Landlords are the least productive class in society, and it's not even close in terms of ranking.
So when you say landlords are the least productive class in society, it is that they are totally unproductive by their nature. There is literally nothing to be produced! The land is there regardless! Then the fact that they collect a tax on consumption of a good they did not create makes them a negative-productivity component.
If you remove landlords (but keep property managers, developers, etc, which are all different jobs sometimes played by the same people), it would be a strict improvement to everything about our economy.
Landlords assume a similar role in economy that banks do, they assume risk on your belalf. We have quantified this to an extent that you can reliably put a dollar amount on how much risk there is.
When you are renting and there is a job change or war or natural disaster or really, anything inconvenient at all, you can more or less walk away without losing much.
The land is there regardless of whether anyone "takes on the risk."
Landlords often take on risk in their role as property managers or developers. They should be rewarded more for that, and not at all for their simple ownership of land, which again: would be there regardless of whether someone else or no one at all owned it.
Equivalently, we can just pretend that there has only ever been one owner.
A real estate bubble bursting or anything that makes your area unappealing to live in would suddenly be really problematic and in the case of leverage get you negative equity.
If they didn't "take on that risk," the land is still right there being land.
That is not true for banks or insurers, where if no one was willing to hold that risk then the inverse product wouldn't exist.
I'm sure you have a philosophical point here, but this is exactly how the modern economy prices risk. Your understanding of the semantics of risk is not being questioned here.
No.
They pool deposits and they lend it out, taking on the risk of doing so with the guarantee they will make their depositors whole. This is called "taking on risk," and they are paid for this service (among the other instrumental services they provide in order to make this happen). Without banks providing this set of services, these deployable pools of capital would not exist.
This is absolutely not the same as the price risk that any asset holder has, and it is not what landowners are paid for.
It's not a philosophical point. It is literally a question of who is getting paid what, and why?
Any high risk high reward strategy gets you in charge of creating the risk to chase a higher reward.
The math is fairly similar between spending 10$ to buy a call option and a 1 million down payment to buy a 10 million property with 15 apartments to rent out.
The missing piece in your comment is the motivation for the government to run such a lottery.
This is why strong regulation is important.
My neighbors, the homeowners who don't rent, are typically on the other side. And it's not unreasonable to want to keep SFH neighborhoods predominantly SFH.
My main risks have have absolutely nothing to do with more housing. It's more physical risk to the property and depreciation.
As we speak, close to a billion people are in the middle of ongoing wars. There are entire countries where land is worthless. Ukraine has several hundred square kilometers of land with a thick covering of fiber optic cables from drones.
If you think insurance will save you, it might not if no one is willing to insure your property (large true in California nowadays) or the insurance company goes bankrupt in a crisis (happens pretty much all the time).
I have a much better idea: point, laugh, and say "sucks to suck!"
I'm telling you why the system works like it does now. You can, of course, choose to deliberately not understand it.
No, the system works the way it does because it was built by the rich, for the rich, to ensure they had a way to get paid for being rich. You can, of course, choose to deliberately not understand that.
Good luck changing things without understanding how they work though.
Where did they say that?
I take your overall point about rich people making laws. But on this specific point you're wrong. Take the L.
In this scenario, who owns the property? And if you are advocating that everyone should own their home, what is the point of a property manager? What about the people who do not actually want to own their home?
Instead of:
Investor owns the land
Investor pays for construction, finance, maintenance
Investor receivers rent
Government owns the land
Investor pays to lease the land for 30 years or whatever
Investor pays for construction, finance, maintenance
Investor receives rent
Of course it is not a solution to current situation when real estate are very expensive, but in theoretical discussion where real estates are affordable you can buy it and sell when you move.
Real estate transactions are extremely expensive. Even if you sell the property for the same price you paid for it, you lose a huge amount of money in the process.
This is not a replacement for renting.
Or you can have the government own the land but do long-term (99 year) leases, like they do in Singapore.
LVT has the same vulnerability as property tax: owners can worm their way into the policy details and redirect the surplus back into their own pockets. Leases bypass this problem through the competitive bidding process.
The problem is always financing. If you're going to own a place you need a lot of upfront capital. If you own a place and plan to maximize rent increases it's easy to leverage your new asset to buy more properties. But if you just want to keep it near cost then you need a new infusion of capital for each new property. So, by their nature such endeavors don't grow as fast as rent maximizing landlord can grow.
It's more about risk management. Do you want your university to be disbanded or your local government bankrupt if there is a war or natural disaster, or even a standard city block fire.
I assure you wars and natural disasters are not that uncommon in the grand scheme of things. That's why we have people or corporations with a higher appetite for risk assume the risk. These entities, unfortunately, don't always have your best interests in mind.
A university endowment or a city's tax revenue is legally and structurally earmarked. They can't just liquidate those assets to buy for local real estate. For the non-profits and community land trusts actually doing this work, securing patient, low-cost capital is absolutely the primary bottleneck.
The high leverage of private landlords actually makes them more vulnerable to systemic shocks. Meanwhile, non-market housing models (like land trusts) don't over-leverage their properties, which is exactly why they historically have much lower default rates during crises.
Given the option of landlords making bank for their risk and then getting a government bailout when there's an economic shock or having more housing decommoddified I'd take the latter. There's very little housing in the US that is under these alternative structures so at the very least I'd encourage more experimentation with them.
Most of the knowledge we have about what works and what doesn't is from decades ago.
Nobody would be allowed to rent out a space they owned because it would turn them into a landlord. All of the rooms people rent out to others would go away. You wouldn’t be able to rent a private house from someone, you’d have no choice but to live in government owned housing developments.
This would be incredibly unpopular if implemented because it wouldn’t resemble the utopian fantasy it’s supposed to represent. It’s a vacuous idealism in the same category as “billionaires shouldn’t exist” that serves as a placeholder for an unspecified utopian government-run economy. The details are never specified, you’re just supposed to imagine it works and nothing is lost as a tradeoff.
You need to be specific about what you mean by “remove landlords” because that’s a nonsensical statement by itself.
Some party must be responsible for the investment to produce the property. Some part must own the property.
The most charitable interpretation of what you’re trying to say would be that private rental contracts are forbidden and the government would have a monopoly on renting properties out. So only the government could own properties that are rented and the entire rental market would depend on how much housing the local government decided to build and manage.
You could, for instance, require people who own habitations to actually live in that location. You could tax people who own property they do not actually live in very aggressively until they would be willing to sell for less to avoid the tax burden. You could have a system which taxes aggressively and builds lots of houses and gives it to people who own it as long as they live there.
There are quite a lot of ideas between "government owns everything" and "let vampire landlords do unlimited rent seeking."
As it happens, I think there is quite a lot to be said for the free market solution of just letting supply meet demand more or less freely, but I think your interpretation really is not the most generous one.
Wishful thinking to imagine that landlords are going to suddenly become homebuilders instead.
That money is going into other investments, like the stock market.
In the process you've destroyed the availability of rental housing.
Better question is: Why are you so focused on punishing landlords instead of getting more housing to market? These conversations always seem to revolve around punitive measures against landlords and rent-seeking, completely forgetting what problem we're trying to solve.
In many cases, the proposals are so backwards that they would disincentivize new rental construction and reduce new housing supply.
Lol, landlords do not create rental stock. Developers do that. Property managers manage it. They should be rewarded for doing so. Instead we reward landowners for holding a piece of paper.
It has nothing to do with “punishing” landlords. It has to do with paying people for behaviors we want to incentivize. Developers and property managers do useful things we want more of. Landlords do not. We should not pay them for doing nothing of value. Why are you so fixated on giving landlords money they did not earn?
It’s simply not true these proposals would disincentivize rental construction or reduce new housing supply. If you think it would, you need to think a bit more.
Go ahead and plug into your favorite LLM: “Does a high land value tax incentivize or disincentivize production of new housing stock?”
Here’s the first line from Claude: “It strongly incentivizes new housing production. Here’s why:…”
You simply don’t understand what’s being proposed if you think that would be the effect.
This is how I know that you've never tried to run houses. If you hire out a property manager and all of your maintenance you are not making money.
I have to be an electrician, a plumber, a painter, a drywaller, an engineer, a salesman, a delivery driver, a businessman, an appliance repairman and a lawyer. And that's to make a measly 8% on my money.
> There is literally nothing to be produced! The land is there regardless!
No one rents bare land. They are renting a depreciating asset that you have to upkeep.
Yea yea yea, Henry George says that the value is provided by the citizens around your property. I call bullshit. The value is the shelter, the heat, the comfort. That's what people need.
A crack shack with a busted roof and broken utilities in a good location sells for the same price as a pristine, functional mansion in the middle of nowhere.
It's not because I'm an awesome landlord or property manager. I did the bare minimum. It's because the location appreciated thanks to the community surrounding the house, which is the driving force of the vast majority of gains in real estate.
Landlords complaining is honestly some of the funniest stuff on the Internet. I really appreciate the lols.
One tenant losing their job, getting some sort of medical issue, or even a poorly trained pet can reverse 2 years of profit. These happen all the time.
Personally, the keyboard jockeys talking about how easy contractors have it is hilarious, so I guess we both get a laugh today
Amazing how many people insist on being landlords despite it apparently being a life of sawdust and sackcloth.
What really happens is that I put on my big boy pants, I talk to the tenant, I visit the unit, I crawl under the house, I cut out the drywall, I remove and patch the plumbing, I replace the drywall, I mud the wall, and I paint the wall.
I could have it the way you suggest, pay 10% to some property manager and 1500-3000 for any call to any contractor but that means... I'd have to raise the rent, and not by a small amount.
At the end of the day I'm a housing provider, so I'd like to keep rents and vacancies low. This seems to be what tenants want too.
So yes, I'm doing the best I can, but no, my work is not encompassed by a phone call
But investment in housing can definitely create more housing, and that is by far the most common type of landlord.
If you genuinely think there is little difference, why do you care so much about not switching to a lease system?
The result is that real estate basically sells for roughly what it would cost to rebuild whatever is built on the land.
There is still a premium charged (in the form of LVT) to allocate access to desirable locations, but the revenue goes to the government/community instead of the previous owner. And the eliminating the incentive for land speculation should actually reduce overall costs.
you mentioned supply and demand, if everyone is struggling to buy houses, downpayments wouldn't just go down a little.
in the end, everyone needs housing, every single house would be occupied just as now, but instead of having renters being squeezed by supply and demand you would have owners.
how is that a worse scenario?
let developers have rent, they are the risk takers, they deserve it.
Not every house is occupied now. Not everyone will sell at loss if they can't rent out. So more homeless people?
What about people who don't have any savings living paycheck to paycheck? There is clearly some floor on housing price and not everyone can afford housing even at zero margin. Giving out free mortgages like it's 2007?
What about new housing? With lower prices supply will further decrease, and in places with high prices it's usually already insufficient.
Without renting everyone would have to buy a house / apartment on each move.
BTW in the US, a big advantage of renting is not having to buy, sell, or maintain appliances like a fridge because the landlord has to deal with it.
For instance: I bought my wife's grand fathers house. It appraised for $165k, and he sold it to me for $130k, I put $50k down, and got an $80k mortgage. I earn a very decent amount around 4x the median household income. I have 22 years of employment history with 0 days "unemployed". I have maintained a DTI of less than 10% and a Credit Rating of 800+ for at least the last 15 years I've been tracking. I have more money in my brokerage than the house is worth, let alone the mortgage, and yet it still took 3 different banks, and over 13 months to close on the house. I was denied by Bank1 (who I have over 20 years of history with) and Bank2 (who owns my business accounts and holds $10s of thousands on average up to $100k regularly). Bank3 approved me, but by the time they approved me, interest rates climbed from 2.5% to 5.75%.
TBF, would you give some randomer a few hundred grand without a strong guarantee you'd get it all back?
Mortgages are backed by the asset you are buying. $400k for a house is backed by the house. On top of that, almost every bank can sell off those mortgages and get the cash back immediately.
So, you are correct, I would not lend hundreds of thousands unsecured to a random person, but if I had the disposable capital, though, I WOULD buy a house with that money, and price in their credit rating to their interest rate, and turn around and sell it to Fannie/Freddie and recoup the principal that I lent.
Banks aren't on the hook for any of this (except for mortgages that don't conform, but most banks don't touch those, you have to go to brokers for those).
And the deposit. A bad faith actor could immediately default on their brand new mortgage and the bank would need to spend money going through the courts reclaiming then selling the house.... That simply costs money . The deposit covers that risk.
This is not to mention people burning a house down. Bank can hardly recoup the sale price from a burnt out husk.
If houses were such low risk assets, banks would be buying them. They wouldn't be selling you a shovel in a goldrush and letting you take all the risk
There's risk in owning housing and so we should make sure people get rewarded for that instead of rewarded for owning land.
You still lose relatively though because the next person with their money in the market made some %
Land and real estate assets are generally a poor investment relative to the market without a ton of active management. There are god knows how many millions of people who own land that would be incredibly valuable if not for the civil engineering lobby getting environmental rules and laws written to their favor.
I personally think it’s usually a shitty investment and a waste of my life, so I’m glad to pay someone else to use theirs.
Landlords do not manage properties. Property managers do that. Property managers should get more reward for managing properties and landlords should get less.
Sometimes these are the same individuals and they lump their fees into a single check, but these are not the same jobs and they should not be treated the same.
From who? Someone has to pay them to do the development, right?