5 ms·
A major argument for why landlords should make money is that they provide risk smoothing. They take on risk and the renter pays a premium (like insurance) for t
by UncleMeat 4y ago
A major argument for why landlords should make money is that they provide risk smoothing. They take on risk and the renter pays a premium (like insurance) for that risk. But that means that some landlords have to lose. The idea that landlords should never lose money breaks the entire arrangement. If that is the case then there should be absolutely zero risk premium and renters should just be paying for the cost of maintenance (often skimped badly by landlords) and the marginal opportunity cost of having either a mortgage or having equity tied up in the property (often much lower than the nominal rent).
Landlords often retreat at this point and just say "well we are charging what the market rate is" and leave behind any pretense that this is a fair economic transaction. In that case, landlords can get fucked, in my opinion. A system that buys up a scarce and necessary resource and then sells it back at prices disconnected from the actual value provided by landlords is unethical.
- scarface74 4y agoJPM is not buying up existing inventory. They are creating new inventory. Why should they do so with the expectation of losing money?
- UncleMeat 4y agoWho said anything about expectation? I'm not saying that landlords need to lose money in expectation. I am saying that some landlords need to lose money if they are indeed charging a risk premium. Same way we expect insurance companies to make money on average but lose money on some individual policies. My point is that complaining about rare cases where landlords lose money because they cannot evict a tenant who isn't paying at the drop of a hat is simply ridiculous. It is like complaining that an insurance company occasionally has to pay out for their policies.
- sahila 4y agoI think a problem with this approach is you rid yourself of all small landlords and move towards corporate owned housing. Only those with a large portfolio of homes can afford the statistical averages you’re talking about.
- UncleMeat 4y agoThat's not really true. Individual people make all sorts of investments that in expectation grow but still carry risk. A system where renters pay risk premiums to landlords is a fine marketplace. A system where landlords insist on carrying minimal risk while also using risk as an argument for extracting money from their renters is garbage. The truth is that the price of rent is utterly disconnected from the value of a landlord's labor plus the various premiums you'd pay for risk smoothing, lower transaction overhead, and opportunity cost. Landlords simply charge whatever they can get away with and we should all laugh at attempts by landlords to justify their rent through any argument other than "fuck you, pay me." After all, I've never heard of a landlord reducing the rent when they finish paying off their mortgage. Once we at least have this shared understanding we can start having a real conversation about the merits and costs of the system we have today, rather than this fake conversation about how landlords are so nice for paying for that new roof.
- scarface74 4y agoIt’s not about carrying minimum risk. When you carry more risk, you expect a larger return - you increase the rent. Which hurts the people you are trying to help Is your pay based on market rate for your services? Do you voluntarily make less money than you can?
- UncleMeat 4y ago> It’s not about carrying minimum risk. When you carry more risk, you expect a larger return - you increase the rent. Which hurts the people you are trying to help I don't believe that rents would actually go down meaningfully if states adopted laws enabling evictions within two weeks. As you say, rent is actually based on market rate and is entirely disconnected from the expenses landlords pay. All of these discussions about landlord expenses are non sequiturs that just hide the real discussion. > Is your pay based on market rate for your services? Do you voluntarily make less money than you can? I am performing labor rather than gating access to a scarce and necessary resource. The social damage of charging for labor is not the same as the social damage of charging for housing.
- tmnvix 4y agoThey are buying up existing land.
- scarface74 4y agoWould it be preferable for an individual to build a single family home on the land than a corporation build multi unit housing? Which does more to increase housing supply?
- seattle_spring 4y agoWait a minute. The risk is from having to pay for a new roof, cracked sewer lines, septic replacement, mold, etc. It's not to allow a subset of renters to explicitly screw the owners by deciding they don't need to pay rent.
- UncleMeat 4y agoWhy is one of those acceptable risk and one of those not acceptable risk? "I'll totally be able to get my landlord to pay for mold treatment" is a good joke, though.