They are providing a service. You arrive in a new city with no money. Where will you live? The landlord is assuming the risk of owning and maintaining the building and all you have to do it put in a deposit.
The main reason they are "parasites" is prop 13. Without that, their building would be assessed at a reasonable level, and most of their profits would be property tax payments.
If you live in California, make sure to vote yes on the two partial repeals of Prop 13 this November:
Landlords may provide services, but they primarily extract economic rent, essentially profiting from their their monopoly on that particular piece of land.
How can they profit from the unproduced value of the land when they had to buy it? It seems to me that you're assuming landlords owned the land since before high property values in SF or wherever were a thing. It seems unlikely this situation accounts for much of the real estate.
They are providing a service in the act of owning and maintaining the building.
What service are they providing in their role as a landowner? Land (in the sense of it being in a specific location) doesn't require any maintenance or risk. It's also not like they created the land.
The majority of rent in SF comes from the land value, so this is the more relevant part to consider.
The reason why land is expensive is because there is high demand for it. Landlords can't set prices arbitrarily. Every tenant has voluntarily agreed to the rent they pay.
How is this relevant except for a hypothetical person who owned land since before there was a city? That person would indeed be profiting unjustly from value created by others, but that doesn't seem like real life. What am I missing?
> Let me give you concrete scenario of where the current system breaks down. Let's say I own an apartment building on the edge of town, and the city decides to build a new transit line to the community. Rents in my apartment building will go up; let's say by $100. Renters are willing to pay an extra $100 because they value living near a transit line more than the being far from one. But why should that extra $100 go to my pockets, while the government has trouble even paying for transit system? It's not like I was the one who built transit system, it was funded by the income taxes of the people who work there, and then built by the government.
This applies to all infrastructure spending of course.
As I said in another comment, this is why there are property taxes. I don't think it's any different than income taxes. You own real estate, the society around you is a multiplier, so you owe a percentage. You make a salary, the society around you is a multiplier, so you owe a percentage.
In practice the percentage could be off, but the basic way the system works makes sense to me and I don't get the people who are sure that it's terribly wrong (whether because they are against taxes or against owning property).
If property taxes are normal (not capped like in California), some of the effect is mitigated, but the property value increase is still greater than the tax increase. Real estate investing as an industry only exists because of the existence of property gaining value.
Most infrastructure spending requires income taxes and transfers from the federal government, so clearly there is wealth transfer happening to the landlords.
Well, maybe it just isn't true that real estate is a perpetual money machine. If it was, yes, that would be a problem because it would eat the world. But people always exaggerate the permanence and universality of any bubble.
You can dismiss it as anecdotal evidence, but I live very far away from SF, in a place built in the early 90s, within city limits, and it has not increased in value faster than inflation in all these years.
Sorry, I replied too fast to see your part about raising rates. Yes, that's roughly in line with I propose. We raise the tax on the land to exactly how much rent you land derive from the land. And then you don't tax the structures on top at all, since we want to incentivize people building on top. This is the Georgist policy of a land value tax.
I don't doubt there are places where rent-seeking from land is not occurring. But we still need to address the places where it is a problem. And this will remain a problem as long as people require land to live, as long as centralization to cities keeps occurring (which we want more off, given its benefits).
My point is not that being a landlord has no risk or guarantees absurd returns. Rather, I'm saying that the returns from land do not come at all from the value that the landlord provides, so we should make sure those returns go back to the community that created them.
The land is still a scarce resource. What do you propose, that the government own all land? Let the property owners just own the buildings?
We tried that before, it was called feudalism. It's where the King owned all the land and the peasants were allowed a small piece of land to work and enjoy the fruits of their labor.
People own the land, they just pay a "user fee" of sorts to the commons.
Actually, the current situation is already like feudalism. Under feudalism, people other than the king also held land (the nobility). These landed gentry also drew the benefits of free rent, from the poor labourers.
Those with land currently can hold it indefinitely, extract a profit from it, and then pass it onto their children. That sounds a lot like the landed gentry under feudalism to me. The property tax tempers it slightly (which is why prop 13 is so bad), but it's easy to eliminate it all, while still keeping private landownership and market mechanisms for allocation (I definitely don't trust the government to own and allocate all land efficiently).
They are providing a service. You arrive in a new city with no money. Where will you live? The landlord is assuming the risk of owning and maintaining the building and all you have to do it put in a deposit.
The main reason they are "parasites" is prop 13. Without that, their building would be assessed at a reasonable level, and most of their profits would be property tax payments.
If you live in California, make sure to vote yes on the two partial repeals of Prop 13 this November:
https://ballotpedia.org/California_Property_Tax_Transfers_an...
https://ballotpedia.org/California_Property_Tax_Transfers,_E...