These businesses should be paid by the landlord to occupy (and therefore maintain) the property for them. This notion that you can own land without occupying it (or paying somebody to occupy it) is an absurdly backwards idea that is responsible for a lot of suffering and exploitation in modern society.
We've constructed a bit of a euphemism for this. "I just want to make a living to put food on my plate". Except it's not the food that's expensive. It's the rent. Which in many places, for low income earners amounts to greater than 50% of their take home pay.
In my city there are dozens of empty stores in the CBD "for lease" as if there is no demand for use of these properties. Absolutely ridiculous. Strangely enough, everyone thinks that renting a home or workplace to occupy is a perfectly normal thing to do.
Building and maintaining commercial properties is absurdly expensive. A landlord takes on the cost, risk, and time of building and maintaining that property in exchange for businesses not having to deal with that.
The idea that a landlord should invest serious capital to build a business park and then pay people to use it is nonsense. In that arrangement zero business properties would be made. People who wish to start a business would have to foot the bill to purchase or build a space for their business.
Besides initial construction you also have maintenance, acquiring tenants, property management, renovations and improvements, etc.
If a company has the means and desire to do all this themselves, there's nothing stopping them from buying the land themselves instead of renting, but it's generally more efficient for a business to focus on what they are good at and leave the real estate issues to a company that specializes in it.
Sounds to me like they're deciding what to do with the land, and then taking on the risk for whether the developed property is economically viable. They should be taxed for the value of the underlying land, but they are absolutely not useless middlemen.
"Taking on risk for whether the property is economically viable" is a funny way of saying "bought a house that a normal person could have purchased and instead charges them a marked up rent"
The developers do not just eat the cost of building a property, they pass it on in the sale price. So yeah, landlords still end up having to deal with it, on top of the day to day maintenance.
The landlords do not just eat the cost of purchasing and managing a property, they pass it on in the lease. So yeah, tenants still end up having to deal with it, on top of the day to day maintenance.
Landlords aren't in the property business. They're in the liquidity business.
I know it sounds weird but that's their function in society, they are one of the many "business lubricant" sellers that allow modern society to work.
A liquidity provider is someone who makes transactions easier. The insurance company will insure you against risk does this. The lender who provides loans does this. The landlord who rents property does this.
You can run an economy without them, but things will cost more and take longer to happen.
liquidity matters to commodity markets that transact often. the flipside of liquidity is instability.
treating real estate as a commodity, not as an intimate necessity of everyday life, helps no one except speculators and rent seekers, at the expense of everyone else doing productive work.
Examine the alternative. Should small businesses purchase the space all out, from developers or brokers? If this is so much more efficient, why don't they do so?
Similarly, you could ask the same of residential renters. What would happen if we simply banned all new rental contracts. Would access improve or diminish?
Owning property is a longterm commitment that limits flexibility and comes with some hefty costs. Rent solves these problems. A small company thats growing might need 2000 sq/ft today and a projected 10,000 sq/ft next year. But if you have to purchases and maintain 10,000 sq/ft for a year, that to be prohibitively expensive to the point that they can't afford to grow that much.
Why then is it ridiculous for me to own 10,000 sq/ft and parcel it out to 5 business that need 2000 sq/ft? I'm taking on the costs of owning and maintaining the property, as will as taxes and other assorted costs. It is fair for me to pass those costs on to the actual tenets of the property for as long as they choose to reside on the premises. They get flexibility and scalability, and I get money for my time and effort to provide their needs.
You're taking on the cost of purchasing the property, which is certainly not nothing. But as a commercial landlord, your tenants pay all the costs of owning and maintaining it, they pay all the taxes, they pay everything. Every commercial lease is structured this way.
You have an outlay of capital to acquire the property up front, and you have a minimal amount of risk if a large portion of the property goes unrented. But even a brand new owner will typically only need to reach 30-40% occupancy by square footage in order to break even, and the unrented portions can be written off for a tax credit.
I would love it if the commercial landlords I've rented from in the past were providing services for the exorbitant checks they were getting every month, but the only different I've encountered between commercial landlords and residential slumlords is that there are generally government protections for the tenants of a slumlord, commercial tenants not so much.
> your tenants pay all the costs of owning and maintaining it, they pay all the taxes, they pay everything
To play devil's advocate, what if the tenants are actually fully compensated for that with a rent that would have been much higher across the entire market if the landlords were paying for all that?
> only need to reach 30-40% occupancy by square footage in order to break even, and the unrented portions can be written off for a tax credit
you seem to imply that commercial landlords are raking it, I think? But, afaik (and I'm admittedly not super-familiar with this), commercial real estate is an open, competitive market? So, given that, why doesn't it get flooded with supply of everyone who rushes in to build and collect those fat margins? Maybe there is still something there that makes it not as lucrative as it seems?
It's not an open or competitive market. It's a fractured, locality-heavy market that's actually operated more like a cartel in many (especially small to mid size) areas. You are never free to just buy a building and do what you want with it - the City has to vote, approve use, permits, etc. All of which conspire against a 'free' market in any sense.
As an example, of the ~30 or so large scale commercial buildings in my local downtown, there's a total of 3-4 owners. You only know this if you know the lawyers who put together the property deals, as each is hidden behind it's own management company and rented through one of 2 commercial real estate management firms (conveniently owned by the same 3 people).
There is no 'rush in to build', as there is no land at all remaining in the city to build new on - any construction requires demolition first. Again, permits, historic district permits, etc. all conspire against the newcomer.
Maybe they pay all the costs, but thats when there are tenants. The landlord is taking on the risk of being the one the bank will come to when a mortgage needs to be paid. And the effort of maintenance (and cost, then there are no tenants). All the tenant needs to do is show up and sign a check, they have no other worries. Thats the trade-off.
A big plus of being a landlord in our current time period is that what you charge the tenants in rent covers: a) the cost of your time b) the cost of maintaining the property c) the cost of paying interest on the loan d) the cost of repaying capital on the loan. After 30 years or whatever once the mortgage is paid off, the landlord's costs will drop significantly, but the amount they charge tenants still takes into account the last two, which is why being a landlord is often seen as a great way to fund retirement.
One way to change that could be to have mortgages that have an unlimited term and are interest only. The way the landlord wouldn't need to charge (d) to tenants and they only advantage to them being a landlord would be (a). But I'm sure if that were to happen capital costs for properties would increase significantly that at the end of the day rents would be exactly the same as they are today.
Triple net leases are quite desirable for landlords but by no means are the sole kind of commercial lease. The most common splits some of the costs of building maintenance (a ‘modified gross’ lease)
Good luck trying to negotiate any gross or modified gross lease when everyone else in the building is on triple net. They're better off taking the tax deduction than cashing your rent check.
You can deduct your actual expenses, but you can’t deduct rent that you didn’t receive because the property was vacant, or get a “tax credit for unrented property” as was claimed.
> I get money for my time and effort to provide their needs.
This is a pretext. You get money, give as little of it as possible to the people who are doing what you claim to be doing (maintaining the property), and pocket the rest. Owner is not a job.
> These businesses should be paid by the landlord to occupy (and therefore maintain) the property for them.
Please, ELI5, how would there be any landlords left if they had to pay their tenants (rather than the other way around)? Or maybe you’re arguing that there shouldn’t be any landlords?
There would be as many landlords left as there were people who had a need to keep up the maintenance of property that they couldn't currently use, but planned to. The same reason why you would pay a housesitter.
I hope you're not implying that society should make rules based on the preservation of the passive income of landowners. Landlords don't add value to anything; they speculatively purchased a title, and are trying to extract value from it.
I'm a libertarian socialist, so while I agree landlords are often evil, I'm also a pragmatist, and don't see the entire system just changing overnight.
A better more practical approach would be guaranteed basic income, and a land value tax that's somehow tied to average rent prices, so if rents go up, the land value tax goes up so much that it probably would've been better to keep rents lower than pay the higher tax.
Since the money from the LVT goes towards GBI, and people's rents are being offset, the one incruing a lot of the costs is the landlord, and they don't just have a free for all.
They need to double the tax though on airbnb and 'hospitality' designated residences that do short-term leases instead of long-term leases.
I'd even say give some lenience for people w/ less than 3 homes (i.e. you get your home/land free/clear and 1 rental you get 10% of normal LTV, instead of the full tax), then maybe graduate it up... 4-10th house you pay 50% on, 10th+ you pay 100% on.
Foreign investors should pay double the tax, if you want investment property in America, then pay other Americans who can't use those homes.
> These businesses should be paid by the landlord to occupy (and therefore maintain) the property for them.
While I do agree that property needs maintenance, why would a landlord pay somebody to occupy their property? What's the incentive to own the property at all then?
I think the argument is, the landlord is not contributing anything productive and is attempting to freeload off of other’s productivity. Most businesses both agree to pay rent and make improvements to the property. When a landlord is demanding both, they are not contributing anything but still seek payment. It is a form of “rent seeking” in the economic sense: https://www.investopedia.com/terms/r/rentseeking.asp#toc-wha...
And so what would be the incentive then to own property? Well if you cannot be productive with it, or otherwise enjoy it for personal reasons, then you wouldn’t have any reason to… which would let people who can do something productive with it the opportunity to do so.
Can a landlord contribute something productive? Sure, but that’s probably more akin to a property management company’s value proposition than a landlord’s.
> the landlord is not contributing anything productive and is attempting to freeload off of other’s productivity
This is patently absurd. Does the Miller not provide anything productive when he brings flour to the Baker? The Landlord provides both a Good and a Service. Just because his contribution is not necessarily concurrent with the Tenet's, does not mean that he is not contributing anything productive.
What does the landlord bring? I think you’re confusing landlord with property manager. The landlord brings nothing and has no productive contribution. They seek only to create scarcity and leech off of others productive output.
Please, list contributions made by the landlord specifically.
They provide the capital so that building exists. If there weren't a chance or probability for it to generate income and to increase in value. A few would pay for it in first place and even then only for personal use. Thus resulting to system where to start business you first must outright build the building with loans or buy from some failed place. As no one would build for you to rent.
So their role is increasing the scarcity/cost of property?
Remember a landlord is not a developer or builder - they generally buy property that already exists.
I think what you are saying is that the property wouldn't be available to rent, BUT would be available to buy at a potentially lower price (as buyers wouldn't be competing with rent extractors/landlords)?
I know we are talking commercial property here, but look at the market in Sweden, where renting property to live in for more than a month is illegal in most cases. The cost for a young person to buy their first flat (often with family support) is low. The country operates fine with very limited rental. People still build property, young people still get to live.
>While I do agree that property needs maintenance, why would a landlord pay somebody to occupy their property? What's the incentive to own the property at all then?
To live in or use? That seems like a way better situation!
That doesn't answer the question. An 18 year old who has literally never worked a day in his life can not afford an apartment no matter what the price, inflated or not. Should land owners be obligated to lower the price to $0.25 so that this teenager can buy the property with a coin he finds on the street? Should it be $20 so that his first paycheck can be used to buy lodging? Should all plumbers and electricians offer their services for a couple dollars so that every teenager can keep their new property maintained?
You have created a false reality, and then cried foul when real life didn't play ball.
>Should land owners be obligated to lower the price to $0.25 so that this teenager can buy the property with a coin he finds on the street?
Wouldn't a reality where land is only held by those using it and you can buy land for a quarter be better? I don't even mean to be funny or anything but that seems like a much better situation that our current one.
This 18 year old can get a loan, they can pool together with a group of flatmates to purchase a property together or they can live in staffed accommodation, such as a dorms, motel, hotel or hostel. They can purchase a room in a boarding house. They can stay with friends and family. Plenty of options.
Landlords buying land does not unilaterally inflate the cost of land. Arguably in the long-run, the price of land just reflects the discounted cashflow of its future rental value. City centre land is expensive not because of landlords, it's expensive because so many different parties are able to derive so much utility from occupying it, and are willing and able to bid large amounts to capture that utility.
Arguably there are two big problems with the market for land/housing, and landlords aren't one o them:
#1 Increases the value of land due to neighbourhood effects accrue to the owner when they do little to deserve it (you can tackle this with land-value taxes).
#2 Various planning controls inhibit the market's ability to respond to high accomodation prices with the construction of more accomodation, keeping rents at a higher level than they would otherwise be without this government intervention.
Land is a finite resource, and developed land in a useful location all the more so. While speculation might skew an areas value somewhat, the cost of purchasing, developing, and maintaining a property would definitely not be zero if renting were abolished. There are still going to be lots of people who can't afford to buy outright even if costs went down several percent.
Land should be a public commodity, nobody should be able to own the land, or the resources under them, or the lakes, or the sky, etc.
Buildings should be 'permitted' to be built on land, and people can own the land insomuch as they pay land value taxes for the utilization of the land. If it's a primary purpose and they don't get income from it, then the tax would be nil, if it's a second home they'd get 90% off as they're still a 'small fry', maybe 3-10 homes is 50% of full tax, and 10+ is the full tax.
LVT can then be funneled into housing programs, housing assistance funds, or straight up basic income.
Land value tax is the tax of the value the owner gets from the land, so if you're airbnb'ing you'd pay more if you make 10k per month in airbnb, then if you're renting long-term for 2k/month. If you still have a mortgage, you could maybe have some sort of deduction - but again that's only if you're owning 3 or less homes, anyone leveraging credit for 10+ homes should be able to afford mortgage out of their normal cash-flows, or they're over-levereged and need to dump a property or two.
So someone who uses land very inefficiently and thus gets very little value out of the land should have it for close to free, whereas someone who would use it efficiently and thus derive lots of value from it should have to pay large sums to keep using it that way?
What incentive is there to develop properties then? So you spend millions on building a commercial property and then… you pay people to occupy it? What about rewarding people for building things? This is an asinine comment.
The incentive is to sell the developed property for a profit. The state would be responsible for determining what the reasonable occupancy rates are on properties for sale or under development. A paid occupier (perhaps a real-estate agent) can be placed onsite for the reasonable amount of time in order to avoid any default occupancy fees by the state.
Why would anyone invest anything for something that doesn't produce profit? Developed properties sell because they are expected to generate profit. And in future higher such. If they didn't it would make more sense just to sit on pile of cash instead of deteoriting building.
> These businesses should be paid by the landlord to occupy (and therefore maintain) the property for them.
Maintaining the property and occupying the property aren't the same thing. It doesn't make sense to equate the two.
Landlords are responsible for maintaining the property. Maintaining commercial real estate is actually quite expensive.
It's definitely less expensive to own and maintain an empty property than to own and maintain a property with $0 renters who are putting wear and tear on it.
Many, if not the majority, of commercial leases, including mine, are Net leases, which have the business maintaining the property (and paying the property taxes in the case of a triple Net lease). And many, if not most, commercial leases are not year to year, but over three or five years.
Right. The failure rate for restaurants is (depending on who you believe) up to 60% in the first year. That's the kind of business that would simply cease to exist if prospective business owners had to convince lenders to fund large capital costs.
Renting property dates back to ancient times. It certainly long predates the modern restaurant. We have records of rent contracts 300 years older than the first known instance of a place where people could buy freshly prepared meals.
This is literally the reification of property-cum-captial. Like when people talk about social constructivism, this is what they're talking about. Please don't.
> This notion that you can own land without occupying it (or paying somebody to occupy it) is an absurdly backwards idea that is responsible for a lot of suffering and exploitation in modern society.
That's called an occupancy tax and it stops most of the idiocy in the commercial renting sector really quickly.
Agree. Imagine if someone claimed dominion over a chunk of the sky or an acre of water. You'd call him a fool and ignore him. The only way land is different is that it's easier to demarcate.
Nations, but people and corporations aren't nations. Can apply institute a no fly-zone over their HQ?
Edit: meaning land, air, water should belong to the people of said nation, and should be taxed as such and divided out to the people as guaranteed basic income.
I'd say the purpose of a nation is to manage resources, which are often natural resources.
Some locales have deeds for land have time limits; you don't own the land, you have been granted rights to it.
Sometimes the FAA will limit airspace usage for private property, for instance restricting airspace around stadiums during sporting events.
You're right that a corporation can't unilaterally declare the airspace over their land their headquarters sits on as a no-fly zone. But the government may still work with them on policy.
Yours is a very strange idea indeed. I guess if you're alright with this then you agree to negative interest for deposits (you pay the bank to keep your money).
Yes rent is a major cost for businesses that depend on foot traffic, so landlords take advantage of that to extract more money. It's just the way capitalism works.
That's 100% the case actually. With the added subtlety we agree that the bank can pay itself by leveraging the money. Or more precisely, the competitive bank will tell you "I keep it for free and will even give you interests" cause it knows it can pay itself by leveraging the money.
Yes but capitalism can also work to make things much much cheaper to almost no cost at all. You simply increase the amount of land available and make regulations that allow for cheaper buildings. 200 years ago, humanity had no problem at all making buildings cheap. Why now all the sudden we're so obtuse that we won't allow it any more.
the problem is: we require people to either own land or pay someone else that owns land.
That alone wouldn't be an issue without the second requirement: You can't have any land because all of it belongs to the government. Even CA, one of the most overpopulated states in the US has more acres of land than people.
We need to start opening up land for development: mainly by starting cities in new underdeveloped states and creating incentives for companies to move there. Once people spread out a bit more, we'll see that there's enough land for everyone and it doesn't need to cost a huge amount to own land or real estate.
We also need to stop building homes w/ 1900s tech and methods.
You can build just as sturdy/sound a home for 10k using earthbags as you can 200k w/ a contractor, albeit there's a lot of hard work, but if you can do it, then you should be allowed to, but zoning laws don't always look favorable on homesteading.
There's a family on youtube who has like 5 homes (1 for each kid, more like little studio apartments as their bedroom), and a big office. All built for <10k each.
Imagine if you could buy 20 acres of land, and put a bunch of outside-the-box homes and apartments and charge minimal fees (like maybe 300/month HOA).
You could build homes using: Earthbags, earthship, dome/concrete, containers, etc.
Any home that uses earth also has the huge advantage of it being an awesome insulator. Earthship homes manage to fluctuate between 50/80 regardless of location or climate (winter/summer respectively).
Creative homing I think could be a big solution to the problems if more people team up and build their own rentals on co-op'd land, then rental prices would go down a lot because demand would go down, or landlords would simply go broke because nobody will rent from them.
random thoughts about this without too deep consideration:
When you rent a place out some portion of the rent should be legally required to go toward an ownership stake. The landlord should have to buy you out if you leave, and you should have the option to buy the landlord out as well. Empty properties should slowly fall into public domain and be re-sold to the public at a low cost based on a lottery system or similar. While renting-collecting-systems aren't necessarily bad, they're usually bad and we should really seek to limit the ability of people to create them.
> As soon as the land of any country has all become private property, the landlords, like all other men, love to reap where they never sowed, and demand a rent even for its natural produce.
and
> No sooner is the exploitation of the labourer by the manufacturer, so far at an end, that he receives his wages in cash, than he is set upon by the other portions of the bourgeoisie, the landlord, the…
> Nevertheless in the most advanced countries, the following will be pretty generally applicable. 1. Abolition of property in land and application of all rents of land to public…
I don't think that's what Adam Smith was getting at. He was saying that gathering food that grew freely shouldn't be taxed by people who put a fence round it and did nothing to make it grow.
Generally there's a building that's useful and the local government have designated that people are allowed to live there.
Unless you mean by landlords "people who own campsites" - that's probably the closest thing to what Adam Smith was describing. Although even they supply amenities.
Believe whatever you want to believe about Adam Smith but he definitely didn't like landlords.
‘The wood of the forest, the grass of the field, and all the natural fruits of the Earth, which when land was in common, cost the labourer only the trouble of gathering them, come, even to him, to have an additional price fixed upon them.’ Adam Smith
‘He must [nowadays] then pay for the licence to gather them; and must give up to the landlord a portion of what his labour either collects or produces. This portion, or, what comes to the same thing, the price of this portion, constitutes the rent of land.’ Adam Smith
‘Civil government as far as it is instituted for the protection of property is in reality instituted for the defence of the rich against the poor, or against those who have some property against those who have none’ Adam Smith
The main difference is that Adam Smith wrote about real land, i.e. natural resource, while current discourse about rent is focused on buildings/apartments - human produced capital.
I think the argument still applies even if you don't go past the land itself. The land itself is the primary cost of housing. This is why we were able to build most of our most famous skylines in much poorer economies than the the people currently struggling to afford to to buy or to rent those same properties.
We've constructed a bit of a euphemism for this. "I just want to make a living to put food on my plate". Except it's not the food that's expensive. It's the rent. Which in many places, for low income earners amounts to greater than 50% of their take home pay.
In my city there are dozens of empty stores in the CBD "for lease" as if there is no demand for use of these properties. Absolutely ridiculous. Strangely enough, everyone thinks that renting a home or workplace to occupy is a perfectly normal thing to do.
Would be great to have a discussion on this.