> Landlords do not create value. They merely charge others to use natural resources (like land) that were already there
and
> Landlords, like all other men, love to reap where they never sowed
Plot twist: these are actually Adam Smith quotes. Karl Marx quoted the second in particular.
There is a contemporary economist and former wealth manager by the name of Henry Fudge who describes the housing markets in Western countries as a "rentier asset black hole" [1] and has written a paper called "The Housing Theory of Everything" [2]. The idea is fairly straightforward: capital moves to housing instead of and at the expense of productive output (eg factories) because of tax advantages, inelastic demand, artificial constraints on supply and it being a political goal to make sure that housing prices always go up.
China had made this same mistake as well. Real estate was one of the few ways people could build wealth prior to Xi Jinping who came in and quietly popped a trillion dollar real estate bubble, famously saying in 2016 [3] "Houses are for living, not for speculation".
My personal view is that ever-increasing house prices are simply stealing from the next generation, a massive wealth transfer to the old and wealthy. It has so many negative effects on society too because it makes everything more expensive. It's an input to every cost (through commercial real estate, which either has to hafve a similar return to residential real estate or it gets replaced with such).
I say all this because the WSJ is defending this generational theft by arguing that people are being "financially savvy" when people seek independence ultimately and this is simply a product of the affordability crisis and declining real wages. It's asinine.
> I say all this because the WSJ is defending this generational theft by arguing that people are being "financially savvy" when people seek independence ultimately and this is simply a product of the affordability crisis and declining real wages. It's asinine.
Indeed. There's this common trope in modern journalim of pretending that these financial moves are pure results of personal choices and nothing else. So, tweens going back to their parents is them "being financially savvy". Americans spending more on groceries and rent rather than other goods and services is them "adopting new consumer preferences".
It's always chosen, never suffered. Once you start seeing it, you notice it everywhere.
Landlords of Adam Smith's England and what "landlord" means in contemporary America are two different things. None of my landlords have charged to use pre-existing natural resources, they charged to use a decidedly non-natural housing structure.
Landlords absolutely create value. One value they create is liquid short-term (yearly, usually) housing. Another value they create is dense housing in desirable areas (such as downtown housing complexes), although landlords are not the only way to do this. They also create smaller housing than single-family homes, and maintenance-free living (again, not the only way to do this).
Now, whether what they charge is commensurate with the value they provide is a different question. My experience with private landlords has been positive and with commercial landlords has been grossly overpriced, lousy construction, and noisy. In my area commercial landlords are priced close to a mortgage, so they are a terrible value unless you are definitely short-term.
(Also, I don't think Xi Jinping popped the real-estate bubble quietly... He was pretty public with your statement, but it was a debt crisis that popped the bubble. It was not quiet at the time, and secondary effects lead to several locally-large protests.)
> Landlords do not create value. They merely charge others to use natural resources (like land) that were already there
and
> Landlords, like all other men, love to reap where they never sowed
Plot twist: these are actually Adam Smith quotes. Karl Marx quoted the second in particular.
There is a contemporary economist and former wealth manager by the name of Henry Fudge who describes the housing markets in Western countries as a "rentier asset black hole" [1] and has written a paper called "The Housing Theory of Everything" [2]. The idea is fairly straightforward: capital moves to housing instead of and at the expense of productive output (eg factories) because of tax advantages, inelastic demand, artificial constraints on supply and it being a political goal to make sure that housing prices always go up.
China had made this same mistake as well. Real estate was one of the few ways people could build wealth prior to Xi Jinping who came in and quietly popped a trillion dollar real estate bubble, famously saying in 2016 [3] "Houses are for living, not for speculation".
My personal view is that ever-increasing house prices are simply stealing from the next generation, a massive wealth transfer to the old and wealthy. It has so many negative effects on society too because it makes everything more expensive. It's an input to every cost (through commercial real estate, which either has to hafve a similar return to residential real estate or it gets replaced with such).
I say all this because the WSJ is defending this generational theft by arguing that people are being "financially savvy" when people seek independence ultimately and this is simply a product of the affordability crisis and declining real wages. It's asinine.
[1]: https://henryfudgeofficial.substack.com/p/the-rentier-asset-...
[2]: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=6571818
[3]: https://en.wikipedia.org/wiki/Houses_are_for_living,_not_for...