Rents will have to come down or be waived.
Almost by definition "rent" is simply extracting value from the productive economy through ownership.
If the productive economy takes a dive or disappears, the amount you can extract must do likewise.
Almost by definition "rent" is simply extracting value from the productive economy through ownership.
If the productive economy takes a dive or disappears, the amount you can extract must do likewise.
It's all supply and demand. Lower economic activity translates to lower demand. I'd also say that to imply that a landlord doesn't provide a service is total nonsense. There are plenty of reasons why people and companies might prefer to rent instead of buy the least of which is that a tenant doesn't have a long term financial commitment or principal / property value risk. There are many companies that even take their wholly owned property and sell it so they can lease it back in a triple net leasing arrangement because it benefits them to not have capital locked up in real estate value.
What? Do you define any profit margin as such? Housing rent is not the same thing as the term 'economic rent'. Housing is as much a liability as an asset. There is risk with owning it. Rent payments are compensation for said risk. All profit is just compensation for risk.
My point is that profit as a concept exists because without it, there would be no reason to assume risk in the first place. Therefore, profit is compensation for risk.
The mentality that you seem to have is more like a moral justification, or excuse, for profit. "X took risks, and got rewards, and it is therefore good and right", to paraphrase. But there's no direct causation between taking a risk and getting a reward; in fact many rewards come from being well connected, having the right background, skin colour, social bearing and milieu, and many other structural advantages, and taking risks without these advantages leads to big fat losses.
Reducing the justification for profit to risk is a massive apology for the inequality in society which stems from far more than mere intolerance for risk. I don't think there's much difference in risk tolerance of young men right across the income distribution spectrum; you see it in boy racers, in the jousting on a Saturday night, in thrill seekers, in criminals, in all sorts. But only a few have the privileged position to be able to put significant capital at risk for reward, rather than their own bodies. Saying that it's justified that people profit from this, because of "risk", is just wrong, it's blinkered in a way which benefits the luckiest in our society.
That's not really how the entrepreneur thing is framed.
But isn't it a moral position then ?
Yes it is. The primary reason anyone takes on risk is because there is profit in it.
Risk is a limiting factor on chasing profit. The risk isn't the other side of a coin with profit. There are lots of different limiting factors on chasing profit; more supply may simply be unavailable, there may be barriers to entry, natural monopolies, regulation, etc. Risk (capital and human time) is one among many.
Please note that this isn't to say tenant laws are a mistake, but they do raise the price of rent for everyone.
In the current environment, asset value decreases and certain costs (prices charged) have decreased as the supply chain adapts to try to maintain break even volume.
Maybe it's different across the board.
If demand for housing climbs noticeably, rates will follow, and vice versa (if supply of housing climbs, rates will plummet)
The reason profit exists is that risk must be assumed to earn it.
It’s a pretty basic business. Watch the money going out, manage the tenants coming in.
I personally know way too many permutations of 'landlords' to feel comfortable judging them all in a similar way, but I'm still inclined to judge most of them negatively and harshly. Because in most cases, it's just so obvious how their owning and 'rentier' status is not a consequence of 'fairness' or even 'fair competition'.
My landlord got what he had because of his age. Most of my rentier friends have what they have because they inherited it. I'm okay with my landlord because he's disabled in some way and scraping by, but it's still weird that I pay for his entire mortgage + more just because he bought a house at the right time. I'd prefer a situation where I can choose to support him rather than feel, weirdly, as part of the precariat that he can kick out whenever he can benefit more from others paying his mortgage and more of his monthly expenses.
The only reason why he can't and won't do this is that legally there's a limit to how much rent he can ask me.
Anyways, point being, there's something fundamentally iffy about the fact that every single 'rentier' I know acquired this status through nepotism or timing, and not via whatever meritocratic measure one could conjure up.
In the real world, there are thousands of landlords that are just regular people and regular businesses that are not royalty. You can live anywhere you like.
If the bank, credit cards and mortgage owners have payments suspended in recessions, there would be many less recessions.
If the top of the chain, that is the elusive 'trickle down' source, felt the pain for recessions the most, there would be many less recessions.
If 'too big to fail' banks and companies were immediately broken up on commencement of recessions, there would be many less recessions.
Markets are efficient, they will hit targets, market regulations can be used to set targets that will keep the whole thing on the rails, remove the rails and the usual happens, more inequality and stagnation.
We have to put the incentives in the right place. If the lower/middle always feel the pain with no consequence for the top or 'too big to fail' companies, then it will be a regular, repeating occurrence. That will create markets where companies get big enough to be 'too big to fail' and get bailouts, or essentially grow to 'bailout big'.
No matter what you believe about economies, or markets, money only goes where other money is, and you can't keep taking from the spenders in a consumer economy. The constant rent-seeking, predatory, value extraction, wealth destroying events are going to break the lower/middle and public markets. Individuals, families and small business especially need support during these times, the longs that all value extractors extract from and the engine of America as well as the research and development labs of larger companies.
Markets are garden, the in trouble lower/middle should be brought up and focused on, the massively growing top should be scaled back or harvested.
Money trickles up and down and all around, but money only trickles where other money is found.
America is mostly small businesses.
SBA/Chamber of Commerce has 30.2 million for companies under 500 people.
Lots are sole proprietors or very small < 5 people. 22 million of the small businesses in the United States are individually operated, meaning that they have no other employees other than the owner.
99.9% of businesses in the United States are small businesses, owing to the rather large threshold of 500 employees, or fewer.
Small business is the engine of America.
Small businesses comprise what share of the U.S. economy?
Small businesses make up [1][2]:
- 99.7 percent of U.S. employer firms,
- 64 percent of net new private-sector jobs,
- 49.2 percent of private-sector employment,
- 42.9 percent of private-sector payroll,
- 46 percent of private-sector output,
- 43 percent of high-tech employment,
- 98 percent of firms exporting goods,
- 33 percent of exporting value.
It is time to help the lower/middle and sole-proprietors and small business or America as we know it is much much different after this.
About 8 trillion in 'stimulus', at a cost of 20k to every citizen, for that we got $1200 we haven't got yet and small businesses finding out how small of fish they a really are.
This market is broken for lower/middle and people or small business. It is gangbusters for wealth and value extraction ops.
The stimulus for individuals, families and small business is vaporware, time for some vaporwave as we fade away into the ether.
Good luck wealth and big business with no one to skim from and no small business to use as research and development or suppliers.
[1] https://www.sba.gov/sites/default/files/FAQ_Sept_2012.pdf
[2] Source: U.S. Census Bureau, SUSB, CPS; International Trade Administration; Bureau of Labor Statistics, BED; Advocacy-funded research, Small Business GDP: Update 2002- 2010, www.sba.gov/advocacy/7540/42371.
I'm curious what the justification for this is. It seems like the kneejerk reaction toward any big/powerful entity (eg. "break up the tech companies!").
Well we do need more Teddy Roosevelts that threaten anti-trust. FDR was also from wealth and took on wealth in a way that made the most secure and trusted investable market for investors and workers ever and has lasted almost a century [1].
Microsoft, even the threat of one in the 90s led to Google, Apple, Amazon, Mozilla, etc to rise. Microsoft is also better for it.
However I don't think any company should be broken up until they start to abuse a monopoly or become a single point of failure for economic disasters or national security issue.
For instance right now banks and ISPs need to be broken up.
Clearly 'too big to fail' banks are a national security issue and lend to massive value extraction events and recessions as they gain.
Also, the local monopolies of ISPs have led to rent-seeking and less innovation.
Competition is a key of capitalism and fair markets. If you do not have competition you have stagnation and monopolies make progression and innovation lazy.
Here's a great quick point by Steve Jobs about product stagnation and the managers/business side [2] and how they can run amok if not controlled to allow value creation to continue, and how monopolies or problems that arise when only the business/managers are in charge.
Essentially when monopolies/oligopolies happen they stagnate and the product/engineer/creates lose power to the business/management side, value creation is killed for value extraction and stagnation happens always, it is basically a law of the universe at this point.
The alternative is to keep sticking it to the bottom, the lower/middle and the worker in consumer economies, the service in a service economy, the small business R&D absorbing failures and proving successes for large businesses, the long investors that are 'suckers' to investment banks, and the overall quality of life we all enjoy. Or you can take some from the top and incentivize them helping to make sure recessions are rare.
[1] https://rooseveltinstitute.org/how-fdr-took-forces-wealth-an...
I'm not too convinced whether a breakup would accomplish that. Smaller banks are less capitalized, and therefore be less able to absorb shocks than big banks. You can see that almost all the banks on the failed banks list[1] are small local banks (although this might also be because bank sizes follow a power distribution, it would be interesting if there was a bank failure rate that accounted for market cap). Also, what's preventing all the banks from engaging in the same risky behavior and all requiring a bail-out? If the government won't let AIG fail, would it let AIG01,AIG02,...,AIG99 fail?
[1] https://www.fdic.gov/bank/individual/failed/banklist.html
>Also, the local monopolies of ISPs have led to rent-seeking and less innovation.
The problem with ISPs aren't that they're big, it's that they hold monopolies over a geographic area limiting consumer choice. Breaking them up will do nothing, as each company post-breakup still hold a monopoly and therefore can continue to abuse consumers.
Semi related I read a detailed description what happened during the hyper inflation in Germany after WWI. A key thing is the inflation was not uniform. Food prices increased the most. And rents the least. At the end rents were effectively zero.
Well, yes. You always need food, but you don't need your own apartment when you can start couchsurfing. Real estate does degenerate fairly quickly when it's uninhabited. You could see a similar phenomenon after German reunification. There was much real estate with unclear title in the East, and students and squatters were actually tolerated - the owners and the city knew that with someone living in the premises the building would not deteriorate further.
For a landlord a tenant unable to pay the rent isn't a problem. If 30-50% can't it's is his problem.
I understand you want to punish working class people for losing their jobs and being unable to pay rent. Fundamentally there will be chaos if it comes to that. First they don't have the money. Second they won't leave. Third the cops and the courts will do NOTHING about it.