Why Do Landlords Still Exist Today?

Even setting aside the social and legal history that traces the origins of rent collection to feudal entitlements that granted hereditary rights to inbred clans of medieval warlords, there is still the question — why should landlords be entitled to payment at all?

A Word About Small-Scale vs. Large-Scale Landlords

Before continuing the discussion, an important distinction needs to be drawn between the small-time “mom-and-pop” landlord and the big-time tycoons and corporate landlords. The key point of difference is that small-time landlords tend to act as groundskeepers who perform labor, such as landscaping and maintenance, whereas the tycoon and corporate landlords act as shareholders, hiring others to perform the labor of maintaining their properties. In the interest of fairness, the following discussion will consider small-time landlords to be groundskeepers and exclusively address the large-scale landlords.

Political Economy of Rental Agreements

The rental of residential land and living-space is a strange commodity. Broadly speaking, commodities — whether physical products like food and cars, services like repair and healthcare, or informations like research and iPhone apps — are the results of some kind of production. Or in other words, commodities are made by people using other things. Cars are made by people using factory machinery and steel, things are repaired by people using tools and parts, and apps are created by software-developers with knowledge gained from education and the value of each is determined by how much labor is needed to produce them. But who produces land and space, with what materials, and how many labor-hours on average is needed to produce them?

If a thing is produced, it is reasonable to argue that the person who labored to make the thing has a right to control its use, whether she wants to use it herself, lend or sell it to others, or give it away because she created it. That, in fact, is exactly the reasoning used by classical-liberal philosophers like John Locke to support the idea of a natural right to property, which was fairly radical at the time because it opposed the feudal entitlements to land held by a ruling minority of aristocrats. Things like land and space, along with springs, oyster-beds, or other forms of natural capital, are non-produced. And if neither the landlord’s nor anyone’s labor is a factor of land’s existence, why should society’s laws entitle landlords to payments from anyone too poor to buy property?

How Rent Harms the Economy & Drains Workers’ Wealth

The absurdity of entitlements to rent is clearest in cases of unimproved land with no structures, utilities, or other bells and whistles added. Extracting rent for the use of idle soil and empty living-spaces is nothing but a legalized act of extortion. Since the basis of society (and human survival) is availability of living-space and cultivation of land, to keep others from occupying living space or using land productively is not just violent but anti-social in the most literal sense of the word.

In cases of improved land, rent collection seems more defensible at first. It may be argued, for instance, that a landlord who buys an apartment complex and pays for its upkeep has a right to collect rents to recover his investment and in reward for assuming the risk. But this accounts only for the landlord’s personal interest without considering the deficit to society overall. After the costs to build the complex, the only real costs left are to maintain it. Since these costs must be less than a landlord’s revenue to create income, rents must always exceed the real cost to maintain the property and rent collectors must always be less efficient than if tenants had simply paid such costs directly.

The real cost to build and maintain housing is unavoidable because society depends on housing to exist and, while small-time landlords often provide at least some real labor and materials, rent collection in itself contributes nothing to this endeavor. If small-time landlords who maintain properties are considered as workers like the grounds-keepers and other workers who are paid for similar labor, the remaining landlords’ only labor is to manage the rent-collecting business. And business is booming.

Because everyone needs a place to live.

The Balance Sheets of the Non-Working Class

According to the US Department of Housing and Urban Development (HUD), this rental business raked in an average $11,232 per unit yearly for about 43.9 million housing units in 2015 — but what does the business provide in return? The US Census Bureau’s Rental Housing Finance Survey shows landlords spend an average of 10 hours per month managing properties overall, while half of them spend just 3 hours per month or less, and that is according to landlords’ own responses. The average expenses were $4,751 per unit and most of it covered property tax and business activity (insurance, payroll, professional and legal services, etc), while maintenance, grounds, and landscaping accounted for just $1,906. This means that, aside from the necessary costs to continue providing housing to a renter, the landlord collects…

$11,232 — 1,906 = $9,326

…around $9,326.

After settling property taxes (coincidentally also $1,906 per unit on average), the landlord is essentially siphoning $7,420 from the wages of each of their tenants. For $11,232, a US tenant can expect $1,906 in maintenance and landscaping services on average, in addition to not having to pay the property tax — and that’s it. In return for arranging those services, the average landlord can expect to be free from the kinds of wage-labor that most renters have no choice but to perform if they wish to enjoy the privilege of a roof over their heads.

Envisioning Alternative Systems of Land Tenure

The alternatives to this medieval system of land tenure are only limited by the imagination. One of the more straightforward options would be to transform private residential properties into housing cooperatives, grouped by neighborhood, building, or community. Instead of rent, funds for maintenance costs (national avg $1,906) would be pooled together through the cooperatives and paid out as needed and surpluses could be re-distributed as dividends to residents to incentivize efficient repairs or re-invested in improvements (community gardens, pools, shared tool-libraries, cooperative wifi-zones, etc).

Depending on how the transition to cooperative housing was handled, it might even be plausible to preserve the jobs of small-time landlords as groundskeepers who are compensated for labor rather than property ownership. The process of changing residence would remain mostly the same except that cooperatives would manage applications rather than landlords and the major consideration would be the average maintenance-costs at different housing cooperatives rather than rental agreements.

Toward Universal Housing & a World Without Rent

Of course, the real problem lies in overcoming political obstacles to land reform. Though rental-property owners make up just 3% of the US population, the rental-housing market is stuffed with nearly as much capital as the US ‘defense’ budget and so it may be fair to say that a successful US land-reform movement would be about as hard to build as a successful US anti-war movement. Not impossible, of course, but pretty damned challenging.​

The good news is that virtually everyone in society stands to benefit from ditching this outdated model and, if the historical record is any indication, the chance of revolutionary action is likely to rise pretty quickly once enough of the peasants are miffed about unfair land-distribution. And if history teaches us anything, it is that nothing — not kings nor even gods — can hold the united wrath of the peasants in abeyance for long…

In solidarity,

John Laurits

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First published at www.JohnLaurits.com