What is the alternative? These people aren't forced to live there. If there were a cheaper, better alternative available to them, they'd probably take it.
Nobody is 'profiting from poverty' here. These landlords would make much more money if these people were wealthier! I'm sure they'd love to make nicer places and charge higher rents with higher margins, but they can't, because that's all these people can pay.
For some reason I'm reminded of the old joke: a Keynesian and a rat-ex theorist are walking down the street. "Look," says the Keynesian, "A twenty dollar bill!" "Can't be," says the other economist. "If it were there, someone would have picked it up already."
Here's the thing: being a slumlord is profitable. Yes, your tenants don't pay much, but if you don't improve your property, ignore complaints, refuse basic maintenance and throw everyone on the street if they're a day late on the rent, your margins are excellent, far better than you'll make with decent apartments where people demand things like legally-conformant housing and nonabusive contracts.
These are tenants who don't have recourse, or at least not easy recourse, to the legal system, so cold water flats, no A/C or furnaces, black mold, and rats and roaches are part and parcel of the slumlord experience. Of course, all this is illegal, but slumlords tend to have a lot of free cash to throw at local politicians and attorneys, and if they own a large number of single-family dwelling it's hard to track down and deal with every nonconformant property.
You made a huge leap from "running a trailer park" to "being a slumlord", and you also implied but haven't answered the question of who is to pay for mold remediation etc when the tenants can't afford to make it profitable. Surely landlords can't be compelled into their own poverty , forced to rent units below cost. Such a price has to be paid by society/government overall, or not at all.
No one is forcing these property owners to "rent units below cost;" they set the rents on their houses and apartments. The issue is that many of these people buy properties that are out of code with no intent to improve them, and then rent them anyway. Yes, it's not economically-rational to rebuild them. No, it's not the government's fault that the slumlord's business model depends on flouting code and safety violations.
The simple answer is that if I can't afford to maintain a minimal level of environmental and residential standards, I'm not allowed to rent out my property. Likewise, I can't buy an empty lot, fail to maintain it to code, and then offer a defense that it's too expensive to keep it up. Governmental police powers are quite adequate to compel compliance.
All this is quite separate from the other point you bring up, which is that affordable and decent housing is going to require socializing costs. In fact, there's no reason government shouldn't engage in more public-private partnerships to help fund affordable housing as part of mixed-income residential planning. But I don't buy the argument that minimal living standards are an unwarranted intrusion on the liberty of rentiers -- and I dont think you do, either. If payday loans can be deemed predatory, can't "environmentally hazardous" rental units also be?
>The simple answer is that if I can't afford to maintain a minimal level of environmental and residential standards, I'm not allowed to rent out my property.
That's all well and good, but what happens to the people who are renting there, and what happens to the people who can't afford a place with "minimal level of environmental and residential standards"? Will those people be better off sleeping rough?
Of course not. But neither is it all or nothing; slum or safety net. My point is the root cause needs to be explicitly identified before it can be rectified. The root cause in this case is America's fetishism for small government and smaller taxes.
Woah, I'm not from America, but that seems really wrong. More taxes and bigger government does not create any sort of extra benefit for the poor - the extra taxes will simply go to creating more levels of indirection and inflated prices in existing government.
Why do you think anything with a government stamp is automatically 10x the price? It's not because of people wanting smaller government. Smaller government is about localizing procurement down to the smallest workable level.
Making a huge tender to build these environmentally safe houses for everyone would mean only the biggest and most expensive companies could compete in the 10 year long bidding process. Making a tender for 10 houses for the local poor in your village would be free in comparison, and those 10 houses would be ready before the poor die of old age.
> Why do you think anything with a government stamp is automatically 10x the price?
In general, yes. But not in the best run governments---Singapore comes to mind.
(But even Europe isn't quite as bad as the US. American public procurement---especially for infrastructure projects---is truly hideous and expensive by global standards.)
The Swiss seem a good model if you are looking for how localized government can work.
>But even Europe isn't quite as bad as the US. American public procurement---especially for infrastructure projects---is truly hideous and expensive by global standards.
I don't understand why that is. We paid ten billion dollars to replace the SF Bay Bridge, and it took forever. Now we're going to spend seventy billion for a train that goes from nowhere to nowhere, and very little is actually going toward construction itself.
Is it the cumulative effect of regulations, or the price of labor, or corruption? Something else?
Labour is expensive in American, but not 10x more than in Europe. You also got corruption, but you got that in Europe, too. Especially southern Europe---but Spain is still not a bad as the US at building public infrastructure.
There's some special American factors. One is that your population, and by extension the lawmakers they vote for, don't trust the bureaucrats at all, and thus make try to micromanage the public servants with laws that remove discretion. These laws are intended to remove opportunities for corruption, but they also remove opportunities for common sense.
For example, in most of the US they have to award public contracts to the lowest bidder---no matter how likely the awarders think the lowest bidder is going to overrun schedule and budget.
I've read a bit about these problems (and my summary above is from memory). Even lurking on HN, this topic comes up from time to time in the comments.
Sort of. Also that for some reason, the government can print money to bail out banks, but when it comes to fixing housing and actually help people, it has to come from taxes. I don't quite understand this.
ALL of the government spending has to come from taxes eventually. It can come today or tomorrow. It can be raised smartly or stupidly, but it's going to come from taxes one way or another.
Depends on how you define taxes. Also, some governments own assets and use returns from those.
(And just to be pedantic, historically there's also spoils from conquest.)
There's also government debt. I know you could argue that this has to be paid back eventually---but when interest rates are below inflation, that's a better than free loan. (And in theory they could invest in assets that yield even more, instead of just consuming the difference between inflation and interest.)
Most people buy government debt out of their own volition even at these low rates. (And if it's foreigners buying it, there's even less direct coercion via regulation involved.)
My point is it's immoral to turn people out of their dwellings unless you've provided them a place to go. It's all well and good to say they should have public housing, but until they do have public housing "slumlords" are providing them a place to live.
Adam Smith, father of free market economics, pointed out already 300 years ago the fallacy of this argument. He has a passage about how an Englishman was expected to wear leather shoes while a frenchman could walk barefoot without being ashamed. Further he talks about how in his day a linen shirt if considered a necessity even for the poor while the ancient greeks and romans could do well without it.
So the point is that following your reasoning there is really no end to the depravity you can reach and somebody would still be able to claim that is all fine, because only rich people in the stone age could afford such luxury.
The point Smith made was that poverty is always a relative phenomenon. What is a necessity is always defined in terms of the society you live in. There is no such thing as a universal definition of necessity.
I had an interesting conversation about this with my wife's American parents. Despite the fact that her parents were noticeably better off economically in their childhood than my parents, they felt a severe stigma of poverty my parents never felt. My parent grew up in a country where they were much the same as everybody else. In fact a little better off. They did not feel poor at all. They had a happy childhood both of them. But one of my wife's American parents had a bad childhood, plagued by a strong feeling of being lesser than everybody else. Never having people over on visit out of shame over their own poverty. She was used to seeing everybody else being better off and internet the idea they they were somehow lesser people.
Today my home country is richer than America by GDP per capita but comparisons of wealth and of people's feeling of wealth or poverty is difficult. Many of my american relatives enjoy bigger houses and cars than I do, but one always gets the feeling that their life is much more of a struggle than mine. I live in a smaller house and have no car. But I have no financial worries like them. I have long vacations, I am not constantly overworked. I don't worry about health care insurance, saving for college education to my kids, getting fired.
So I think one should have some respect for the desperation and despair the poor in America feel. Knowing that a surprising car repair or medical bill could send you onto the street in no time. Even poor in much less wealth western countries have to deal with quite that level of insecurity.
Poverty may always be a relative phenomenon (even in Cuba) but there has been no better system to lift people out of the life-threatening effects of abject poverty than capitalism. In fact, you cannot have a success with socialism without a large number of wealthy (or well-off) people to tax, and a society cannot tax itself to prosperity.
> I live in a smaller house and have no car. But I have no financial worries like them. I have long vacations, I am not constantly overworked. I don't worry about health care insurance, saving for college education to my kids, getting fired.
In America, we trade stability for social mobility (probably truer before the WWII), and our government promotes car and home ownership, but I doubt those were tradeoffs you made for longer vacations and "free" health care and education. We became more socialist and fascist after WWII and during the Cold War, but we've still managed to maintain steady income growth for average Americans, despite what the media would have you believe with "household income": http://politicalcalculations.blogspot.com/2012/12/the-discov...
Poverty will always be with us, but there are plenty of things our bureaucrats can give up to fight it better. Our federal government has more or less the same number (very few added in the last 100 years) of representatives despite our population tripling. This system has become more susceptible and beholden to corporate interests, including media corporations that promote stories like this one and the problems and divisions in our society without any context of our achievements and commonality. This promotes bandaid and politically expedient half-measures that only make the problem worse in the long-run.
> In fact, you cannot have a success with socialism without a large number of wealthy (or well-off) people to tax, and a society cannot tax itself to prosperity.
And you can't have success with capitalism without a healthy and prosperous working/poor middle class to be your consumers.
I'm thinking of democratic socialism. It's capitalism with a heavy emphasis on welfare and super strong social safety nets.
If you look at the quality of life index (the "where-to-be-born" index), you'll see that the top 10 countries all employ a form of democratic socialism. That's saying something right there.
Is it fairer to compare not the hovel of today against those of decades past, but the hovel of today to a satisfactory house today? The occupants of today's hovel are competing with the occupants of the decent home, not their ancestors.
If we hope that they might compete fairly to improve their lot, are they started well behind in a house with failing power, or heat or cold that keeps them awake or sick and so on?
Without a fairer playing field, they can fall further behind.
A satisfactory home that complies with regulations would ideally allow the occupant to get a decent sleep, prepare food healthily and present themselves appropriately for work.
no I'm sorry, I live in a house that was a damn luxury a 100 years ago and it's still a pretty fine house today. The houses described in the article would probably look pretty good compared to the poor housing of a 100 years ago, but not like any sort of luxury. The "look at those big screen tvs the poor have" argument does not translate well here.
Indoor plumbing came to rural America in the 1930s.
Electric lighting came to cities in the 1920s.
Electric appliances were rare in the 1920s, even in cities. The first self-contained electric refrigerator was invented in 1923. (Ever wonder why your grandparents probably still call it "the ice box"?)
Cold running water was probably available, but water was still heated by the stove or fire in most places. (The single-lever faucet was only invented in the late 1930s.) Rural water supplies were still via manual wells.
Heating systems were commonly manually fed by coal with no thermostatic control.
A modern small home, with electric lighting, an indoor flush toilet, a refrigerator and other electric appliances, hot and cold running water, thermostatically controlled HVAC, microwave, and cable TV? Absolute luxury compared to the typical house built and lived in in 1916.
My house (a quite respectable house built in the mid-1920s in Cambridge, MA) appears to have originally been fitted with a coal furnace and has had electric lighting retrofitted (originally had gas lighting). An oil furnace was retrofit in 1937. It seems to have had flush toilets from the start.
I guess I will accept those as a list of luxuries that are available now that would have required servants to match before 1916 ( I guess if you had servants the hot and cold running water, the refrigerator and microwave were matched in utility - and servants are a luxury.)
However there are a number of luxuries that have not increased in these years that are pretty important, such as personal space and privacy, my house and I suppose yours have this luxury. The houses I grew up in, and which poor people are living in now, often do not have these luxuries.
There is another thing that it seems was not a luxury in 1916 and is becoming now, relative freedom from the threat of eviction. According to the article there is a greater deal of eviction of today's poor than there was in the past, and I think that luxury might be really important if you have children. Important enough that I would be willing to trade indoor plumbing, microwave and TV for it, maybe some other luxuries if I was given the tools to make up for them (tools like ice delivery and so forth).
Finally given the low quality of poor people's housing not all of these luxuries you list can be counted on as being available, if for example the heating breaks it might take months to fix etc, so the luxury at the level is highly variable.
Forced to rent below cost, no, but if they can't make a profit out running a business that works within the law they shouldn't be engaging in the business.
Don't get me wrong, i'm not saying it's not plenty profitable. I only mentioned the higher rents thing to illustrate the point that the landlord does not have an interest in keeping these people poor.
This article is suggesting that these landlords are causing poverty, but then it goes on to not even try to make that case. They may be making money from poor people, and they may even not provide them the level of service they are legally required to, but this article makes no actual case for them causing or being any real part of the poverty cycle. Unless of course you think that the mere fact of asking that their rents be paid is the problem - and if you do, fine, but you're then tasked with proposing an alternative way of housing these people.
>This article is suggesting that these landlords are causing poverty
The landlords are causing poverty by increasing rents to the maximum level the market will bear, removing money from the system and - usually - moving it offshore.
Because slum property is so immensely profitable, there's no incentive whatsoever to invest the profits in anything riskier. So you end up with wasteful non-projects like this:
Meanwhile renters see their disposable income - in fact their economic freedoms - eroded until they can barely afford housing and food.
You now have a deflationary cycle where it becomes harder to find customers for new businesses, and harder to find investment because investors don't believe customers are easy to find.
Of course it's not just landlords. But generally economic cultures are designed to be favourable to either increasing or decreasing economic freedom for the low-paid. And if it's the latter, the predictable result is massive inequality and a deflationary uncontrolled descent into terrain which not only does the poor a lot of damage, but also eats away at the sustainable economic value of the assets of the rich.
If this had any economic truth to it, there would be a market in undercutting these overpriced rents. If this were true at all, you should go to your local bank, get a loan, snap up some property, and undercut your local slumlord by 10%.
By your logic, you'd have plenty of profit to spare, and you'd be providing an enormous social good.
But my guess is that you will not do this. And you will not do this because your analysis of their margins and business is not actually correct, and you and everyone else in the market knows this.
Also, you always get to keep the security/cleaning deposit, and if you have a lot of churn, you get to collect an extra month's rent every few months -- another great incentive to evict people.
>> What is the alternative? These people aren't forced to live there. If there were a cheaper, better alternative available to them, they'd probably take it.
What sort of lame excuse is that for exploitation? "These people could be much
worse off if they were being exploited more"? Well, duh. The point is that
they're in a dire situation in the first place because they're being
exploited. Their landlord is not some benevolent benefactor, he or she is the
purveyor of their misery, that's the only reason why he or she has a say in how
deep that misery is.
By analogy, imagine you grab someone off the street and beat the shit out of them.
You break their ribs, kick their teeth in, bash in their skull, but stop just
short of killing them. Then you go "hey, it could be much worse: I could have
killed you".
Well, yeah, you could have. You could also have avoided attacking them in the
first place. They're not "better off" thanks to you, they're much worse off than
they could have been because of you.
In what sense is their landlord purveying their misery? They need a place to live. The landlord offers such a place. They enter into a voluntary exchange of domicile for cash, terminable at any time.
Where is the exploitation? Nobody is being tricked or duped. Two people are coming together to exchange something without coercion, intimidation, or trickery.
>In the sense that he or she is charging 70% of their monthly income for rent.
No. He or she is charging an absolute amount, not a percentage of their payslip.
>And it's coercion alright if the alternative is being left homeless.
Coercion /koʊˈɜːrʃən/ is the practice of forcing another party to act in an involuntary manner by use of intimidation or threats or some other form of pressure.
There is no coercion here. Poor people are not mindless sheep, they have their own will, their own goals and their own plans. If they live there it is because they chose it. Not the landlord, and not "the rich".
>> He or she is charging an absolute amount, not a percentage of their payslip.
Here's another analogy. I make this beautiful and unique item that you want to buy. I charge - literally - an arm and a leg over it. Like, the actual body parts.
You protest: "You're asking for a part of my body??". I reply "I'm asking for an arm and a leg, not a part of your body". Hey, maybe you can pay me with someone else's arm-and-a-leg, right?
That is how absurd it is to say what you just said.
>> There is no coercion here.
Yeah, there totally is. It's the same kind of coercion the Mafia employes. "You don't want to pay us to protect your establishment? Well, fine, but then something may happen to it".
You don't want to pay 70% of your income to stay at my dirty, dilapidated hovel? That's fine, but then you might find yourself homeless.
The tactics are similar because the mindset is similar. Pay up or else. It's exactly how it works and it's precisely why it's coercive and morally repugnant.
More to the point: I find it morally repugnant because I don't have to pay 70% of my income to stay at a trailer, and I make probably 70 times more than the people who are forced to live there. There is no excuse for that. If I payed 70% of my income to live in a shithole, then I would think, OK, that's how it goes. That's life, see?
Except, it's not. I know it's quite easy to get a much better deal, as I got. If someone forced me to live in such conditions, I'd be up in arms. Therefore, I also do mind a lot that other people are living in such conditions.
That is not coercion. You fundamentally misunderstand (or apparently disagree with) literally all of western philosophy and economic thought if you think that charging rents in a voluntary exchange is 'coercion'.
The simple fact is that, over many thousands of years, humans have evolved a system of voluntary exchange. And we have found that that system produces the greatest benefit for the largest number of people as compared to all other systems we have tried at scale. This means that those with property rent their property to others so that they may live there.
If you don't allow the owners of property to rent their property, then there will be no homes for anyone. If you do not allow people to own property, then property will likely not be put to its most productive use (see: communist russia, china, north korea, etc.).
If you'd like to propose a better system, i'm all ears. But until then, you need to accept the hard reality that there is no better solution for these people, and that an offer like "pay 70% of your income in rent" is something that they have the right to accept.
To suggest that these people are being exploited when they are entering into such an agreement is to suggest that they are incapable of agency, and to deny them the most basic of human rights.
>> You fundamentally misunderstand (or apparently disagree with) literally all of
western philosophy and economic thought if you think that charging rents in a
voluntary exchange is 'coercion'.
On the one hand, to say that with any authority you have to be a, well,
authority, on "western philosophy and economic thought" or at least to have read
it. All of it. Have you?
On the other hand, I'm not conversing with "all of western philosophy and
economic thought" here. I'm disagreeing with you about a very specific thing, which btw is not at all whether "charging rents in a voluntary exchange is a coercion". That's your interpretation of my comments.
What I find coercive is charging someone 70% of their
income to let them live at a shithole with the unspoken threat of them becoming
homeless otherwise looming over their head. Not to mention the threat
of kicking them out if they complain about the state of the property, or if
somebody calls the cops on them, and so on, as the article reports.
The people who rent those properties, far from being "free agents" as you
pretend they are, find themselves in dire economic straights and with extremely
limited options. They are under immense pressure to find a house and grave
consequences if they can't pay the rent.
If you consider that "free agency" then you might as well consider extortionate
lending, such as practiced by loan sharks, with the threat of having your legs
broken by thugs if you can't pay, to be a fair and acceptable exchange.
I don't know what "literally all of western philosophy and economic thought"
says about extortion, but I do know it's illegal in most of the world- and for
good reason.
Loan sharking is not extortion, and neither is the renting of property. Let's not confuse our terms here. Extortion is unrelated to either of those activities.
The premise of your argument fundamentally rests on the idea that these landlords are choosing to charge "70% of their income to let them live at a shithole". But is that true?
Do the landlords have much of a choice in this matter? We can see with a simple thought experiment. What would happen if they were to lower their rents?
I'll tell you. They'd get more customers. Their vacancies would quickly be filled, because they'd be cheaper than the 'shithole' next door. And if they are already full, then all they'd need to do is keep building new shitholes until they can take all their competitors tenants too.
So, then. The obvious question: Why doesn't this happen? Why don't all these slumlords recognize this obvious opportunity for massive profit? Why don't you or I build a shithole of our own and charge only 60% of people's income?
And the answer is simple: Running shitholes costs 69% of the income of those monthly tenants. Charge any less and you're losing money. If you do not believe this to be the case, then by all means, start your own shithole and charge less. Let me know how that works out for you.
That doesn't make it coercion. That is just enforcing the agreement that was entered into voluntarily. Or do you think the poor should be exempt from rent?
So what you are, in effect, saying, is that these poor people would be better off if the owner of the trailer park would kick them all out? Then they would not be "exploited".
I am inclined to believe you are a troll, because the distinction between an aggression of violence and a voluntary free exchange on the market is quite easy to make, which in your argument you fail to do.
If every time you took an ambulance you were forced to sign over 80% of your wealth or be left to die in the streets in a 'voluntary exchange', that would be exploitation.
The difference between that and slumlords is simply a matter of degree.
Desperation is the route to profit in both cases. Truly voluntary exchanges without gaping chasms of systemic inequality do not provide opportunities for sustained profit.
>If every time you took an ambulance you were forced to sign over 80% of your wealth or be left to die in the streets in a 'voluntary exchange', that would be exploitation.
What is wrong with this scenario? If there were no ambulance service I automatically choose "Die" (which is, apart from matters of inheritance, always the wrong choice), but if there is the ambulance service I can buy my life for the relatively meagre price of 80% of my wealth, then having neither children nor wife I would take that deal ten times out of ten.
All prices, everywhere, are limited in some way by the cost of a torches-and-pitchforks mob to storm the chateau.
I'd pay the price on the spot, because I like not being dead. But afterward, I think I'd try to rob that guy to get my 80% back, and maybe some of the 80% from some other people. That's not a "thank you so much, you're my hero" price. That's a "better watch your back" price.
When too many people start to see you as a parasite upon their community rather than a foundation pillar for it, they will certainly reduce their rate of cooperation with you, and some may retaliate. You may have to acquire a taste for other people's spit in your restaurant food, for instance. And worst of all, you may motivate someone to launch a business in direct competition with yours.
Then, if your choice is 80% to the dirty exploiter or waiting a few more minutes for a Medic-Uber to pick you up take you to the hospital, you would almost have to be gushing blood from a major artery to accept the former.
I don't see the false dilemma, I think you're hinting at a third choice where the ambulance company charges a price that is not extortionate, but if that was part of the hypothetical then, sure, I would have chosen to get my emergency care from the company that charges less (but it's not, the GP postulated that all ambulance companies charge 80%).
Either way it's not exploitation, even if there's a company that charges prices that always bankrupt their patients, I still choose broke over dead, and if I wanted to choose dead I can do that too.
I get the point in your scenario. The simple matter of "degree" in this case might be simple but it is very big. First of all, i would say that your scenario is unrealistic. It is made up and it would never happen in actual real life. First of all, what psychopaths would leave a dying man, woman or child like that? Also, how would these ambulances get customers? Thirdly, who would sign up for their ambulance service? Yes, if we accept your premise of a society where this psychopath ambulance service has a monopoly and everyone is forced to use it, then sure, it is exploitation. But on the other hand, someone with authority has therefore sanctioned this psychopath monopoly ambulance service. Where did this authority get this mandate? Democracy? If you want to argue that this scenario would happen on the free market, i would like to see your arguments to why this ambulance service would still have customers.
If you control the premise of the arguments, it is easy to "win".
The largest fortune in the Roman empire was amassed in almost exactly the same manner (Marcus Linnus Crassus - he ran a fire service).
Desperation is a rich source of profit. Neoclassical economics, instead of analyzing this sordid detail, masks it with assumptions.
That's why you view it as an unrealistic scenario despite the massive amount of historical precedent. Under econ 101 models (perfectly equal wealth; perfectly competitive market) it is an unrealistic scenario.
> The landlords chose their market, not the other way
> around.
That goes against.. almost all economic thought.
You don't choose to make umbrellas for the umbrella market, and just keep churning out umbrellas, perpetually disappointed by the fine weather.
This market is profitable, but if it were wealthier, it would be more profitable. There's no incentive for a business-owner in such a place to somehow keep the locals in a state of poverty.
If this market were wealthier it wouldn't exist. The tenants would be getting mortgages or renting nicer apartments, not living in trailer parks. And, because governments like to have higher income residents, they would have more choices of where to live, as trailer parks are exiled to the fringe. Some of these market dynamics exist precisely because these people are poor and the landlords have no incentive for their customers to be better off, just like Walmart would not be better off if its customers got more money and started going to Macys.
> If this market were wealthier it wouldn't exist. The
> tenants would be getting mortgages or renting nicer
> apartments, not living in trailer parks.
No, because the cost of building, maintaining and keep in a state of compliance a housing lot is superior to the increase in rent. Sleep dealing is a lucrative job.
There are many factors explaining this : reduced access to law for the poorest, lack of alternatives, but also social perception of the tenants and of their worth, or the cognitive bias displayed by many about homo economicus.
>You don't choose to make umbrellas for the umbrella market, and just keep churning out umbrellas, perpetually disappointed by the fine weather.
You do if people keep buying them, irrespective of the weather.
You've misread my comment. I'm not saying that the landlords create the market; simply that the landlords chose a market that requires less capital outlay, and also with full knowledge that the market is not typically upwardly mobile.
In other words, it's fairly rare that landlords buy mobile parks with the intent of later upgrading their customers to upscale condominiums.
If a landlord is about to chose a market that requires less capital outlay it's because there is an unfilled need in that market. Without the lower cost housing the tenants will only have fewer options, potentially more expensive ones at that.
If all of the needs are filled and somebody else decides to target the market then they have to find a way to disrupt it, in this case that probably means figuring out how to reduce costs and charge less.
Except your fantasy of a free real estate market doesn't exist. FED policies, by their own admission, serve to artificially drive up real estate prices, which punish the poorest, who don't own property and are forced to rent. This is a direct subsidy to property owners with the size of the subsidy equal to the amount of property owned. These FED efforts (MBS purchasing, ZIRP, suspension of MTM, QE1-3) to prop up housing also inflate equity and bond markets, further subsidizing the wealthy (while those in poverty who own no stocks or bonds fall further behind).
Not sure about the Fed, but plenty of UK politicians own buy to let property, so hardly a free market when they have such vested interests in keeping prices high.
We've gotten off track. I'm not arguing whether the market exists or how basic economics in a perfect market work.
If you look back at my original comment it's WRT the assertion that these landlords would love to upgrade their properties and charge higher rents. I was simply saying that's largely untrue. These landlords are aware of the market dynamics/demographic when choosing to invest and have little-to-no desire to "upgrade for higher margins".
They would have that desire if all their tenants were suddenly wealthy enough to pay those rents, was my point. Which speaks to the broader point that these landlords are not working to keep these people in poverty.
All of those tenants suddenly becoming wealthy enough to pay higher rents is a magical hypothetical that undermines the basis of this discussion. Someone else on this thread said it succinctly:
"If this market were wealthier it wouldn't exist"
That is exactly right.
The landlord would be more likely to wait for them to move elsewhere and just await more customers for their current offering as long as the market was there. This, rather than outlay the capital to upgrade the place; else the landlord would have likelier invested in a more upscale offering to begin with.
Likewise, depending on the degree of increased wealth, the tenants may well prefer to move. Slums and trailer parks generally don't have a tendency to just "happen" in otherwise affluent areas. With increased options, renters would likely desire better surroundings, schools, ownership, etc. vs new granite countertops in their double-wides.
Of course for this same reason, landlords don't want to risk upgrading beyond what can be recovered in a reasonable time by rents that the market will bear. No amount of upgrades is going to make more affluent buyers with other options move to a mobile park.
People are suggesting here that the landlord would upgrade because it's economically rational to collect higher rent, while simultaneously ignoring much of the actual economic reality here.
Again, I'm not claiming that the landlords create the market. But they are under no delusion when they invest.
> What is the alternative? These people aren't forced to live there. If there were a cheaper, better alternative available to them, they'd probably take it.
You need money to buy into a housing cooperative, and even more to start one (i.e. build a whole new apartment building). The poor people who are renting the apartments in the linked article don't have it; they are living paycheck to paycheck, and frequently falling behind even on that.
I'm not seeing a workable alternative beyond government-provided housing, but that doesn't have a good history of success in the US.
Let's for a second assume that people stay in the same house for 30 years[1]. Why can't they just purchase the house cooperative slowly with each rent payment ?
My grandma in Israel paid rent in a public housing that had exactly such an arrangement, and after becoming a pensioner, she was finally able to purchase her house. And i have no doubt such arrangements are one reason why Israel, a nation establshed from poor immigrants did quite well for both economically and socially for relatively long.
Largely because of the "Dodd-Frank Wall Street Reform and Consumer Protection Act" of 2010.
That's right, government protecting the people again; in this case, lease-options or lease-purchase agreements with a financing component where the purchaser is living in the property during the term are now deemed consumer financing arrangements (rather than real estate financing arrangements), which are subject to review by the then-newly-created Consumer Financial Protection Bureau.
It all but dried up the willingness of sensible sellers to write lease-options on property where the lessee would live in the structure. Yes, there was some amount of fraud and exploitation under the old laws as well, but now that entire mechanism was closed off to property owners willing to sell and [typically] working-class families looking to buy.
This is interesting. A quick search turned up an article [1] that outlined some of the difficulties with lease-to-own residences I wasn't aware of. However, the CFPB is likely on the losing side if the leases are structured as short-term rentals, terminable at any time, as Rent-A-Center has done [2]. This type of consumerism is likely to be self-correcting over generations of time; I'm seeing far less participation by Millenials and younger generations for this consumerism than older generations, by simple virtue of the fact that they are quite drained of financial resources and growth potential by the time they graduate. If this trend is real and continues, then the velocity of money could seem great while juiced by the Fed, then drop like a cliff function when demographic realities trump monetarism and lack of fiscal policy changes in the US.
No, I think it's much worse than that. There's a general sentiment that triple penalties are applicable (or a danger at least) if a seller is remiss in qualifying the lessee/optinee at the time the contract is struck. The idea being that if a few years down the road, the lessee can't qualify for a mortgage and loses all their option premium money, they've been taken advantage of. So, the only safe thing is to underwrite the lessee for a mortgage at the time the contract is written.
Hint: most of these people can't qualify for a mortgage, otherwise they'd just buy outright.
Franky, the FHA should be writing mortgagees, not Joe Sixpack Seller Financing. Seller financing is more often than not used just as rent-to-own furniture stores are: rent seeking of the poor, with them losing their entire invested amount when they hit a financial hiccup.
The people in the linked article are frequently moving between housing, though. If they had thirty solid years of employment lined up they wouldn't be in their situation to begin with. What you're proposing is rent-to-own, which the vast majority of people would never make any headway on.
What about adding something like transferable shares mechanism - so so you could use your ownership stake in another house if you want you need to move?
Maybe it worked for Israel, because it was run by politicians who cared about their people and not by those who cared for the interests of mainly the mega-corporations (e.g. USA) or the interests of mainly the party-workers (e.g. USSR).
Such schemes from government are a must.
They are much better than "welfare" which just encourages people to be lazy.
Edit: added about "welfare".
It worked pretty well in the USSR - housing was generally not a problem. Heck even after the collapse of the USSR economy, people still had a place to live. Can you imagine how hellish it would be if it happened in the US , when everything is private and most don't own?
What are you even talking about? Apartments in USSR were infamously hard to get, and even now, significant part of tge population lives in dorms, communal apartments or in buildings too dangerous to live in. Plus, USSR has a long tradition of several generations of the same family living in the same apartment together, a room per family.
Nobody is 'profiting from poverty' here. These landlords would make much more money if these people were wealthier! I'm sure they'd love to make nicer places and charge higher rents with higher margins, but they can't, because that's all these people can pay.