this post was submitted on 27 Feb 2024
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Sorry, rent-seeking. It's when capital buys a scarce or exclusive resource in order to charge consumers for access to it indefinitely. Finite expenditure for potentially infinite revenue.
It's generally considered extremely immoral when used on the means of survival. Not just profiting off the misery of others; but making others miserable specifically in order to profit from temporary relief of that misery.
Despite the name, it doesn't usually apply to real estate (since there's usually other real estate available); rather, that provides a good analogue for the model. A better example is buying the patent to a lifesaving medication and then charging exorbitant prices for it.
But there are cases when it definitely does apply to real estate, such as when the local primary employer also owns most of all of the housing stock in commuting range of where they enploy people. Think mining "company towns" or, say, the Hyde Park neighborhood of Chicago around the University of Chicago in the 80's and 90's (and, after a couple decades to let the outrage die down, again today). They control their employees' homes, giving them outsize leverage in labor relations, but they also can charge unfair rents due to their monopoly.
Right, wasn't sure if you meant that or something else.
In real estate, people often forget that houses are not forever. They require maintenance, sometimes full refurbishment to bring them up to code, then eventually they become condemned, with extra cost to clear the land, and even the land itself may need utilities renewed. They're long lasting, but ultimately perishable goods (in most cases).
Even in captive audience situations, the calculation is not as simple as comparing mortgage to rent, since rent is the final expense, but mortgage is only a part of it. Depending on how long the housing lasts, how expensive is the upkeep, and what is its final resale value, rent as high or even higher than mortgage, can be the cheaper option.
In some cities with controlled rent, and historical building protection laws, owners have been known to purposefully leave a building unoccupied and in disrepair, just so it would get condemned and they could build a new one in its place. Some cities have struck a deal where owners can tear down the inside of a building, as long as they preserve the facades.
There is definitely a bunch of people speculating, and housing seems to follow a periodic bubble cycle, but then they burst, leaving most of the small and naive investors as bag holders.