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It's an unprecedented catastrophe, and even if we will weather it, someone (well, many someones) will suffer (we'll all suffer, but some more than others). Bes
by tomp 7y ago
It's an unprecedented catastrophe, and even if we will weather it, someone (well, many someones) will suffer (we'll all suffer, but some more than others).
Besides solving the crisis (to which most of us cannot meaningfully contribute) the main priority is preserving the rest of the society so that we can go on with as little harm as possible when the immediate crisis (virus) is over.
In this specific situation, it's obviously better to prioritize borrowers/renters over landlords, because the former are actually productive. Restaurant fails => no food; landlord goes bankrupt => house remains, it's just gonna be owned by someone else.
What complicates matters, obviously, is second-order effects; first of all, if some / many landlords are leveraged, them defaulting might impact banks, which is definitely something we don't want; if I were the government, however, I'd be saving banks directly in this situation, not landlords. The other consequence is a crash of the housing market, which IMO isn't that much of a big deal, but it's been politically untenable for a while because too much of ordinary people's wealth is tied in housing. It might be a good opportunity for a reset, though.
- jandrewrogers 7y agoOne of the largest second-order effects of transferring all risk to landlords is that rents will go up because risk has a real financial cost that must be covered by cashflow. That will remain true no matter who ends up owning the property.
- jjoonathan 7y agoThe risk has a cost, yes, but it's far from clear that tenants will be the ones who end up paying it. Not all businesses get to pass all costs to the customer. Sometimes customers win and the business has to live with reduced profitability. I'm sure that landlords will play the "tenants pay" angle in the media, but the more vigorously they play it the more I will suspect it isn't true.
- maxsilver 7y ago> One of the largest second-order effects of transferring all risk to landlords is that rents will go up The opposite is likely. If we finally require landlords to actually take on the risks they already consented to previously, many of them will give up and sell out -- freeing property up to be used productively by real people, and lowering rents. In effect, if we stop bailing out landlords, landlording will become a slightly-less-lucrative industry, which will slightly reduce cost-of-living across the entire market.
- RhysU 7y agoYeah, but the landlords will increase their rents to account for the risk that you will stop bailing them out. Landlords already take risk that you stink as a renter. What's new is that everyone stinks simultaneously for the first time in many decades.
- tomp 7y agoMaybe the house prices will go down instead.
- ars 7y ago> restaurant fails => no food; landlord goes bankrupt => house remains, it's just gonna be owned by someone else. Restaurant fails => someone else will occupy that space and be productive. landlord fails => that new building will not get built. Calculating economic effects is not simple. Landlord fails => doesn't make bank payment => bank fails => people don't get their deposits => government has to make up the difference. At the end of the day we are all poorer, and we will all have higher taxes and less money because of it. There is not any one entity that should be singled out as having to shoulder the cost. We all will.
- mcphage 7y ago> Restaurant fails => someone else will occupy that space and be productive. Eventually, probably, but landlords are a lot more fungible than restaurants—even chain restaurants.