Itās the degree to which landlords charge well beyond what they need to to make an adequate return.
Would this be in any way comparable to me telling you that you are making too much money at where you work, or too much interst at where you save, or too much of a dividend from the companies that you invest in? Seriously, Cynic, wouldnāt you think that you are not making too much ā¦ in fact, you havenāt gotten an increase in pay and interst for savers has been almost ā0ā and the stock market has been in the doldrums for over 18 months!
Poorer tenants end up paying 2/3 of their income away in rent. Theyāve got no close by alternative. Captured market.
Maybe ā¦ but, this really appears to be saying is that a coin has only one side! Who can determine if someone is spending what ever fraction of their income they get on rent? Could it be that they got an apartment in a particular section of town, or with a particualr view, or has additional bedrooms or whatever? Seriously, there are some things people are willing to spend trade off to have other things. While 2/3 does seem excessive to me - does it include all utilities, water, sewage, basic phone and cable, covered parking, etc. We just can not pull an arbitrary percentage out and say this is wrong on the face of it. I do not know about NZ, but there is an active housing market in the US and those looking for an apt in Houston have a general map of the city laid out telling people where the apts are located, and the features and the costs.
Many will buy 10+ properties with the help of the banks, pushing up house prices for first time buyers.
Now, this is assuming a very particular set of circumstances - and appears to disregard actual market forces.
Letās say that a builder just completes 10 houses that were pre-sold to a particular landlord ā¦ and there are no other houses for sale (the monopoly you are addressing). For this landlord to rent all 10 houses - there have to be more then 10 families wanting to rent them. Unless this landlord has an infinite amount of wealth - he may have maxed out his credit limit and still there is this desire for more housing. Donāt you think someone else will step up to the plate and do some building for tenants? I do. And, by this very fact, there will be competition.
But, letās say that these 10 house do not rent outā¦ letās say only 1 or 2 do ā¦ so, now our landlord is stuck with his own monthly payments on 8 un-occupied homes. Chances are, the rents received will not cover this expenseā¦and he will have to consider lowering his rent on the other 8 so he can get some cash flow coming in.
Finally, letās say that half of these homes rent out - and the people who still need a place to live go to the bank and take out a mortgage on owning their own home. Now, we can argue that the only reason they are not buying is they can not affort the expenses - but, if that were always or usually true, then no one would ever buy a home. There really is more flexibility then you are giving the market system that our countries enjoy.
Landlords provide a good, needed and very valuable service. They allow people a place to live without the commitment necessary for home ownership. Is this a perfect system - NOā¦ but, tell me what is! Here is an example of a fabled āWorkerās Paradiseāā¦
Russia was very proud (once upon a time) of the apartment buildings that they built to house the workers that they enslaved in the factories that they ran. Low rents - but shoddy conditions, poor access to reliable utilities and ever increasing amounts of crime were the prelude to buildings actually falling down due to poor materials or workmanship used in building the apartments. No one could afford to buy a home under these conditions.
God bless
Tom
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