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What they've identified is that the amount of profit a landlord who owns a house outright can extract from their tenants "feels" too high. Even if they can't ex

What they've identified is that the amount of profit a landlord who owns a house outright can extract from their tenants "feels" too high. Even if they can't explain the reasons, intuitively they feel there is some kind of injustice occurring. There is, because land owners are monopolists that can extract economic rents (extra-high profits due to monopoly ownership) far beyond the ordinary rate of return in a fair and free market of capital goods. This is primarily because land (or more specifically, location) is a monopoly good, not a capital good that can be created if demand increases. The extreme end of this reality is feudalism, which most countries in the world decided against for one reason or another. Your young relatives are intuitively sensing that they feel like serfs in feudalism, and there's an increasing truth to that. Land value tax would solve this.

prepend 4y ago
In my county, they have a “homestead exemption” that only applies to people to live in their home. I think this helps with the problem you’re describing. This allows the property tax rate to increase while impacting non-resident owners more than resident owners. Sadly though, this kind of tax just increases rent as it’s an additional cost to land owners.
- BirdieNZ 4y ago
  Landlord costs aren't ordinarily passed onto tenants, or only in minor part, because landlords already charge as much as they can. If they could raise rents by some incoming cost amount, they would have already done it. I don't know if there are good statistics showing this in the USA, but in NZ it's pretty easy to demonstrate (e.g. interest rate rises are an increase in costs to most landlords, but they aren't followed by corresponding rent rises, and vice versa for interest rate decreases). Landlords charge as much as the tenant can bear, so an increase in discretionary tenant income is where you see a correlation to rents, not landlord costs.
  - prepend 4y ago
    > Landlord costs aren't ordinarily passed onto tenants I disagree. Costs are frequently passed on directly. For example, if utilities are included in the rent and the utility rates shift up, then the rent will increase due to that. I think it’s common that there’s an expected rate of return that investors want in their rental property and they invest according to that. It’s not that landlords charge what the tenant can bear as the tenant might be able to afford lots. The landlord charges what the market will bear. If the tenant makes $1M/year it won’t really affect what the landlord charges them.
    - BirdieNZ 4y ago
      > For example, if utilities are included in the rent and the utility rates shift up, then the rent will increase due to that. This is an example of a tenant cost, not a landlord cost. In fact, the landlord may not be able to increase rent as much in the future due to the utility cost increase, because the tenant has less disposable income. > If the tenant makes $1M/year it won’t really affect what the landlord charges them. I don't think an extreme end of the scale is particularly useful to consider in this case; most tenants don't make $1m a year, and most people who make $1m a year don't rent. This is relatively easy to resolve, anyway. If "Costs are frequently passed on directly" as you say, then you should be able to make some predictions about landlord costs and rent and then see them replicated in the market. An example would be: Many landlords have mortgages. An increase in mortgage rates in countries with non-30-year mortgage rates is an increase in landlord costs. We can expect a doubling of mortgage rates to have a significant impact on landlord costs, and thus a significant impact on rents. Do we find in countries with non-30-year mortgage rate rises that rents go up significantly more than usual with significant mortgage rate rises, or not? You can also think of an example more to prove whether rents go up when tenant incomes go up or not, such as: Do rent increases have a correlation with tenant income increases, or are they unrelated? In my country (New Zealand), there is ample evidence to support landlord costs not generally being passed onto the tenants (I say generally because there will be specific instances where this isn't true).

prepend 4y ago

In my county, they have a “homestead exemption” that only applies to people to live in their home. I think this helps with the problem you’re describing. This allows the property tax rate to increase while impacting non-resident owners more than resident owners. Sadly though, this kind of tax just increases rent as it’s an additional cost to land owners.

BirdieNZ 4y ago
Landlord costs aren't ordinarily passed onto tenants, or only in minor part, because landlords already charge as much as they can. If they could raise rents by some incoming cost amount, they would have already done it. I don't know if there are good statistics showing this in the USA, but in NZ it's pretty easy to demonstrate (e.g. interest rate rises are an increase in costs to most landlords, but they aren't followed by corresponding rent rises, and vice versa for interest rate decreases). Landlords charge as much as the tenant can bear, so an increase in discretionary tenant income is where you see a correlation to rents, not landlord costs.
- prepend 4y ago
  > Landlord costs aren't ordinarily passed onto tenants I disagree. Costs are frequently passed on directly. For example, if utilities are included in the rent and the utility rates shift up, then the rent will increase due to that. I think it’s common that there’s an expected rate of return that investors want in their rental property and they invest according to that. It’s not that landlords charge what the tenant can bear as the tenant might be able to afford lots. The landlord charges what the market will bear. If the tenant makes $1M/year it won’t really affect what the landlord charges them.
  - BirdieNZ 4y ago
    > For example, if utilities are included in the rent and the utility rates shift up, then the rent will increase due to that. This is an example of a tenant cost, not a landlord cost. In fact, the landlord may not be able to increase rent as much in the future due to the utility cost increase, because the tenant has less disposable income. > If the tenant makes $1M/year it won’t really affect what the landlord charges them. I don't think an extreme end of the scale is particularly useful to consider in this case; most tenants don't make $1m a year, and most people who make $1m a year don't rent. This is relatively easy to resolve, anyway. If "Costs are frequently passed on directly" as you say, then you should be able to make some predictions about landlord costs and rent and then see them replicated in the market. An example would be: Many landlords have mortgages. An increase in mortgage rates in countries with non-30-year mortgage rates is an increase in landlord costs. We can expect a doubling of mortgage rates to have a significant impact on landlord costs, and thus a significant impact on rents. Do we find in countries with non-30-year mortgage rate rises that rents go up significantly more than usual with significant mortgage rate rises, or not? You can also think of an example more to prove whether rents go up when tenant incomes go up or not, such as: Do rent increases have a correlation with tenant income increases, or are they unrelated? In my country (New Zealand), there is ample evidence to support landlord costs not generally being passed onto the tenants (I say generally because there will be specific instances where this isn't true).