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[deliberate] Mistake Blog
Rent
What is rent?
Why are rents so expensive?
Who let this happen and how?
Is there a way out?
Why are rents so expensive?
Who let this happen and how?
Is there a way out?
What is rent?
I can rent something to you, if I happen to own something you want. But, if you wanted it, surely you would just buy it! There are relatively few reasons to rent if you can buy instead. Imagine you need some decoration for your room, or house, or desk - say a photo frame... Out in the shops you see row on row of cheap, plastic frames. Knowing that you'll use this day after day, you purchase one, and if the price is too expensive you can go elsewhere. But what if there was only one or two shops in your area, all offering just a couple of photo frames? Well in that case you'd try and buy one, but wait! The owner has just a few, and knows you have little other option, they don't want to let go of their goods. Instead of the bill for buying the frame, the owner offers you to pay to use the frame each day. In this scenario, you have a photo frame each day which is better than the alternative (of no décor), and the owner receives income for you renting the object. Importantly the photo-frame is scarce - meaning there is little of it available. That is what rent is: the income an owner gets from controlling scarce resource.
Why are rents so expensive?
I'd like to tell a story which few people know. As with so many untold stories, it is centred around a woman. Her name was Elizabeth Magie and she created "The Landlord's Game", which came with two sets of rules:
The first way to play was to go about the game with each player being rewarded whenever something was added to the board. All players win when the poorest player has doubled their initial wealth.
The second way to play relies on players buying up parts of the board, creating scarcity to make money and forcing others out the game.
As you may have guessed, the second version was later to become Monopoly, but how that happened is an entirely different story. The point here lies in the concept at play, the concept of a monopoly. A monopoly is where a seller/owner has either total, or at least great control of something being sold. In theory:
a) The more control the seller has over a 'scarce resource' like we mentioned earlier, the less they compete with other sellers, so they have more power they have to increase its price.
b) Using the same idea, the more control a buyer has, the less they compete with other buyers, so they have more power to reduce a price.
In practice: let's look at the housing market. Various sellers control many many homes, yet buyers all compete with each other. In other words, owners don't compete and have lots of power, whereas renters have to compete with all other renters in the area. By having lots of control over a resource, sellers can manufacture scarcity - they can make it appear like there is little to go around, when actually there is plenty.
Who let this happen? How?
From what you've read so far, I am sure you clearly see the pickle we're in. Our system said that most people have to spend paycheque after paycheque just to afford basic shelter, whilst others get richer in their sleep. Yet, none of us want this - even some of the owners don't particularly want it. Ever since the start of explaining this, we've relied on one crucial concept: property or ownership. This is the root of the inequality, which has grown into the problem of rent now. One persons ownership of something, means another's separation from that thing. The communist shouts triumphantly at reading these words. However, it is not a simple criticism. Of course, an ideal world can exist where people can use and access common resources without it needing to be private - in fact, social-scientists/anthropologists have observed this in operation in less 'western' societies. It is not as simple as getting rid of the owners, or having a revolution. This understanding of ownership lives within all of us. So who made the [deliberate] mistake?
The answer is our institutions, whatever that means. Years and years of law have asserted ownership and property as part of the world. Police, lawyers, underwriters, farmers, artisans, shop-keepers, traders, investors etc. all buy into it and protect it. Previous governments have a lot to answer for, selling off land to the already-wealthy and, globally, corruption has given wealthy aristocrats/crooks huge amounts of property. Even now multi-millionaires and billionaires have a cosy relationship with government. Importantly, governments have always made sure to enforce property rights, making sure that landlords have their way. Ask yourself, which is higher up their list, human rights (such as access to basic facilities) or property rights (ensuring that landlords are able to operate and profit)?
Yes, the mainstream economists are right, houses should be expensive anyway because they are slow to build, require lots of investment blah blah, but rent should not be as expensive as it is! I make that claim because all that the rent really reflects is an imbalance of power between the renter and the owner. This leads us to one possible route out.
Is there a way out?
Escaping this situation would ideally begin with a change in the law, to reduce the landlord's ability to set the price, or limit the amount of total property any person could own. Let's say to four houses (or an equivalently large number of rooms). You'd think that would be enough for anyone. However, without change from a government - which is unlikely any time soon - renters' unions are good ways of rebalancing power. If renters collaborate, instead of competing, they work together and get more control over prices. It's an "apes together strong" moment. The power of people collaborating [right] is that they have more hands to fight and more force behind each action.
