> through the first five days of April, 31 percent of tenants had so far failed to pay their rent, compared with 18 percent in the same period a year ago.
If the headline had said 18%, the situation would have sounded bad to me, but apparently that's normal?
Depends on how long the rent goes delinquent. It's not uncommon for the rent to finally show up around the 15th. I used to rent out a property and would typically write the lease so that the rent was due within 5 days of the 1st. I would send a reminder but I didn't really start to worry as long as it showed up before the 20th. If it took longer than that I would start to worry.
The difference here is that the percent of that 31% who really can't afford the rent -- not now, and not any time soon -- is probably closer to 100%.
> To clarify: Are all rents in the US monthly and due on the first of the month?
Yes, at least in all the markets I'm aware of. If someone moves in after in the middle of a month, you'll pro-rate the rent for that first fraction of a month so that everyone's back on the monthly cycle for the rest of the lease (typically 12 months, but in some markets there's a strong preference for a particular month and so the lease will be written to end after less than 12 months. Typically uni towns where you really want to lease to end on August 31st regardless of when it started).
To clarify the 15th: paychecks typically also always arrive bimonthy and on fixed days. So, people would fail to budget for the 1st but would be able to cover rent when their second bimonthly paycheck hit their account. As a land owner extracting rent from folks, I think it's more than fair that they get a ~10 day interest fee loan as needed. And even if I were an asshole, it wouldn't be in my economic interest to do anything about those sorts of 10 day delays.
But I sort of suspect a lot of the folks who couldn't afford rent on the 1st of April 2020 won't be able to afford rent on the 15th of April 2020 either...
Where I live, although the rent was technically due on the first, there's an automatic grace period of three days without late fees so the actual due date is the fourth.
Years of renting. I imagine it goes by state law but the grace period has always been three days. The 4th of the month is when the late fee would be tacked on.
The article pointed out that a significant portion of renters spend over half their income on their rent. If they are not working, they will not be able to ever make up the difference.
Seems about par for the average New Yorker. Folks in NYC seem especially gullible to spend more than half their paychecks on rent, something even folks in SF would hesitate. This is not for lack of options - my colleagues who make the same as me would rather pay $1000 more a month to stay in Manhattan instead of (a very comfortable still) place in Brooklyn. The commute is still very tolerable by any modern city standard, probably around 30 minutes (12 if you want to stay in downtown Brooklyn), but apparently thats too long?
Maybe instead we should ask ourselves why the rent is so high instead of blaming people who just want to minimize the time they take out of their short lives to spend commuting to a job they need to survive.
"31% Can't Pay the Rent" != "31% Are Not Paying Rent"
"Can't" indicates they are unable, whereas I suspect at least some are taking advantage of the current situation [1]. Any situation where it's possible to take advantage, you can almost guarantee that people will.
This is not the way forwards - not paying rent will have a large knock-on effect for landlords (which, despite some sentiment, isn't necessarily the 1%). The US government needs to provide money if they are going to demand that people stay at home and not work.
Ultimately they either bring the economy to a screaming halt (entirely) or trickle money to those unable to work in order to keep things going. In my opinion stalling the economy is a bad idea - it can cost a lot of time and money to get it going again.
The economy will be fine... the black plague had great economic outcomes as it always does when a whole bunch of people die. We should reopen the entire country tomorrow... no travel restrictions, open every border and see what happens.
The 'economy' isn't some wild and mystic beast that we must tame into subservience. It's the way we measure the flow of money, goods, and services. By definition it cannot 'serve' anyone.
Start by banning China (and any other country that doesn't allow US citizens to own land) from owning property in the US. Something tells me when you get rid of all the foreign profit lords, that property will be much more affordable in many areas.
It’s not that simple, unfortunately. US businesses and governments have heavily relied on Chinese capital for various economic initiatives, from transit to manufacturing.[0]
Barring one of our largest financial partners (and largest creditors) would certainly have a devastating effect on our economy.
The number of housing buys in the US and Canada that are by Chinese nationals is low single digits. Chinese people, AirBnB, and boomers seem to be the boogeymen of choice for people who want to blame high housing prices on anything other than the fact that new housing supply has been retarded while demand continues to increase at a low but steady rate.
If demand grows while supply stays constant, any 7th grader could tell you the consequences, but this basic fact seems to elude our elected officials.
You conveniently fail to mention that those properties are in already high demand areas with huge shortages in affordable housing. It makes a difference, like it or not. Pretending that because its not the entire issue, it isn't part of it at all, is ignorant at best.
No city I'm aware of enacted a severe lockdown by our standards during the Spanish Flu. I haven't seen any record of a ban on private gatherings, or a general shutdown of non-essential businesses (as opposed to a targeted ban of bars and restaurants).
And more people did die as a consequence. I’m not being smart, maybe that was the better option compared to what we’re doing now, all things considered. We may be at or close to exemplifying the idiom of “cutting our nose to spite our face”.
NYC didn’t shut down, but had an active surveillance program to monitor the situation and act. That’s one of the real tragedies of the complete failure of the federal government. Their ineptitude will kill thousands and impoverish millions.
This looks consistent with what I said. The city shut schools, libraries, everywhere that involved indoor public gatherings, but I'm not seeing anything here about bans on private gatherings or general orders to not leave your house.
Spanish Flu and Covid-19 seem comparably lethal. The flu killed 600,000 Americans out of a much lower population and incapacitated many millions more due to illness, plus those caring for them. All of that even with a basic lockdown would cause economic mayhem anyway. There is no magical choice which leads to an un impacted economy. Those cities that did the least suffered the worst anyway, because there is no option to ‘choose the economy’. That’s the real lesson of the Spanish Flu.
Your first two paragraphs are an interesting point. If I were laid off (or just hours reduced to zero for the duration), I wouldn't be paying bills that I didn't have to pay. I'll save my money for groceries; the rent can wait. Either I get a check from Uncle Sam, or the renter cuts me some slack, or I go live in my car, but I still have to eat.
> This is not the way forwards - not paying rent will have a large knock-on effect for landlords (which, despite some sentiment, isn't necessarily the 1%).
Maybe this is the time for them to pick up some useful skills. Maybe learning to code? I hear that's good.
I mean, extremely unsurprising. The vast majority of white caller workers I know are working from home. Of course, those who are in industries that are getting slaughtered (travel, non-emergency medicine, local business services, etc.) are having a tough time, but wouldn't expect those delinquencies to show up until May or later.
Where I live, there is a huge service economy (restaurants, bars, gyms, etc.) and most of those service workers were laid off extremely fast, with very little savings to get through extended unemployment.
I'm as skeptical of neo-Georgism as anyone, but this is a pretty standard fallacy. I seriously doubt that most people who rent their homes and business properties have viable alternatives to renting.
Define viable. You mean a dwelling place that protects you from the elements well enough that they won't even be in the top 50 ways you'll be likely to die statistically? Homeless shelters take care of that and there are other options in between. As for businesses - I know plenty of multi-million dollar businesses that have no need for a brick and mortar, but the business angle isn't even an argument - there's never a need for anyone to create a business, there's only incentive and the incentive is high enough that people freely choose to pay rent for businesses that require a physical location.
> You mean a dwelling place that protects you from the elements well enough that they won't even be in the top 50 ways you'll be likely to die statistically? Homeless shelters take care of that and there are other options in between.
Ah yes, the newly established internet debater. Fully equipped with "that's a logical fallacy (that you didn't bother naming or explaining because you don't know what you're talking about)" into the standard polite ad hominem (which I will explain because I'm capable of doing so). You see, directing insults at the person rather than attacking their argument is an actual fallacy. Here, I'll even link you to some materials to study up on for your next meaningless argument. With all due respect, of course. https://en.wikipedia.org/wiki/Ad_hominem
Cheers and I hope you contribute something of substance next time.
It wasn't an ad hominem. I meant what I said literally. I respect you as a human being, but you don't seem to know what you're talking about.
Do you want an explanation of why I believe you don't know what you're talking about? Okay, fine.
Define viable.
Let's go with "within financial means without incurring significant non-financial hardship".
You mean a dwelling place that protects you from the elements well enough that they won't even be in the top 50 ways you'll be likely to die statistically?
This is a ridiculous definition, and it almost doesn't make sense to respond to the rest of your post as a result.
You want to start name-dropping debating fallacies? This one is called a "strawman"..
Homeless shelters take care of that and there are other options in between.
This might be wrong even under your absurd definition of a viable alternative to renting. In 2017, assault homicides were between the 20th and 7th most common way to die in the USA [0].
Violent assaults (although not necessarily resulting in death) are so common in NYC homeless shelters that the city restricted its definition of a "critical incident" in order to keep these numbers low [1].
There were 62,679 homeless people in shelters in January 2020 [2]. In 2017 and 2018, there were 675 critical incidents in homeless shelters; let's assume that's 337 a year, and let's assume that only 1/4 are violent crimes (the rest being drug and weapon possessions), meaning about 84 violent crimes in shelters a year. So that's 84 / 62,679 = around 0.13% violent crime rate in homeless shelters. The NYC population in January 2019 was around 8.3 million. There were 3,865 violent crimes in January 2019 [3]. So that was 3,865 / 8,300,000 = around 0.05% violent crime rate. So violent crimes, according to my back-of-the-envelope estimates, were 2.6 times more likely in homeless shelters than in the general population.
And if we expand beyond just "death" as the only negative outcome, it's a general fact that homeless shelters can be just as dangerous as living in the street, if not moreso [4] [5] [6].
But let's expand into my definition of viable. If you know anything about a homeless shelter or homelessness, you know that being homeless in general, and living in a shelter specifically, does incur several forms of significant non-financial hardships. So, no, homeless shelters are not a viable alternative to renting an apartment. And the only way you can argue otherwise is if you don't know what you're talking about.
As for businesses - I know plenty of multi-million dollar businesses that have no need for a brick and mortar, but the business angle isn't even an argument - there's never a need for anyone to create a business, there's only incentive and the incentive is high enough that people freely choose to pay rent for businesses that require a physical location.
I'm not talking about multi-million dollar businesses. So let me clarify.
Find me a deli, local drugstore, or local clothing store that doesn't need a storefront. The alternative is some kind of currently-nonexistent delivery-only society. Likewise, find me a wholesaler that doesn't need a warehouse. I don't even know how this would work. Maybe you can explain it to me; otherwise I have to conclude that you don't know what you're talking about.
Please don't post unsubstantive comments and/or attacks to HN, regardless of how little someone knows or you feel they know. It only makes the thread even worse.
If you know more than others, share some of what you know so we can learn.
In cities where prices have risen because Airbnb has reduced long-term rentals, it feels more like rent-seeking behavior creating problems than actually providing value because so few can afford to buy.
Many landlords still have to pay for their ownership of buildings and properties and maintenance, etc. They need to see relief first if tenants are to also see relief.
Not saying you're wrong about this, and what I'm really advocating for is relief all the way from the top down. There are plenty of people who would be fine not making their MAXIMUM PROFITS for a little while while the rest of us proles can hopefully not die
> They need to see relief first if tenants are to also see relief.
You mean concurrently, surely? I don't see an issue with a mortgage relief, but the rent after paying for their portion of mortgage, tax, must go somewhere. Where does it go if not saving for value upkeep?
>Almost by definition "rent" is simply extracting value from the productive economy through ownership.
What? Do you define any profit margin as such? Housing rent is not the same thing as the term 'economic rent'. Housing is as much a liability as an asset. There is risk with owning it. Rent payments are compensation for said risk. All profit is just compensation for risk.
Theoretically yes, although the demand curve also comes into play. In a parallel universe where the risks of a pandemic/lockdown was known and taken seriously, you would definitely expect rents to be higher.
Maybe the landlords should've been more responsible and saved for a rainy day. Isn't that what the less-well-off are always told to do? Poor planning on their part shouldn't be the fault of renters.
I don't mean to be pithy, but rents are established by supply and demand, not by an analysis of who's at fault or a decision about whether some particular landlord needs more money.
Would you please stop using HN for political battle? You've been doing it a lot, and it's not what this site is for.
Also, while I have you, would you please stop creating accounts for every few comments you post? We ban accounts that do that as well. This is in the site guidelines: https://news.ycombinator.com/newsguidelines.html.
You needn't use your real name, of course, but for HN to be a community, users need some identity for others to relate to. Otherwise we may as well have no usernames and no community, and that would be a different kind of forum. https://hn.algolia.com/?sort=byDate&dateRange=all&type=comme...
There's discourse between differing opinions and then there's spamming and rule breaking. One is encouraged. The other is something we could all do with less of.
It's possible to express one's opinions thoughtfully and substantively, and as part of a wider pattern of using the site (i.e. not being on HN primarily for political battle). In other words, it's possible to follow the site guidelines. Plenty of users do that, on all sides of these issues. They don't run into problems with moderation.
This would be poor planning on the renter first. The obligation is on the renter to pay for the service (housing) they are using. The banks expect the mortgage holder to pay for borrowing money. If the renter can't pay they shouldn't get to stay. If the borrower can't pay they will lose the property. If the owner can't pay the taxes, they also lose the property.
Basically yes, but there are more things at play. For instance, if evictions are not being processed right now (or if there are very strong squatting laws in normal times) this distorts the price discovery of the market. Actual demand will have dropped, but the resulting free supply cannot also come online because people will be living rent free. You can't rent out a unit with someone living in it.
Please note that this isn't to say tenant laws are a mistake, but they do raise the price of rent for everyone.
Not really, you have to take into account a renter’s ability to pay. There’s an upper limit to what people can afford to spend on housing. Risk dictates a low percentage of the overall factor in pricing.
I think you're confusing the risk of buying an asset with the day to day reality of operating in.
In the current environment, asset value decreases and certain costs (prices charged) have decreased as the supply chain adapts to try to maintain break even volume.
Price (in essentially all cases, particularly for commodity goods like housing) is based on supply and demand, not on the individual financial situation of the person selling the product.
If demand for housing climbs noticeably, rates will follow, and vice versa (if supply of housing climbs, rates will plummet)
The reason profit exists is that risk must be assumed to earn it.
It can't go up. And, as a result, many landlords will lose their businesses. This is why it's a "risk." The risk of being a landlord is playing out right now and, as a result, many could stand to lose their business.
Even without debt to service there is are still property taxes to pay and the opportunity cost compared to investing that capital in something else like 30- year treasury bonds that pay ~1%
Have you talked to many landlords that own a dozen units? It's my understanding that owning so many units is hard, requiring you to either work full time or hire a property management company, and you incur a serious risk of massive costs from misbehaving tenants.
You're right that it's not an uncharacteristically complicated business, but all businesses are hard! The idea that business owners sit there sipping whiskey, living an unburdened life like an aristocrat, is almost always false.
It can still be an unreasonably comfortable life provided by, proportionally, little effort and, disproportionately, sizeably negative consequences for much of society.
I personally know way too many permutations of 'landlords' to feel comfortable judging them all in a similar way, but I'm still inclined to judge most of them negatively and harshly. Because in most cases, it's just so obvious how their owning and 'rentier' status is not a consequence of 'fairness' or even 'fair competition'.
My landlord got what he had because of his age. Most of my rentier friends have what they have because they inherited it. I'm okay with my landlord because he's disabled in some way and scraping by, but it's still weird that I pay for his entire mortgage + more just because he bought a house at the right time. I'd prefer a situation where I can choose to support him rather than feel, weirdly, as part of the precariat that he can kick out whenever he can benefit more from others paying his mortgage and more of his monthly expenses.
The only reason why he can't and won't do this is that legally there's a limit to how much rent he can ask me.
Anyways, point being, there's something fundamentally iffy about the fact that every single 'rentier' I know acquired this status through nepotism or timing, and not via whatever meritocratic measure one could conjure up.
What planet do you live on? San Francisco? Maybe you can get lucky and accidentally buy a house in a place that becomes the next silicon valley like your landlord.
In the real world, there are thousands of landlords that are just regular people and regular businesses that are not royalty. You can live anywhere you like.
Profit is not compensation for risk. Risk is a limiting factor in chasing after profits, sure, but you can take unprofitable risks, and if you have a particularly privileged position or information, you can make a profit with little to no risk. Hugh Grosvenor, 7th Duke of Westminster doesn't exactly take a lot of risk for his rents.
My point isn't that "all profit that ever occurs in this universe happens only because an equivalent level of risk was assumed". This isn't thermodynamics.
My point is that profit as a concept exists because without it, there would be no reason to assume risk in the first place. Therefore, profit is compensation for risk.
Under an ideal, efficient free market, profit exists to be squeezed out of existence. Profit incentivizes more supply, so that existing producers have their profit margin squeezed to zero.
The mentality that you seem to have is more like a moral justification, or excuse, for profit. "X took risks, and got rewards, and it is therefore good and right", to paraphrase. But there's no direct causation between taking a risk and getting a reward; in fact many rewards come from being well connected, having the right background, skin colour, social bearing and milieu, and many other structural advantages, and taking risks without these advantages leads to big fat losses.
Reducing the justification for profit to risk is a massive apology for the inequality in society which stems from far more than mere intolerance for risk. I don't think there's much difference in risk tolerance of young men right across the income distribution spectrum; you see it in boy racers, in the jousting on a Saturday night, in thrill seekers, in criminals, in all sorts. But only a few have the privileged position to be able to put significant capital at risk for reward, rather than their own bodies. Saying that it's justified that people profit from this, because of "risk", is just wrong, it's blinkered in a way which benefits the luckiest in our society.
The idea about "all profit is due to risk" is a little one-dimensional. People/groups of people can profit for many reasons. For example, owner of a company can profit by selling or even bankrupting his company. There is often little to no risk connected to that. On the other hand, if somebody else takes on some substantial risk and invests in a company, he may not profit at all - if the owner makes it bankrupt.
I’m not sure your last part is completely true. All parts of land development and land owning must be securely insured. there are hoops to jump through.
I believe the concept of risk as a justification for profit is a moral justification, yes; a faulty, unbalanced one, one that, if widely believed, enables the perpetuation of structural inequalities. A lot of people are incentivized to encourage other people to believe it.
You have it backwards. You make it sound like we want people to take risks, and therefore we make it profitable.
Risk is a limiting factor on chasing profit. The risk isn't the other side of a coin with profit. There are lots of different limiting factors on chasing profit; more supply may simply be unavailable, there may be barriers to entry, natural monopolies, regulation, etc. Risk (capital and human time) is one among many.
I agree rents will probably come down, as they do in any economic down turn, but not because of some exploitative relationship between landlord and renter as you imply.
It's all supply and demand. Lower economic activity translates to lower demand. I'd also say that to imply that a landlord doesn't provide a service is total nonsense. There are plenty of reasons why people and companies might prefer to rent instead of buy the least of which is that a tenant doesn't have a long term financial commitment or principal / property value risk. There are many companies that even take their wholly owned property and sell it so they can lease it back in a triple net leasing arrangement because it benefits them to not have capital locked up in real estate value.
The best thing to do is just put a moratorium on rents and debt for a couple of months.
Semi related I read a detailed description what happened during the hyper inflation in Germany after WWI. A key thing is the inflation was not uniform. Food prices increased the most. And rents the least. At the end rents were effectively zero.
Well, yes. You always need food, but you don't need your own apartment when you can start couchsurfing. Real estate does degenerate fairly quickly when it's uninhabited. You could see a similar phenomenon after German reunification. There was much real estate with unclear title in the East, and students and squatters were actually tolerated - the owners and the city knew that with someone living in the premises the building would not deteriorate further.
A lot of people don't really get the reality here. It's like the old saying if you owe the bank $100,000 and can't pay you have a problem. If you owe the bank $100,000,000 and can't pay the bank has a problem.
For a landlord a tenant unable to pay the rent isn't a problem. If 30-50% can't it's is his problem.
I understand you want to punish working class people for losing their jobs and being unable to pay rent. Fundamentally there will be chaos if it comes to that. First they don't have the money. Second they won't leave. Third the cops and the courts will do NOTHING about it.
If rent collection at the very top, above the landlord, above the management company, if they have to take the hit from this the most, there will be many less recessions.
If the bank, credit cards and mortgage owners have payments suspended in recessions, there would be many less recessions.
If the top of the chain, that is the elusive 'trickle down' source, felt the pain for recessions the most, there would be many less recessions.
If 'too big to fail' banks and companies were immediately broken up on commencement of recessions, there would be many less recessions.
Markets are efficient, they will hit targets, market regulations can be used to set targets that will keep the whole thing on the rails, remove the rails and the usual happens, more inequality and stagnation.
We have to put the incentives in the right place. If the lower/middle always feel the pain with no consequence for the top or 'too big to fail' companies, then it will be a regular, repeating occurrence. That will create markets where companies get big enough to be 'too big to fail' and get bailouts, or essentially grow to 'bailout big'.
No matter what you believe about economies, or markets, money only goes where other money is, and you can't keep taking from the spenders in a consumer economy. The constant rent-seeking, predatory, value extraction, wealth destroying events are going to break the lower/middle and public markets. Individuals, families and small business especially need support during these times, the longs that all value extractors extract from and the engine of America as well as the research and development labs of larger companies.
Markets are garden, the in trouble lower/middle should be brought up and focused on, the massively growing top should be scaled back or harvested.
Money trickles up and down and all around, but money only trickles where other money is found.
America is mostly small businesses.
SBA/Chamber of Commerce has 30.2 million for companies under 500 people.
Lots are sole proprietors or very small < 5 people. 22 million of the small businesses in the United States are individually operated, meaning that they have no other employees other than the owner.
99.9% of businesses in the United States are small businesses, owing to the rather large threshold of 500 employees, or fewer.
Small business is the engine of America.
Small businesses comprise what share of the U.S. economy?
Small businesses make up [1][2]:
- 99.7 percent of U.S. employer firms,
- 64 percent of net new private-sector jobs,
- 49.2 percent of private-sector employment,
- 42.9 percent of private-sector payroll,
- 46 percent of private-sector output,
- 43 percent of high-tech employment,
- 98 percent of firms exporting goods,
- 33 percent of exporting value.
It is time to help the lower/middle and sole-proprietors and small business or America as we know it is much much different after this.
About 8 trillion in 'stimulus', at a cost of 20k to every citizen, for that we got $1200 we haven't got yet and small businesses finding out how small of fish they a really are.
This market is broken for lower/middle and people or small business. It is gangbusters for wealth and value extraction ops.
The stimulus for individuals, families and small business is vaporware, time for some vaporwave as we fade away into the ether.
Good luck wealth and big business with no one to skim from and no small business to use as research and development or suppliers.
[2] Source: U.S. Census Bureau, SUSB, CPS; International Trade Administration; Bureau of Labor Statistics, BED; Advocacy-funded research, Small Business GDP: Update 2002- 2010, www.sba.gov/advocacy/7540/42371.
>If 'too big to fail' banks and companies were immediately broken up on commencement of recessions, there would be many less recessions.
I'm curious what the justification for this is. It seems like the kneejerk reaction toward any big/powerful entity (eg. "break up the tech companies!").
> I'm curious what the justification for this is. It seems like the kneejerk reaction toward any big/powerful entity (eg. "break up the tech companies!").
Well we do need more Teddy Roosevelts that threaten anti-trust. FDR was also from wealth and took on wealth in a way that made the most secure and trusted investable market for investors and workers ever and has lasted almost a century [1].
Microsoft, even the threat of one in the 90s led to Google, Apple, Amazon, Mozilla, etc to rise. Microsoft is also better for it.
However I don't think any company should be broken up until they start to abuse a monopoly or become a single point of failure for economic disasters or national security issue.
For instance right now banks and ISPs need to be broken up.
Clearly 'too big to fail' banks are a national security issue and lend to massive value extraction events and recessions as they gain.
Also, the local monopolies of ISPs have led to rent-seeking and less innovation.
Competition is a key of capitalism and fair markets. If you do not have competition you have stagnation and monopolies make progression and innovation lazy.
Here's a great quick point by Steve Jobs about product stagnation and the managers/business side [2] and how they can run amok if not controlled to allow value creation to continue, and how monopolies or problems that arise when only the business/managers are in charge.
Essentially when monopolies/oligopolies happen they stagnate and the product/engineer/creates lose power to the business/management side, value creation is killed for value extraction and stagnation happens always, it is basically a law of the universe at this point.
The alternative is to keep sticking it to the bottom, the lower/middle and the worker in consumer economies, the service in a service economy, the small business R&D absorbing failures and proving successes for large businesses, the long investors that are 'suckers' to investment banks, and the overall quality of life we all enjoy. Or you can take some from the top and incentivize them helping to make sure recessions are rare.
>Clearly 'too big to fail' banks are a national security issue and lend to massive value extraction events and recessions as they gain.
I'm not too convinced whether a breakup would accomplish that. Smaller banks are less capitalized, and therefore be less able to absorb shocks than big banks. You can see that almost all the banks on the failed banks list[1] are small local banks (although this might also be because bank sizes follow a power distribution, it would be interesting if there was a bank failure rate that accounted for market cap). Also, what's preventing all the banks from engaging in the same risky behavior and all requiring a bail-out? If the government won't let AIG fail, would it let AIG01,AIG02,...,AIG99 fail?
>Also, the local monopolies of ISPs have led to rent-seeking and less innovation.
The problem with ISPs aren't that they're big, it's that they hold monopolies over a geographic area limiting consumer choice. Breaking them up will do nothing, as each company post-breakup still hold a monopoly and therefore can continue to abuse consumers.
I don't get why it's not ok to steal food from a grocery store but it is ok to not pay rent. Both are basic necessities and in both cases you hurt someone else by not paying for service (food/shelter).
There is florist in the article that is introduced as someone who could pay rent from her savings. However, she has decided she would "rather conserve her money than pay bills now."
And even worse, there is a guy in there who still has a job, has the money, and isn't paying rent because of "solidarity" with the florist! What sort of weirdness is that? I feel sympathy for those in precarious finances who really can't pay, but then articles like this come with examples of people who can pay but don't because... theoretical "social injustice"? That surely doesn't make me sympathetic to any cause...
Solidarity is a principle of social justice [0]. It's very simple, and related to tragedies of the commons. When there is some common resource, solidarity is the idea that we should all adopt common attitudes towards that resource.
I can afford to pay my rent. I have no problems doing so. However, if I were to learn that my rental management group were facing a large rent rebellion, that I believed that the rebels had legitimate complaints, and that the rental management group could survive the rebellion by evicting all of the rebels but only if I paid my rent, then I would consider not paying my rent.
Therefore, I can imagine a situation where I would not pay my rent despite being able to afford it, and be expressing solidarity by doing so.
I don't really care whether or not you're sympathetic right now to this particular cause, but you should consider the principles behind the actions that people are taking, and spend some time putting yourself in everybody else's shoes.
Because if every landlord took that approach now they would be sitting around in 3 months time saying they need loan abolishment and/or bailouts because they suddenly have next to no income.
Most people see a vast moral difference between failing to pay a debt you owe and taking something that doesn't belong to you in the first place. If you broke into an unoccupied apartment and squatted there, that'd be at least as stealing food from a grocery store.
But living in a place without paying is taking something that doesn't belong to you. That space could be otherwise used if you hadn't temporarily stolen it.
If an apartment is unoccupied, chances are it's used for speculation and/or short term rentals. If that's the case, I'd rank squatting better than stealing and failing to pay your rent. I'm sure others share this position, given posts like https://news.ycombinator.com/item?id=22852570.
Or it's being renovated, or someone's due to move in next month, or all kinds of legitimate reasons. I'm definitely on board with the idea that people should be structurally discouraged from owning housing they don't plan to put to use, but enforcing that by allowing people to steal non-compliant housing seems pretty bad.
People without incomes right now can probably afford food, even if they can't afford rent. The fact is that a significant fraction of society is in an impossible situation right now, through no fault of their own. And probably very few rentiers are in that group.
Very few rentiers is likely true. However, very few landlords are rentiers. The average investor owns 2 rental units [1]. And the vast majority of property investors have full time jobs and mortgages on their rental properties (I can't link directly to a source, but Buildium regularly conducts surveys to understand property investors).
To paint landlords as rentiers who can easily afford to go without rent or with greatly reduced rent is wrong. It mischaracterizes the problem in a way that will lead to bad solutions.
If there is to be rent reductions or forgiveness, there must also be reductions, aid or forgiveness on mortgages, property taxes and utilities. Somebody needs to pay for these things. Yes, profits will be reduced, but losses cannot be sustained for as long as social distancing measures are expected to last.
Most of the people who can't afford rent are probably living in apartment complexes, not houses, which probably means they're renting from a real-estate conglomerate of some kind and not a private landlord.
That said I agree there are many edge cases in this crisis and that, ideally, assistance should be given fairly liberally to all individuals who find themselves in tough situations.
Those are both potentially morally acceptable. If you are on the verge of starving and have no money and no other source of food, it's ok to steal something from a grocery store. If you are on the verge of homelessness and have no money and no other source of shelter, it's ok to not pay your rent.
I'm sure there's a moral framework where it's never acceptable to hurt someone else when you could sacrifice yourself instead, but I don't think that's a particularly common school of thought. More often people will weigh two potential harms to make a decision, like "I can't pay my rent, but property taxes and foreclosures have been suspended during the pandemic, so my landlord will likely suffer less harm than I would if I became homeless."
Finally, "can't pay the rent" doesn't necessarily mean silently fail to mail a check. It might mean talking to the landlord about a payment plan, or frankly telling them you have no money and can't even afford food for the week. Landlords are humans, just like grocers who might give food to a starving person
If you're starving, stealing from the food delivery network is about the worst thing you could do about it. Robbing random strangers in the street would do less damage than victimizing the specific people you depend on.
Apparently, there are a couple of mega wealthy properties ($2M-$20M) near me made over 20 years ago that have never had anyone live in them ever, as supposedly banks financed them for foreign businessmen but were never repaid the mortgages when said businessmen fled the country along with their debt obligations. At least this is the story I was given, after buying a car from a caretaker of two of such properties - one of which I was very familiar with, as it had a prominent observatory built in its roof...
But that story checks out, as when the market crashed ~2008, the FED bailed underwater mortgage assets (such as these supposedly) off banks hands to avoid bank runs via QE. You can see that mortgage-backed securities still comprise a significant portion of the FED's balance sheet:
Corporations are really leading the way here. If they can't preserve enough cash to last a month and plan to strike as their opening negotiating tactic then people should too. Why not?
Tenant fails to pay rent because of economic hardship. Building owner get in a cash squeeze and can't pay vendors like plumber, snow clearing, landscaping, and eventually can't make loan payments.
Mortgage holders see a rise in troubled loans, eventually writing a large number of them off for large losses.
REITs take losses on investments they must write off.
Your own retirement plan or personal investment portfolio takes a hit because some portion of it is REITs.
Everything is interconnected. I see a lot of simplistic "landlords must suck it up" comments in this thread. Really, who is so naive as to think that the typical commercial property is not leveraged?
> I see a lot of simplistic "landlords must suck it up" comments in this thread.
Your answer is for the rent payer, with no economy, to "suck it up".
If the top felt the pain of recessions more than the bottom, you can bet there would be less recessions where massive wealth value extraction happens. You have to align the market incentives right. Make the top feel the pain, at the bank level even, and you are gonna have better ratings agencies, better leverage ratios, and less pump and dump bubbles setup. Right now if the top always gains, even in pain, there will be more and more pain as they look for gains guaranteed.
If we truly are in a trickle down system, shouldn't emergency hits to the recession start at the top, the trickle source?
Money trickles up and down and all around, but money only trickles where other money is found.
> Your answer is for the rent payer, with no economy, to "suck it up".
You miss-read me. First of all, I did not suggest any answer. I suggested that people put more thoughtfulness into their analysis.
What I am saying is that there really is no one person to "suck it up". The furloughed school cafeteria worker is going to take a double hit because the public employee retirement system probably holds REITs.
Scapegoating landlords is the tactic of leftest South American dictators. Landlords are middlemen, earning a return on providing housing liquidity. They take on short-term risk in the form of their tenants potential inability to pay, and long-term risk in the form of long-term loans collateralized by their properties. The system doesn't work unless someone is willing to take on that risk profile. Stop scapegoating landlords.
> long-term risk in the form of long-term loans collateralized by their properties. The system doesn't work unless someone is willing to take on that risk profile. Stop scapegoating landlords.
Implicit in the criticism of landlords is that the majority of this long term loan is for an arbitrary asset valuation created by artificially low interest loans. Most of the cost of real estate is not in the building or upkeep itself, which is why everyone worries (or hopes) that real estate values will drop when the debt treadmill slows. Like NYC taxi medallions, it's an overfinancialized setup that taxes real production for the sake of the financial industry.
So yes, looking at the individual landlords they are indeed working to fill a market niche. But looking at the emergent system taken as a whole, it's preposterous.
If rent collection at the very top, above the landlord, above the management company, if they have to take the hit from this the most, there will be many less recessions.
If the bank, credit cards and mortgage owners have payments suspended in recessions, there would be many less recessions.
If the top of the chain, that is the elusive 'trickle down' source, felt the pain for recessions the most, there would be many less recessions.
If 'too big to fail' banks and companies were immediately broken up on commencement of recessions, there would be many less recessions.
If you let the bottom just suck it up, extract all value and wealth from them while they take the hit and are the value creators and workers, then there will be many more recessions and incentives to go bigger every single time.
Stop incentivizing bigger and bigger recessions and companies that get 'bailout big' from 'too big to fail'.
It is only going to get worse if the top doesn't feel the pain, instead they gain with the current setup. This isn't a normal market, you can't put it on the bottom again. We shouldn't only care about the rent-seekers, they add little value and the assets still exist if they change. We should be focused on the value creators, workers and consumers, not just the value extractors and rent-seekers.
Incentives and regulations drive markets to targets, set the targets better, and take the target off the backs of the lower/middle class.
Markets are garden, they mostly just grow, but it takes some maintenance. The in trouble lower/middle should be brought up and focused on, the massively growing top should be scaled back or harvested regularly.
If you run any projects or have any game designs for markets, you know this is something that requires maintenance and balance, not inequality. Life is a free to play game, whales should provide most of the funds for a good game design for all.
130 tenants? People at that level, I would have considered them to be corporations collecting rent, not individual landlords. Well, he probably collects everything through a corporation too, I imagine. My point is that I've never put a face to a corporate landlord before. It's always been a faceless corporation, even for corporations where the founding face is famous. Reading this was weird for me. He behaves like an individual landlord too, personally answers all the emails, doesn't have a secretary? Maybe 130 tenants is too low a number to justify hiring help. Blows my mind.
146 comments
[ 2.7 ms ] story [ 209 ms ] threadIf the headline had said 18%, the situation would have sounded bad to me, but apparently that's normal?
The difference here is that the percent of that 31% who really can't afford the rent -- not now, and not any time soon -- is probably closer to 100%.
In NZ rent is weekly, on no particular day (can be different for each tenant).
Yes, at least in all the markets I'm aware of. If someone moves in after in the middle of a month, you'll pro-rate the rent for that first fraction of a month so that everyone's back on the monthly cycle for the rest of the lease (typically 12 months, but in some markets there's a strong preference for a particular month and so the lease will be written to end after less than 12 months. Typically uni towns where you really want to lease to end on August 31st regardless of when it started).
To clarify the 15th: paychecks typically also always arrive bimonthy and on fixed days. So, people would fail to budget for the 1st but would be able to cover rent when their second bimonthly paycheck hit their account. As a land owner extracting rent from folks, I think it's more than fair that they get a ~10 day interest fee loan as needed. And even if I were an asshole, it wouldn't be in my economic interest to do anything about those sorts of 10 day delays.
But I sort of suspect a lot of the folks who couldn't afford rent on the 1st of April 2020 won't be able to afford rent on the 15th of April 2020 either...
"Can't" indicates they are unable, whereas I suspect at least some are taking advantage of the current situation [1]. Any situation where it's possible to take advantage, you can almost guarantee that people will.
This is not the way forwards - not paying rent will have a large knock-on effect for landlords (which, despite some sentiment, isn't necessarily the 1%). The US government needs to provide money if they are going to demand that people stay at home and not work.
Ultimately they either bring the economy to a screaming halt (entirely) or trickle money to those unable to work in order to keep things going. In my opinion stalling the economy is a bad idea - it can cost a lot of time and money to get it going again.
[1] https://news.yahoo.com/rent-strike-idea-gaining-steam-170345...
Governments have a responsibility to all their citizens, not just stockholders.
Barring one of our largest financial partners (and largest creditors) would certainly have a devastating effect on our economy.
0: https://www.americanmanufacturing.org/blog/entry/congress-ex....
"You must sell."
"Okay, this 3br house is $10MM. It's not selling."
Eminent domain?
Are we going to do that for the huge swathes of vacant homes we already have, too?
That is sure to go down well.
If demand grows while supply stays constant, any 7th grader could tell you the consequences, but this basic fact seems to elude our elected officials.
https://www.weforum.org/agenda/2020/04/pandemic-economy-less...
Here’s my city. https://www.influenzaarchive.org/cities/city-albany.html#
NYC didn’t shut down, but had an active surveillance program to monitor the situation and act. That’s one of the real tragedies of the complete failure of the federal government. Their ineptitude will kill thousands and impoverish millions.
Maybe this is the time for them to pick up some useful skills. Maybe learning to code? I hear that's good.
The difference in tenants is real. Equity residential tenants are higher end rentals in big to midsized cities with strong economies.
http://investors.equityapartments.com/file/Index?KeyFile=403...
Where I live, there is a huge service economy (restaurants, bars, gyms, etc.) and most of those service workers were laid off extremely fast, with very little savings to get through extended unemployment.
Corporate America will be culling the herd in a few weeks. Financial services are already purging.
I'm as skeptical of neo-Georgism as anyone, but this is a pretty standard fallacy. I seriously doubt that most people who rent their homes and business properties have viable alternatives to renting.
Yikes.
Cheers and I hope you contribute something of substance next time.
Do you want an explanation of why I believe you don't know what you're talking about? Okay, fine.
Define viable.
Let's go with "within financial means without incurring significant non-financial hardship".
You mean a dwelling place that protects you from the elements well enough that they won't even be in the top 50 ways you'll be likely to die statistically?
This is a ridiculous definition, and it almost doesn't make sense to respond to the rest of your post as a result.
You want to start name-dropping debating fallacies? This one is called a "strawman"..
Homeless shelters take care of that and there are other options in between.
This might be wrong even under your absurd definition of a viable alternative to renting. In 2017, assault homicides were between the 20th and 7th most common way to die in the USA [0].
Violent assaults (although not necessarily resulting in death) are so common in NYC homeless shelters that the city restricted its definition of a "critical incident" in order to keep these numbers low [1].
There were 62,679 homeless people in shelters in January 2020 [2]. In 2017 and 2018, there were 675 critical incidents in homeless shelters; let's assume that's 337 a year, and let's assume that only 1/4 are violent crimes (the rest being drug and weapon possessions), meaning about 84 violent crimes in shelters a year. So that's 84 / 62,679 = around 0.13% violent crime rate in homeless shelters. The NYC population in January 2019 was around 8.3 million. There were 3,865 violent crimes in January 2019 [3]. So that was 3,865 / 8,300,000 = around 0.05% violent crime rate. So violent crimes, according to my back-of-the-envelope estimates, were 2.6 times more likely in homeless shelters than in the general population.
And if we expand beyond just "death" as the only negative outcome, it's a general fact that homeless shelters can be just as dangerous as living in the street, if not moreso [4] [5] [6].
But let's expand into my definition of viable. If you know anything about a homeless shelter or homelessness, you know that being homeless in general, and living in a shelter specifically, does incur several forms of significant non-financial hardships. So, no, homeless shelters are not a viable alternative to renting an apartment. And the only way you can argue otherwise is if you don't know what you're talking about.
As for businesses - I know plenty of multi-million dollar businesses that have no need for a brick and mortar, but the business angle isn't even an argument - there's never a need for anyone to create a business, there's only incentive and the incentive is high enough that people freely choose to pay rent for businesses that require a physical location.
I'm not talking about multi-million dollar businesses. So let me clarify.
Find me a deli, local drugstore, or local clothing store that doesn't need a storefront. The alternative is some kind of currently-nonexistent delivery-only society. Likewise, find me a wholesaler that doesn't need a warehouse. I don't even know how this would work. Maybe you can explain it to me; otherwise I have to conclude that you don't know what you're talking about.
0: https://www.cdc.gov/nchs/data/nvsr/nvsr68/nvsr68_06-508.pdf 1: https://www.nydailynews.com/new-york/violence-redefined-nyc-... 2: dang ↗ Please don't respond to a bad comment by breaking the site guidelines yourself. That just makes the thread even worse.
https://news.ycombinator.com/newsguidelines.html
If you know more than others, share some of what you know so we can learn.
https://hn.algolia.com/?dateRange=all&page=0&prefix=true&que...
Alternatively, it's always an option not to post. Whatever you choose, please follow the site rules: https://news.ycombinator.com/newsguidelines.html
*as long as it's not real estate?
You mean concurrently, surely? I don't see an issue with a mortgage relief, but the rent after paying for their portion of mortgage, tax, must go somewhere. Where does it go if not saving for value upkeep?
Almost by definition "rent" is simply extracting value from the productive economy through ownership.
If the productive economy takes a dive or disappears, the amount you can extract must do likewise.
What? Do you define any profit margin as such? Housing rent is not the same thing as the term 'economic rent'. Housing is as much a liability as an asset. There is risk with owning it. Rent payments are compensation for said risk. All profit is just compensation for risk.
Also, while I have you, would you please stop creating accounts for every few comments you post? We ban accounts that do that as well. This is in the site guidelines: https://news.ycombinator.com/newsguidelines.html.
You needn't use your real name, of course, but for HN to be a community, users need some identity for others to relate to. Otherwise we may as well have no usernames and no community, and that would be a different kind of forum. https://hn.algolia.com/?sort=byDate&dateRange=all&type=comme...
It's possible to express one's opinions thoughtfully and substantively, and as part of a wider pattern of using the site (i.e. not being on HN primarily for political battle). In other words, it's possible to follow the site guidelines. Plenty of users do that, on all sides of these issues. They don't run into problems with moderation.
Please note that this isn't to say tenant laws are a mistake, but they do raise the price of rent for everyone.
In the current environment, asset value decreases and certain costs (prices charged) have decreased as the supply chain adapts to try to maintain break even volume.
Maybe it's different across the board.
If demand for housing climbs noticeably, rates will follow, and vice versa (if supply of housing climbs, rates will plummet)
The reason profit exists is that risk must be assumed to earn it.
It’s a pretty basic business. Watch the money going out, manage the tenants coming in.
I personally know way too many permutations of 'landlords' to feel comfortable judging them all in a similar way, but I'm still inclined to judge most of them negatively and harshly. Because in most cases, it's just so obvious how their owning and 'rentier' status is not a consequence of 'fairness' or even 'fair competition'.
My landlord got what he had because of his age. Most of my rentier friends have what they have because they inherited it. I'm okay with my landlord because he's disabled in some way and scraping by, but it's still weird that I pay for his entire mortgage + more just because he bought a house at the right time. I'd prefer a situation where I can choose to support him rather than feel, weirdly, as part of the precariat that he can kick out whenever he can benefit more from others paying his mortgage and more of his monthly expenses.
The only reason why he can't and won't do this is that legally there's a limit to how much rent he can ask me.
Anyways, point being, there's something fundamentally iffy about the fact that every single 'rentier' I know acquired this status through nepotism or timing, and not via whatever meritocratic measure one could conjure up.
In the real world, there are thousands of landlords that are just regular people and regular businesses that are not royalty. You can live anywhere you like.
We need to unlearn our current relationship with housing and change our view entirely.
My point is that profit as a concept exists because without it, there would be no reason to assume risk in the first place. Therefore, profit is compensation for risk.
The mentality that you seem to have is more like a moral justification, or excuse, for profit. "X took risks, and got rewards, and it is therefore good and right", to paraphrase. But there's no direct causation between taking a risk and getting a reward; in fact many rewards come from being well connected, having the right background, skin colour, social bearing and milieu, and many other structural advantages, and taking risks without these advantages leads to big fat losses.
Reducing the justification for profit to risk is a massive apology for the inequality in society which stems from far more than mere intolerance for risk. I don't think there's much difference in risk tolerance of young men right across the income distribution spectrum; you see it in boy racers, in the jousting on a Saturday night, in thrill seekers, in criminals, in all sorts. But only a few have the privileged position to be able to put significant capital at risk for reward, rather than their own bodies. Saying that it's justified that people profit from this, because of "risk", is just wrong, it's blinkered in a way which benefits the luckiest in our society.
That's not really how the entrepreneur thing is framed.
But isn't it a moral position then ?
Yes it is. The primary reason anyone takes on risk is because there is profit in it.
Risk is a limiting factor on chasing profit. The risk isn't the other side of a coin with profit. There are lots of different limiting factors on chasing profit; more supply may simply be unavailable, there may be barriers to entry, natural monopolies, regulation, etc. Risk (capital and human time) is one among many.
It's all supply and demand. Lower economic activity translates to lower demand. I'd also say that to imply that a landlord doesn't provide a service is total nonsense. There are plenty of reasons why people and companies might prefer to rent instead of buy the least of which is that a tenant doesn't have a long term financial commitment or principal / property value risk. There are many companies that even take their wholly owned property and sell it so they can lease it back in a triple net leasing arrangement because it benefits them to not have capital locked up in real estate value.
Semi related I read a detailed description what happened during the hyper inflation in Germany after WWI. A key thing is the inflation was not uniform. Food prices increased the most. And rents the least. At the end rents were effectively zero.
Well, yes. You always need food, but you don't need your own apartment when you can start couchsurfing. Real estate does degenerate fairly quickly when it's uninhabited. You could see a similar phenomenon after German reunification. There was much real estate with unclear title in the East, and students and squatters were actually tolerated - the owners and the city knew that with someone living in the premises the building would not deteriorate further.
For a landlord a tenant unable to pay the rent isn't a problem. If 30-50% can't it's is his problem.
I understand you want to punish working class people for losing their jobs and being unable to pay rent. Fundamentally there will be chaos if it comes to that. First they don't have the money. Second they won't leave. Third the cops and the courts will do NOTHING about it.
If the bank, credit cards and mortgage owners have payments suspended in recessions, there would be many less recessions.
If the top of the chain, that is the elusive 'trickle down' source, felt the pain for recessions the most, there would be many less recessions.
If 'too big to fail' banks and companies were immediately broken up on commencement of recessions, there would be many less recessions.
Markets are efficient, they will hit targets, market regulations can be used to set targets that will keep the whole thing on the rails, remove the rails and the usual happens, more inequality and stagnation.
We have to put the incentives in the right place. If the lower/middle always feel the pain with no consequence for the top or 'too big to fail' companies, then it will be a regular, repeating occurrence. That will create markets where companies get big enough to be 'too big to fail' and get bailouts, or essentially grow to 'bailout big'.
No matter what you believe about economies, or markets, money only goes where other money is, and you can't keep taking from the spenders in a consumer economy. The constant rent-seeking, predatory, value extraction, wealth destroying events are going to break the lower/middle and public markets. Individuals, families and small business especially need support during these times, the longs that all value extractors extract from and the engine of America as well as the research and development labs of larger companies.
Markets are garden, the in trouble lower/middle should be brought up and focused on, the massively growing top should be scaled back or harvested.
Money trickles up and down and all around, but money only trickles where other money is found.
America is mostly small businesses.
SBA/Chamber of Commerce has 30.2 million for companies under 500 people.
Lots are sole proprietors or very small < 5 people. 22 million of the small businesses in the United States are individually operated, meaning that they have no other employees other than the owner.
99.9% of businesses in the United States are small businesses, owing to the rather large threshold of 500 employees, or fewer.
Small business is the engine of America.
Small businesses comprise what share of the U.S. economy?
Small businesses make up [1][2]:
- 99.7 percent of U.S. employer firms,
- 64 percent of net new private-sector jobs,
- 49.2 percent of private-sector employment,
- 42.9 percent of private-sector payroll,
- 46 percent of private-sector output,
- 43 percent of high-tech employment,
- 98 percent of firms exporting goods,
- 33 percent of exporting value.
It is time to help the lower/middle and sole-proprietors and small business or America as we know it is much much different after this.
About 8 trillion in 'stimulus', at a cost of 20k to every citizen, for that we got $1200 we haven't got yet and small businesses finding out how small of fish they a really are.
This market is broken for lower/middle and people or small business. It is gangbusters for wealth and value extraction ops.
The stimulus for individuals, families and small business is vaporware, time for some vaporwave as we fade away into the ether.
Good luck wealth and big business with no one to skim from and no small business to use as research and development or suppliers.
[1] https://www.sba.gov/sites/default/files/FAQ_Sept_2012.pdf
[2] Source: U.S. Census Bureau, SUSB, CPS; International Trade Administration; Bureau of Labor Statistics, BED; Advocacy-funded research, Small Business GDP: Update 2002- 2010, www.sba.gov/advocacy/7540/42371.
I'm curious what the justification for this is. It seems like the kneejerk reaction toward any big/powerful entity (eg. "break up the tech companies!").
Well we do need more Teddy Roosevelts that threaten anti-trust. FDR was also from wealth and took on wealth in a way that made the most secure and trusted investable market for investors and workers ever and has lasted almost a century [1].
Microsoft, even the threat of one in the 90s led to Google, Apple, Amazon, Mozilla, etc to rise. Microsoft is also better for it.
However I don't think any company should be broken up until they start to abuse a monopoly or become a single point of failure for economic disasters or national security issue.
For instance right now banks and ISPs need to be broken up.
Clearly 'too big to fail' banks are a national security issue and lend to massive value extraction events and recessions as they gain.
Also, the local monopolies of ISPs have led to rent-seeking and less innovation.
Competition is a key of capitalism and fair markets. If you do not have competition you have stagnation and monopolies make progression and innovation lazy.
Here's a great quick point by Steve Jobs about product stagnation and the managers/business side [2] and how they can run amok if not controlled to allow value creation to continue, and how monopolies or problems that arise when only the business/managers are in charge.
Essentially when monopolies/oligopolies happen they stagnate and the product/engineer/creates lose power to the business/management side, value creation is killed for value extraction and stagnation happens always, it is basically a law of the universe at this point.
The alternative is to keep sticking it to the bottom, the lower/middle and the worker in consumer economies, the service in a service economy, the small business R&D absorbing failures and proving successes for large businesses, the long investors that are 'suckers' to investment banks, and the overall quality of life we all enjoy. Or you can take some from the top and incentivize them helping to make sure recessions are rare.
[1] https://rooseveltinstitute.org/how-fdr-took-forces-wealth-an...
[2] https://www.youtube.com/watch?v=GXO3xMfuo20
I'm not too convinced whether a breakup would accomplish that. Smaller banks are less capitalized, and therefore be less able to absorb shocks than big banks. You can see that almost all the banks on the failed banks list[1] are small local banks (although this might also be because bank sizes follow a power distribution, it would be interesting if there was a bank failure rate that accounted for market cap). Also, what's preventing all the banks from engaging in the same risky behavior and all requiring a bail-out? If the government won't let AIG fail, would it let AIG01,AIG02,...,AIG99 fail?
[1] https://www.fdic.gov/bank/individual/failed/banklist.html
>Also, the local monopolies of ISPs have led to rent-seeking and less innovation.
The problem with ISPs aren't that they're big, it's that they hold monopolies over a geographic area limiting consumer choice. Breaking them up will do nothing, as each company post-breakup still hold a monopoly and therefore can continue to abuse consumers.
I can afford to pay my rent. I have no problems doing so. However, if I were to learn that my rental management group were facing a large rent rebellion, that I believed that the rebels had legitimate complaints, and that the rental management group could survive the rebellion by evicting all of the rebels but only if I paid my rent, then I would consider not paying my rent.
Therefore, I can imagine a situation where I would not pay my rent despite being able to afford it, and be expressing solidarity by doing so.
I don't really care whether or not you're sympathetic right now to this particular cause, but you should consider the principles behind the actions that people are taking, and spend some time putting yourself in everybody else's shoes.
[0] https://en.wikipedia.org/wiki/Solidarity
To paint landlords as rentiers who can easily afford to go without rent or with greatly reduced rent is wrong. It mischaracterizes the problem in a way that will lead to bad solutions.
If there is to be rent reductions or forgiveness, there must also be reductions, aid or forgiveness on mortgages, property taxes and utilities. Somebody needs to pay for these things. Yes, profits will be reduced, but losses cannot be sustained for as long as social distancing measures are expected to last.
[1] https://www.huduser.gov/portal/pdredge/pdr-edge-frm-asst-sec...
That said I agree there are many edge cases in this crisis and that, ideally, assistance should be given fairly liberally to all individuals who find themselves in tough situations.
I'm sure there's a moral framework where it's never acceptable to hurt someone else when you could sacrifice yourself instead, but I don't think that's a particularly common school of thought. More often people will weigh two potential harms to make a decision, like "I can't pay my rent, but property taxes and foreclosures have been suspended during the pandemic, so my landlord will likely suffer less harm than I would if I became homeless."
Finally, "can't pay the rent" doesn't necessarily mean silently fail to mail a check. It might mean talking to the landlord about a payment plan, or frankly telling them you have no money and can't even afford food for the week. Landlords are humans, just like grocers who might give food to a starving person
https://www.bbc.com/news/world-europe-36190557
But that story checks out, as when the market crashed ~2008, the FED bailed underwater mortgage assets (such as these supposedly) off banks hands to avoid bank runs via QE. You can see that mortgage-backed securities still comprise a significant portion of the FED's balance sheet:
https://www.federalreserve.gov/releases/h41/current/h41.htm
https://www.federalreserve.gov/monetarypolicy/bst_fedsbalanc...
wait, is that even legal? Aren't security deposits meant to be held in trust?
Tenant fails to pay rent because of economic hardship. Building owner get in a cash squeeze and can't pay vendors like plumber, snow clearing, landscaping, and eventually can't make loan payments.
Mortgage holders see a rise in troubled loans, eventually writing a large number of them off for large losses.
REITs take losses on investments they must write off.
Your own retirement plan or personal investment portfolio takes a hit because some portion of it is REITs.
Everything is interconnected. I see a lot of simplistic "landlords must suck it up" comments in this thread. Really, who is so naive as to think that the typical commercial property is not leveraged?
Your answer is for the rent payer, with no economy, to "suck it up".
If the top felt the pain of recessions more than the bottom, you can bet there would be less recessions where massive wealth value extraction happens. You have to align the market incentives right. Make the top feel the pain, at the bank level even, and you are gonna have better ratings agencies, better leverage ratios, and less pump and dump bubbles setup. Right now if the top always gains, even in pain, there will be more and more pain as they look for gains guaranteed.
If we truly are in a trickle down system, shouldn't emergency hits to the recession start at the top, the trickle source?
Money trickles up and down and all around, but money only trickles where other money is found.
You miss-read me. First of all, I did not suggest any answer. I suggested that people put more thoughtfulness into their analysis.
What I am saying is that there really is no one person to "suck it up". The furloughed school cafeteria worker is going to take a double hit because the public employee retirement system probably holds REITs.
Scapegoating landlords is the tactic of leftest South American dictators. Landlords are middlemen, earning a return on providing housing liquidity. They take on short-term risk in the form of their tenants potential inability to pay, and long-term risk in the form of long-term loans collateralized by their properties. The system doesn't work unless someone is willing to take on that risk profile. Stop scapegoating landlords.
Implicit in the criticism of landlords is that the majority of this long term loan is for an arbitrary asset valuation created by artificially low interest loans. Most of the cost of real estate is not in the building or upkeep itself, which is why everyone worries (or hopes) that real estate values will drop when the debt treadmill slows. Like NYC taxi medallions, it's an overfinancialized setup that taxes real production for the sake of the financial industry.
So yes, looking at the individual landlords they are indeed working to fill a market niche. But looking at the emergent system taken as a whole, it's preposterous.
If rent collection at the very top, above the landlord, above the management company, if they have to take the hit from this the most, there will be many less recessions. If the bank, credit cards and mortgage owners have payments suspended in recessions, there would be many less recessions.
If the top of the chain, that is the elusive 'trickle down' source, felt the pain for recessions the most, there would be many less recessions.
If 'too big to fail' banks and companies were immediately broken up on commencement of recessions, there would be many less recessions.
If you let the bottom just suck it up, extract all value and wealth from them while they take the hit and are the value creators and workers, then there will be many more recessions and incentives to go bigger every single time.
Stop incentivizing bigger and bigger recessions and companies that get 'bailout big' from 'too big to fail'.
It is only going to get worse if the top doesn't feel the pain, instead they gain with the current setup. This isn't a normal market, you can't put it on the bottom again. We shouldn't only care about the rent-seekers, they add little value and the assets still exist if they change. We should be focused on the value creators, workers and consumers, not just the value extractors and rent-seekers.
Incentives and regulations drive markets to targets, set the targets better, and take the target off the backs of the lower/middle class.
Markets are garden, they mostly just grow, but it takes some maintenance. The in trouble lower/middle should be brought up and focused on, the massively growing top should be scaled back or harvested regularly.
If you run any projects or have any game designs for markets, you know this is something that requires maintenance and balance, not inequality. Life is a free to play game, whales should provide most of the funds for a good game design for all.
More in this comment so I don't have to repeat it: https://news.ycombinator.com/item?id=22852799