A landlord gets a loan from a bank to develop a residential property. That loan is paid by the tenants who live in that property. At the end of the day, the landlord owns the property. This is fundamentally unjust. If the tenant paid off the mortgage, they should own the property, or their portion of it.
Can you imagine this for anything else? Imagine I got a loan to buy a television. The television is yours in every sense but in the legal sense. It is in your home. You are the only person that uses it. Over time you pay me back the cost of the TV, and some extra for interest. Yet, even after you have paid me back, you have to keep paying. It’s still my TV, and will be forever. If any month you don’t pay, I can come and take the TV away.
Another way of looking at it is that a residential development in a high demand area is basically a guaranteed money-fountain. Banks buy them and gift them to whoever they choose. They always choose people who are already wealthy and low-risk, causing an increase in wealth inequality. A bank could choose a homeless person instead for such a low risk project.
Another idea is to only allow renting when it is rent-to-own. A developer may build a large development, but over time that development will eventually become a co-op.
Remove profit motive from housing entirely. When the only interest someone has in a home is living in it, prices will make sense.
The idea that a home loan is risk-free ignores decades of recent history. A quick google search for "2008 GFC" will bring you up to speed.
Given that home loans are not, in fact, risk-free, how do you expect anyone to risk the large up front cost of financing a home if they do not have any expectation of profit? The small profit that landlords make off of these investments is mostly that risk premium. As a tenant, I am not liable to the bank for hundreds of thousand of dollars if any one of hundreds of calamities outside of my control were to occur rendering my home worthless. In exchange for this relative lack of risk, I gladly pay the 2% premium to my landlord. This is not to mention the benefit of mobility, among others.
Home loans are one of the most accessible loans in modern western civilization, so no, banks don't "always choose people who are already wealthy."
I assure you that if we were to remove the profit motive from financing the development of housing stock, there would be far less of it and home prices would certainly increase.
> how do you expect anyone to risk the large up front cost of financing a home if they do not have any expectation of profit?
This is done already, and it's not complicated: A property development company will present a project and sell subscriptions to people who want to invest (usually people who want to live in the apartments). These people will start paying a monthly amortization to the property development company, which uses that money to purchase the land and start building. People start paying this amortization a few years before construction commences, and continue to pay it a few years after construction is finished. After that, they own their real estate outright.
Yes, the property developer expects some profit from this. And most people who are subscribing except profit as well. They can sell their investment / subscription at any stage of the development. But the financial risk is spread among all investors.
Yes, I can imagine this for other things. We have exactly that model for TVs, other appliances, and most especially cars. Getting something on a lease is by no means restricted to houses. Sure, it's not always a great idea, but there are definitely circumstances where it is useful.
Obviously the landlord offers something of value or the tenant would just do what the landlord did.
Your analogy is also somewhat unfortunate since people did, in the past, rent TVs! Now that supply is far greater than demand, a quality TV can be purchased for very little money.
The tenant can not do what the landlord did only because they are not already wealthy enough for the bank to give them a huge loan. Even if a bunch of tenants band together to collectively develop a property, a bank will not choose them when a wealthy developer is available instead.
Banks have essentially infinite money. The band of tenants is not competing with the landlord for the loan. If the tenants are likely to pay the loan off, they will get a loan, as well as the landlord.
I feel like you are skipping over the part where people bid for houses, a process which advantages people with more access to capital in a fairly obvious way.
In risk terms the landlord is a better bet because they have collateral.
Landlords have assets they can leverage to acquire more property, while renters have to save deposits from income that's steadily eaten away by... rent...
> Obviously the landlord offers something of value or the tenant would just do what the landlord did.
I mean, yeah, they had access to capital.
As I understand it the traditional answer to this is "the landlord took the risk", but in practice I find that explanation questionable when propping up and supporting housing markets is basically political job #1.
I think the landlord was just richer, and was able to use that to exploit the renter.
Sometimes landlords fails. You just do not hear too much about it because in retrospect it was obvious. Buying units in dying areas with low demand or over paying at times.
Generally only winners get looked at. Not the loses in places no one cares about anymore.
Sure, but I don't believe "some landlords fail" changes the fact that as a class, they are structurally advantaged over renters.
Landlords can leverage existing assets (having 1 property helps you get more), benefit from asset appreciation and get tax advantages. When infrastructure or amenities get built, they capture a share of the value. When jobs are created or wages go up in an area, again the landlord captures value. Their asset class is politically protected in many ways. Then there's the whole inter-generational thing...
To a large extent, if your parents were owners, you will be an owner and if your parents were renters, you will be a renter. It's not guaranteed of course, but the effect is very strong.
I'm no socialist but I know a rigged game when I see one.
I agree with your sentiment and I wish there was more discussion on how to actually solve some of the issues at the core of this. I believe that home ownership is a strong positive for our communities. And our government does incent home ownership but it is still difficult for many. I also think we need to heavily disincentivize home hoarding.
Rental services? Any online service? What you mean you pay your development costs from my fees and get to keep them at the end? Or same with streaming services.
Price is kept low so everyone can afford one, so the limited supply is rationed in other ways. I remember the local MP where I used to live boasting about how when she was a child her father managed to get a nice council house with the help of then then Local MP.
I.e. rationed based on party loyalty. Or nepotism.
We currently mostly ration on money, which is the least worse option if we refuse to increase prices. There is also rationing based on sexual favours, which I'd assume everyone would agree is terrible.
Many would prefer to ration on place of birth -- if you are not born in the city then you don't get to live in the city and don't get the job opportunities of the city.
If supply in say London suddenly doubled overnight though (magically make every borough the same density as Westminster - with all those big open parks), that would put downwards pressure on prices.
It would release the currently suppressed demand as those currently living in overcrowded situations could afford to live on their own, those currently living outside the city who don't want to could move in. I'm not sure what the supply would have to be to raise main-home occupancy in London to 90% with prices down at the same level as it is in Stoke, but it's far far higher than it currently is.
Or limit people to owning 1 or 2 homes. Does it make sense for one person to own 100 homes and rent them out? Think about the distinction that permanently creates for people who live in that community. Something like that only benefits the landlord class.
>[…] does everyone get their own home from the government (if they can’t afford one)?
Uh… yes? I mean, housing is a basic right in most countries. Also, a humanitarian, right thing to do. That housing became big business (or business at all) is the real tragedy here.
https://www.theguardian.com/lifeandstyle/2024/mar/19/end-of-...
A landlord gets a loan from a bank to develop a residential property. That loan is paid by the tenants who live in that property. At the end of the day, the landlord owns the property. This is fundamentally unjust. If the tenant paid off the mortgage, they should own the property, or their portion of it.
Can you imagine this for anything else? Imagine I got a loan to buy a television. The television is yours in every sense but in the legal sense. It is in your home. You are the only person that uses it. Over time you pay me back the cost of the TV, and some extra for interest. Yet, even after you have paid me back, you have to keep paying. It’s still my TV, and will be forever. If any month you don’t pay, I can come and take the TV away.
Another way of looking at it is that a residential development in a high demand area is basically a guaranteed money-fountain. Banks buy them and gift them to whoever they choose. They always choose people who are already wealthy and low-risk, causing an increase in wealth inequality. A bank could choose a homeless person instead for such a low risk project.
Another idea is to only allow renting when it is rent-to-own. A developer may build a large development, but over time that development will eventually become a co-op.
Remove profit motive from housing entirely. When the only interest someone has in a home is living in it, prices will make sense.