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I'm going to assume ignorance and try to explain why landlords exist. Of course you could already understand this and have this as an ideological stance, in whi
by fooker 4mo ago
I'm going to assume ignorance and try to explain why landlords exist. Of course you could already understand this and have this as an ideological stance, in which case my effort is likely wasted.
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.
- hgoel 4mo agoThose same landlords also control many of the levers that might cause their investment to be less profitable.
- fooker 4mo agoDefinitely This is why strong regulation is important.
- smallmancontrov 4mo agoWhen ownership shows up at zoning meetings, the main risk they seem to be concerned about is accidentally letting someone build enough housing. Heaven forbid!
- fooker 4mo agoAre you perhaps too privileged to have seen situations where owning land is a liability? 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.
- smallmancontrov 4mo agoWhy on Earth should I feel the slightest obligation to make whole some jerk who bought the right to kick me off a piece of land and lost money when that right became less valuable? I have a much better idea: point, laugh, and say "sucks to suck!"
- fooker 4mo agoI did not say anything about how you should feel. That's up to you. I'm telling you why the system works like it does now. You can, of course, choose to deliberately not understand it.
- smallmancontrov 4mo agoIf you didn't mean to imply that I should feel an obligation to compensate the risk of a capital loss, what was your argument? 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.
- fooker 4mo agoThat's an amusing misunderstanding of history. I can see why you'd feel this much animosity if you strongly believe this. Good luck changing things without understanding how they work though.
- smallmancontrov 4mo agoEnjoy the high interest rates <3
- triceratops 4mo ago> I should feel an obligation to compensate the risk of a capital loss Where did they say that?
- 4mo ago
- cucumber3732842 4mo agoA better first world example is laws change and now this site where you were gonna build self storage for 20yr before selling out to an apartment/office developer is now worthless
- fooker 4mo agoWe have seen forest fires burning city blocks in west coast cities in the recent past, can't get more first world than that. 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).
- duped 4mo agoAnecdata here but I'm a landlord in an area with low 10s of thousands of residents and low 100s of rental units. I absolutely do not care about new housing being built, other than encouraging it because economic development of the town is good for everyone. 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.
- chadgpt3 4mo agoLandlords assume artificial financial risk entirely created by landlords
- fooker 4mo agoOf course, that's how risk works. 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.
- chadgpt3 4mo agoThen let's make a government run lottery where you either get infinite money or you die. Huge risk, huge reward, right?
- estearum 4mo agoLandlords do not assume risk in their role as landlords. 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.
- smallmancontrov 4mo agoWe need to draw a box around the property owner, the previous owner, the owner before that, etc, because the current property owner does take price risk, but only by virtue of the payment they made to the previous property owner and so on. The intra-chain P&L distribution is not a legitimizing factor if you believe the entire ownership structure is an exercise in rent seeking (in the economic sense -- as you point out, development and management are not economic rent and I'd add abatement to that list). Equivalently, we can just pretend that there has only ever been one owner.
- fooker 4mo agoThe risk inherent in the ownership of land is having too much of your wealth concentrated in it, and having used leverage to purchase the land. Both are true for a large fraction of landlords in the world. 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.
- estearum 4mo agoJust because you can lose money does not mean you are "taking on risk" in the way a bank or insurer does. 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.
- fooker 4mo agoBanks hold money for you, the cash would still be under your mattress if the bank did not hold it. 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.