right now. It is our country and we can do what we like? no?

I mean, you get why this is a terrible idea right?

> Ban rent for COVID-19-affected businesses

Landlords have mortgages and a host of other associated costs. If this were made a policy in the UK, you'd have a huge number of small-time buy-to-let landlords going bankrupt and losing their nest-egg to the bank.

It's a get-rich-quick scheme that has inflated house prices. These landlords aren't providing any value — they're literally rent-seeking.

Someone has to pull the short straw.

If I put a plastic egg in your nest, does that by natural law make me the owner of your eggs?

The article is dumb. If the statement "Landlords don’t employ anyone; their benefit to society is frankly pretty marginal" was true, why did the author willingly sign his rent or lease contract (which binds him to pay a large regular payments for a long period)... Why would he do it if there is no benefit!?

Because the landlord got there first and staked a claim to the parcel of land, that they then don't use themselves for anything except charging others for the privilege of using it. I mean you can see how it's not a super compelling arrangement even though landlords have made it impossible to avoid in desirable areas.

Someone paid to make the land useful for you. They cleared the land, built a building, added utilities, and made it convenient for you so you didn't have to do all that yourself.

The "benefit" obtained by rent is, mainly, permission.

When the authoer says landlords don't provide much benefit to society, I think they are comparing against a society in which landlords don't exist.

The author pays rent because they have no choice if they want permission to use a property; all available properties are owned by landlords.

(You can tell it's more about permission than service provided, because there are so many empty buildings, and many people would be delighted to be permitted to just go ahead and use them.)

In the alternative society where landlords don't exist, the author would not need to pay for permission. The "marginal" benefit is other things of value, such as making a nice place, and upkeep and repairs, which many landlords don't do much of.

I think you would see the benefit if you got rid of landlords and let anarchy rule real estate.

It wouldn't be anarchy. It would be government controlled and distributed based on whatever criteria. I'm sure there are other ways to distribute it too.

You don't need to only imagine either this current system existing or anarchy.

It already is anarchy. I can just sneeze on my land lord.

The benefit of rent is that they are allowing you to use the property for $1,000 per month instead of having you buy the property upfront for $1,000,000.

What universe do you live in that a $1,000,000 property leases for $1,000/mo?

It had me read a bit and 1% is kinda normal for a normal home. If that pushes it to far above what people can pay or to far above what rents are paid for similar properties one would usually lower it.

If there is enough inequality in the area the 0.1% rent could be realistic.

they aren't selling they are seeking rent.

Well, there’s a reason the Plague ended feudalism.

Placing the burden on landlords will unintentionally lead to greater concentration of wealth. Property owners with mortgages will be forced to sell (at a loss, if there is a glut of properties on the market). The buyers will be those who already have a lot of cash, or who are otherwise in a strong enough financial position to wait out the crisis.

Proposal: set an immediate 3% interest rate ceiling on all credit cards. This eliminates the immediate cash crunch that everyone is feeling. If a cc company complains, nationalize them.

Then take six months to put together a comprehensive debt-forgiveness program that looks at income, family situation, etc. Forgive things like food, rent, etc. Slowly increase the interest rate cap as the economy recovers.

We need ongoing money in peoples hands now to put everyone at ease that they aren't going to be out on the streets in a week with their kids, not a piddling one-time payment in a month.

This makes a lot of sense. Rentiers are among the worst. My rental contract is so strict that it is insane. For example, I have to give 60 day notice, but those 60 days have to begin on the 1st of a month. It can't be 2nd or the last day of the previous month, it has to be the 1st.

Rentiers deserve no protection, especially when everyone else is bleeding

I’ve never seen a contract so strict. There might be a lawsuit in there. If not, there’s definitely a complaint you can raise.

They probably don’t accept the first of the month if it’s a Sunday, either, right?

Plenty of states in America give tenants nearly zero protections

Honestly sounds like measures that could get pushed at local levels by local people, successfully

No because the local governments are owned by homeowners

That’s a quitting attitude. This is possible.

Yes they will, my apartment's leasing office is open all day Saturday and half day Sunday. They have their bases covered. They know what they are doing, the company owns multiple buildings and hundreds of apartments. They have written contracts for every single teeny tiny thing.

I find it amusing that I am getting downvoted. Everything I said here is true. In places like NYC, it is not easy to get a half decent apartment without paying through the nose. I've heard it is worse in SF, but I haven't lived there, so can't comment.

Maybe people here own more than one home that they rent and get pissed at anything negative that is said about landlords. But the thing is, I've rented most of my life and despite being an ideal tenant (always pay rent on time, no parties/pets/noise ... and so on), all I have experienced is a serious headache while looking for apartments. All the downvotes isn't going to change that.

I think most landlords are wealthy people who are easily placed to weather this financial crisis.

By definition if you are wealthy enough to own property beyond one house then you’re wealthy enough to survive this.

And if you can’t afford to, then sell it and suffer like all the other real business owners are suffering.

Why should landlords be a protected species in all this?

You can’t sell if no one is buying and if it’s anything like some stories I’ve heard, some people are doing interest only loans on houses

If you sell it for less than your mortgage, you’re still on the hook for that loan, too.

The situation is complicated and ‘just sell it’ comes with other problems.

Being bankrupted by a landlord also comes with other problems.

The biggest expense renters typically have is ..... rent. And for many businesses it’s a major expense too.

Governments are desperately coming up with financial support packages for what? To give to landlords?

This doesn’t contradict anything I said

Not all wealth is liquid. Not all wealth can be liquefied.

Equity release may provide that liquidity, if you can find a willing provider.

most "landlords" are regular folks with a mortgage and would get wiped out just as easily as the tenants

I've been a landlord. I absolutely was not wealthy.

I bought a house to live in because it was the most affordable solution. When we moved for my husband's career, it got rented out and we became renters elsewhere because we couldn't afford to sell. The market had tanked, our house value had dropped and we didn't have enough equity to sell it without losing our shirts.

Not all landlords are filthy rich. Even if they are, if they are heavily invested in real estate and everyone stops paying them, they will soon be in real trouble themselves.

No one has a Scrooge McDuck swimming pool of money. Rich people tend to have equity in the form of stocks and real estate. When the economy tanks in a big way, they aren't immune from the effects.

This is why a lot of people jumped off of ledges when the stock market tanked in 1929. They knew they were suddenly wiped out and couldn't face living that way.

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