3 ms·
When someone rents a small apartment in the center of Paris for 4k on the private market in all likeliness they're paying more than 3k of pure rent profit to th
by cultureswitch 3y ago
When someone rents a small apartment in the center of Paris for 4k on the private market in all likeliness they're paying more than 3k of pure rent profit to the owner.
The rent can be levied by the owner however the owner actually did not provide any of the investment or labor required to give the apartment the value it has. The apartment has value not because of anything inside the apartment or the building. It has value due to its location, something that the owner has no control over and did not spend a single penny to make more attractive.
This is obviously a huge inefficiency in the economy. Why should someone profit from the attractiveness of a location they haven't actually built? This is a positive externality.
Part of the solution of our huge housing crisis across most developed cities is obviously that there should just be more housing. This would bring prices down overall. However, new construction is extremely difficult, and that is due the in part to lobbies of wealthy owners which seek to keep prices high by maintaining scarcity.
Turning private rent housing into public housing is a good way to eliminate the economic inefficiency of rent in that one case and it also drives the price of nearby housing down too, as the private market has to compete with the public offering.
- its_ethan 3y ago> It has value due to its location, something that the owner has no control over and did not spend a single penny to make more attractive To be fair, the owner is paying property taxes - which do go towards improving the location. > The apartment has value not because of anything inside the apartment or the building. I think you'll find, in basically any city, that the quality of a building does correlate to it's rent price or value. You'll also find that owners do invest in increasing the quality of their buildings, which does improve the value or "niceness" of the location. If this wasn't true, gentrification couldn't exist. > Why should someone profit from the attractiveness of a location they haven't actually built? If you're claiming that since no real identifiable person or group "built" the attractiveness of a location, and that therefore no one should get to profit from it, you'd be seriously tampering with the signal that the natural markets supply/demand provides in the form of rental prices. That's going to lead to some significant "economic inefficiencies" for the area in the medium to long term.
- dugmartin 3y agoYou've left out a few things the landlord does and the risks they assume (at least here in the USA, I'm not sure about Paris): - mortgage costs - property taxes - insurance - utilities - repairs - maintenance - savings for large future capital outlays (new roof, furnace, etc) - renters not paying - empty rental units - loss of investment opportunities of the capital locked up in the building - possible loss of all income due to fire, etc - 34 other things I'll leave out It may look like landlords have it easy but as a former commercial landlord I can tell you it is not easy at all.
- bombcar 3y agoLandlords (in the USA at least) are wildly subsidizing renters, because they're so hungry for the appreciation benefits. You can test this anywhere the rental prices are below about 1% of the purchase price.