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Dear Landlord: Please Heed These Words That I Speak

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I play too hard when i ought to go to sleep
They pick on me because i really got the beat
Some people give me the creeps
every other week i need a new address
Landlord landlord landlord cleaning up the mess
Our whole f*cking life is a wreck
We’re desperate get used to it
–X, We’re Desperate

By Lambert Strether of Corrente

This weekend all over the country students were not only entering their decades-long and hopefully fruitful (for them) relationship with the FIRE sector, they were moving into their new apartments.

Since the family manse is in part student housing, I thought I’d write about this process from the perspective of a downwardly mobile rentier. Here’s an interesting passage from Christopher Alexander’s A Pattern Language (1977). From Pattern #79, Your Own Home:

People cannot be genuinely comfortable and healthy in a house which is not theirs. All forms of rental — whether from private landlords or public housing agencies — work against the natural processes which allow people to form stable, self-healing communities. …

(c) Ms Carol Ann Lowry/DACS; Supplied by The Public Catalogue FoundationThis pattern is not intended as an argument in favor of “private property” or the process of buying and selling land. Ineed, it is very clear that all those processes which encourage speculation in  land, for the sake of profit, are unhealthy and destructive, because they invite people to treat houses as commodities, to build things for “resale,” and not in such a way as to fit their own needs.

And just as speculation and the profit motive make it impossible for people to adopt their houses to their own needs, so tenancy, rental, and landlords do the same. Rental areas are always the first to turn to slums. The mechanism is clear and well-known. … The landlord tries to keep his maintenance and repair costs as low as possible; the residents have no incentive to maintain and repair the homes — in fact, the opposite — since improvements add to the wealth of the landlord and even justify higher rent. And so the typical piece of rental property degenerates over the years.

People will only feel comfortable in their houses, if they can change their houses to suit themselves, add on whatever they need, rearrange the garden as they like it; and, of course, they can only do this is circumstances where they are the legal owners of the house and land.

This requires, then, that every house is owned — in some fashion — by the people that live in it; it requires that every house, whether at ground level or in the air, has a well-defined volume within which the family is free to make whatever changes they want; and it requires a form of ownership which discourages speculation.

Therefore [emphasis in original]: Do everything possible to make the traditional forms of rental impossible, indeed, illegal. Give every household its own home, with space enough for a garden.* Keep the emphasis in the definition of ownership on control, not on financial ownership.

Well, that’s bracing!

First, Alexander’s major premise. He writes: “People cannot be genuinely comfortable and healthy in a house which is not theirs.” Is this true? In Germany, “just 45% of homes in Germany are owner-occupied, one of the lowest rates in Europe.” Are 55% of Germans not, then, genuinely comfortable and healthy in their living quarters? (We’ll return to the example of Germany below). 

Nevertheless, Alexander’s conclusion I couldn’t agree more with: Renting works against “stable, self-healing communities.” As Alexander points out, the tenant-landlord relationship, no matter how mitigated, is inherently adversarial. (One might almost say, participates in class warfare. Certainly if the People’s Liberation Army marched into my town tomorrow, my position, as a rentier, would be equivocal!) Every investment the renter makes is creamed off by the landlord; but every investment by the landlord is, at best, hard used by the tenant and at worst destroyed. I’ve nearly finished repairing a stairwell where an entire ceiling of century-old horsehair and lathe plaster had to be replaced with drywall because the exiting tenants jammed a sofa down it, wrecking it. And from their perspective, why shouldn’t they have? And let’s not even talk about heat! Needless to say, I’d rather be blogging or gardening, and I’m old enough to know that every day counts. So, not only poor behavior on their part, but feelings of rage and disgust on mine, which will now poison, at least potentially, every single rental relationship I have in the future. (To pre-empt: Yes, vetting; yes, security deposit.) Of course, if I were to be a less sensitive plant and take a purely financial view of these transactions, I’d trade that set of emotions for a different one — greed and fear — so in neither case is a “healthy, self-healing” community promoted.

In fact, as a society, we seem to be heading in exactly the opposite direction from the direction Alexander recommend, as speculators (“dumb money”) make a post-foreclosure crisis rental play. Yves writes (May 2013):

The degree to which the housing “recovery” has been driven by speculators isn’t fully appreciated. Reuters tried to pin down a number, but they apparently did it by identifying specific private equity firms and tying them to purchases. They came up with “at least 10%” in Las Vegas, suggesting that was representative for the most distressed markets.

But while it’s hard to get good data in such a fragmented field, that estimate is likely to be markedly too low. Some sources have said that cash buyers have accounted for as much as 50% of the activity in the hottest states, and those would also have a bigger impact in the national estimates of home price appreciation.

Why are these investors so hard to identify? Many are newbies. One colleague reports that he knows roughly 15 newly minted real estate mini-moguls. They might have had some cash from a previous life on Wall Street, and raised a bit more initial dough from well-heeled friends. But most after buying a few houses then raised money overseas, mainly from the Middle East and China. They may call themselves hedge funds as a way of glamorizing their strategy and justifying asking for hedgie-type fee structures, but it’s more accurate to simply call them investors.

And what are these investors doing? According to my source, they often aren’t renting but are warehousing the properties, sometimes renovating them (I didn’t nail down whether to flip to a renter or to sell to a buyer) or simply holding them for expected appreciation.

Either way, as Alexander points out, home ownership for rental by absentee landlords is a recipe for degeneration. (When private equity was excited about housing, one issue raised was how on earth would the properties be managed? Perhaps the cynical answer, “not at all,” would have been the correct one.)

However, it isn’t at all clear to me the exact form of property ownership Alexander would recommend (back to TINA….). It’s really not enough for him to say “[t]his pattern is not intended as an argument in favor of ‘private property’” when the alternative, which apparently includes “ownership,” is not fully worked; Alexander gives criteria and proposals, but nothing operative in what we are pleased to call “the real world.” In fact, the first time I read Pattern #79, I thought, uh oh, Bush the Younger’s now-discredited “Ownership Society” (pioneered by Maggie Thatcher, bless her heart). And we all know how that turned out: The very idea of ownership — at least for the little guy — has turned out to be illusory, as the banksters, gaming the system on an almost inconceivably grand scale, gamed the land title system:

“What’s happened,” said Christopher Peterson, a law professor at the University of Utah who has written extensively about MERS, “is that, almost overnight, we’ve switched from democracy in real-property recording to oligarchy in real-property recording.” The county clerks who established the ownership of land, who oversaw and kept the records, were democratically elected stewards of those records, said Peterson. Now a corporation headquartered outside Washington, D.C., oversaw the records. “There was no court case behind this, no statute from Congress or the state legislatures,” Peterson told me. “It was accomplished in a private corporate decision. The banks just did it.” Peterson said it was “not a coincidence” that more Americans than at any time since the Great Depression were being forced out of their homes just as records of home ownership and mortgages were transferred wholesale to a privatized database.

(Happily for almost everyone, efforts are underway at the state and the Federal level (readers?) to retroactively legalize MERS’s clouded titles. Tell me it’s not a great country.)

So, it’s not at all clear to me how we get to Alexander’s Pattern #79, even if we knew, concretely, what the alternative to “our” current home “ownership” system of primitive accumulation (theft, fraud, and force majeure) by the FIRE sector might be. To return to Germany:

For Germans, the financial crisis that followed the property boom has reinforced their suspicion of rising house prices. The idea that families would sit around the dinner table discussing how much their home had risen in value over the past year is alien.

Arguably, the tenant is “king” in Germany, enjoying far greater rights and protection from poor landlords, as well as the freedom to decorate their homes (although you have to repaint the walls “in neutral colours” before you leave a property).

Those who rent tend to treat the property as a real home, decorating it and doing far more of the maintenance themselves than a tenant would in Britain. On average, a tenant spends three to seven years in one property, much longer than in other countries.

Having read Alexander, the rights of tenants to invest in the property by decorating and maintaining it (“treat the property as a real home”) leaps out at me (though it’s hard to imagine that working for student housing).** So, it seems at first glance that the German system of home ownership and rental is more humane and less vicious than our own.

Readers, do you have experience in Germany or in other nations with systems of home ownership and rental that “allow people to form stable, self-healing communities”? Do you have policy recommendations of your own?

Or is it the nature of private property as such that is at issue? Structurally, I’m not sure there’s all that much difference between me as a rentier and some billionaire; the incentives tend to be the same, do they not? Maybe the People’s Liberation Army has that right! And although I’m “a little guy,” that’s always relative; there’s almost always somebody bigger, and mere millionaires tend to think of themselves as hard-pressed. On the other hand, I tend to be invested (both senses) in the property, and to take care of it for that reason, not financial returns alone. I think that’s a good thing. Perhaps that is a “natural” tendency? 

NOTE The painting, “Derelict Building,” is by the wonderful LS Lowry, rent collector by day.

NOTE * To pre-empt the “people who live in high rises can’t garden, dammit” permathread, Alexander is talking about a new built environment.

It takes a while for a British visitor window-shopping in any German town to realise that something is missing. But then it clicks: someone has removed all the estate agents.

NOTE ** To be fair, the Guardian article also cites the German reluctance to borrow, large deposits, and differences between Western and Eastern (i.e., formerly communist) systems of ownership as factors that increase the propensity to rent?

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63 comments

  1. clarence swinney

    REAGAN AMNESTY ACT
    Ed Meese said Reagan regretted it.
    He gave Amnesty to 3,000,000 illegal immigrants
    The Quota in 1990 WAS 5000,000.
    Yet! 1,500,000 were allowed to enter the United States.
    Those who got Amnesty soon became citizens after which they were entitled to bring in their immediate family thus the 1,500,000.
    Today, we have 11,000,000 illegal immigrants.
    What happens if we give them Amnesty?
    In five years will we allow 5,500,00 more to enter as immediate family members?
    President Bush, Sr. increased the quota to 700,000.
    Where are the jobs for them?

    1. Stelios Theoharidis

      Your perspective regarding illegal immigration is tremendously misinformed. The rate of illegal immigration to the U.S. never really changed. It was our enforcement of immigration that changed significantly. We had a tremendously steady population of illegal immigrants from Mexico and Central America because they went back home after earning money and supporting their families to start businesses and invest in their communities. Because of our increased border controls these individuals that formerly returned cannot anymore so they either reside here permanently or try to bring their families. Combine that with our foreign engagements in Mexico and Central America including: causing drug wars, destabilizing peasant agriculture (NAFTA), fomenting political unrest and training their military to violently defend of corporate power to the detriment of their populations(School of the Americas, Contras, Honduras, Guatemala) making these areas more insecure and more of their citizens were prone to escape these conditions via illegal immigration. Sure they had poor democratic institutions and violent dictators but we had a hand in establishing those systems.

  2. anon y'mouse

    one guesses it depends entirely upon the individual and what they consider valuable. some of us are more territorial than others. I have lived in rentals my entire life, and always been uncomfortable. sometimes we painted and did pretty much as we liked, but others have said that not so much as a poster push-pinned into the wall was acceptable.

    the main issue (for me) is that you can be pitched out with little or no reason, simply because the landlord decides that he doesn’t like you for some reason. having worked on the Management side, I’ve seen exactly that and the argument that there are legal barriers to this occurring is very weak. the onus is on the tenant to prove that something untoward happened, and the mgmt. office keeps all of the records. it is a bit like trying to prove medical malpractice. why would the individual in the position of power leave a trail that incriminates themselves?

    another is that the cost continually ratchets up (those annual increases) even though the owner does not do even the most basic of maintenance. the building is depreciating, and falling apart and yet the renter pays more every year. sometimes rental increases themselves are used as the not-so-subtle hint that the landlord would prefer the tenant to hit the road.

    the owner can come in at any time and make “improvements” and changes, and inspections and disrupt one’s life. they then decide that, because you are a working mom who has no time to clean, you need warning letters and possible eviction. ((I’ve seen this happen in practice. the tenant was so harassed by the manager, especially after his comment about the “proper” raising of her child: “kids should be in bed at 10, not up running around the house and potentially waking up the neighbors.” that she left))

    then there’s the “other” issues about communities. if you and your neighbors are all moving every year, or even every 5 years, why get to know any of them? most mobile (and upwardly mobile) professionals view their neighbors as weird if they speak more than 3 words at the mailbox. I’ve lived in buildings with some of them whom I didn’t recognize by sight when they changed their hairstyle. and, they likethatverymuchthankyou. they don’t want to know you. they are moving next year to another, better place in another better city. why interact with someone who just happens to coexist in the same location for awhile?

    yet, I believe it is this extremely mobile attitude that contributes to not caring at all about place, or what happens to it. similar to the article referenced in many locations lately that those who can afford to put their children in private school are somehow “bad” (bad parents is what she said, but she should have said “good parents, bad public citizens”), why care about or fight for some improvement when you can use your money to insulate you from suffering the consequences of disinvestment?

    1. diptherio

      I worked for a number of years on the Montana Tenant-Landlord Hotline and let me tell you, I’ve heard it all…from both sides of the fence, so to speak. You are quite right that many large property managers/owners abuse their positions of power to screw tenants at every possible turn. (While working on the hotline, I figured out that our largest PM company in town withheld the entirety of every tenant’s security deposit, regardless of the condition the property was left in, unless the tenant complained and threatened to file a small claims suit. Since there is no penalty in Montana for wrongfully withholding a deposit, this company violated the law as a normal course of business…still do, so far as I know).

      But then, there are the small time landlords who end up having their hard work and investment destroyed by tenants who just don’t give a rip. The LL can always take them to court to recover damages, but that is time consuming and, of course, you can’t get blood from a turnip. My buddy (see my comment below) has had this happen to him twice in the last few years and is now selling the property because he can’t afford to be taken advantage of by another tenant.

      T/LL regulation is a state-by-state matter. Many states have adopted the URLTA (Uniform Residential Tenant Landlord Act) in part or in whole. The URLTA is better than nothing, but it does leave some major holes in protection, both for tenants and for small-time landlords. I have specific suggestions for improving tenant protections, but I’m still at a loss as to how small landlords can be protected from bad tenants though, especially if the tenants don’t happen to have enough money to cover the damage they do.

      Which has lead me to the conclusion that landlording is really only a rich-man’s game. It’s just too dangerous for those of us running on thin margins. Which is why I am an advocate for occupancy and use as the major, if not sole, determining factor in land/housing ownership.

      1. Propertius

        But then, there are the small time landlords who end up having their hard work and investment destroyed by tenants who just don’t give a rip. The LL can always take them to court to recover damages, but that is time consuming and, of course, you can’t get blood from a turnip.

        Well, that certainly brought back some unpleasant memories. In my case it was a tenant who absconded in the middle of the night after having done about $20,000 in property damage – leaving piles of rotting food and unpaid utility bills in her wake.

      2. anon y'mouse

        undeniably, there are unconscionable individuals who will wreck properties. and you can’t always tell (by class) who those people might be.

        I suggest that much “damage” is caused by the poor construction and poor overall design of many structures. when you look at buildings designed for public use, they are almost over-designed for sturdiness and hard wear. every landlord I’ve ever met was surprised that tenants did not treat the buildings and fixtures as gingerly as if they were in their own(ed) homes. fact is, you can’t rely upon delicate treatment of, in many cases, substandard equipment.

        yes, I’ve seen juvenile delinquent-type tenants that smashed holes in ever door in the apartment, wrecked all the screens, ruined the linoleum and more. but, if you’re the kind of landlord that goes to Home Bleepot and purchases the cheapest cabinetry, faucets and badly veneered fittings, installs them into a bathroom that was designed to be on the interior space of the building with no window access, keeps a ceiling fan that isn’t actually hooked up to any outdoor vent, and then is angry at your tenant for any mold growth that ensues, you are the kind of landlord that expects miracles.

        perhaps the kind that should play the lottery.

        1. WorldisMorphing

          You are spot on with your first comment.
          To this one, I would simply add :[if you're the owner of wood-frame apartment building(aka- a slum), and the ceilings of said apartments is made of that 1970's cardboard thingy...and you are shocked at having to repair holes in it (as the ones broomstick would do...) ---then you're an idiot.
          If you think what you have is an "asset", let me be the first to pop that bubble of yours: what you have is a blight generator...]

        2. PeonInChief

          Absolutely true. Many years ago I wanted to replace the plastic mini-blinds my landlord had installed in our apartment. I headed off to the local hardware store and described the blinds. “Oh,” the salesperson said, “You want the landlord special.” I didn’t know that there were cheap, soon to be unusable products and fixtures that all landlords install in their properties. I cried when I saw how cheap the replacement blinds were, as I’d taken them down and carefully cleaned them several times. Unlike metal blinds, they weren’t intended to last more than a few months…

    2. bluntobj

      I certainly agree with the premise of the post in regard to stability and community. The transitory nature of american life results in the extreme disconnection that people have with other human beings.

      That said, let’s do avoid extremes. I would not like to be a serf in the old russian sense, lacking mobility as I needed it to live. It’s not even possible to get rid of landlords, because life ensures that there is always a pool of people who lack a home, sometimes through no fault of their own.

      Consider landlords to be the necessary “liquidity” in the housing system. Too much liquidity is just as harmful as too little.

      1. jrs

        Landlords are not the cause of the lack of stability and the transitory nature of society or at least not directly so. Jobs are. Jobs have become transient and lack stability. And there aren’t always other decent paying jobs nearby to take when you lose one. Moving for work is often necessary.

  3. Cloud

    the tenant-landlord relationship, no matter how mitigated, is inherently adversarial.

    Tell me about it, grrlfriend.

    1. Sufferin'Succotash

      the tenant-landlord relationship, no matter how mitigated, is inherently adversarial.

      As opposed to the relationship between the home-buyer and the bank, which is inherently warm and fuzzy.

      1. ambrit

        Dear ss;
        So, let us tax the H— out of the inheritence, and be left with the warm and fuzzy part, eh?

  4. Crazy Horse

    I think Dimitri Orlov’s description of the collapse of the Soviet Union (“Reinventing Collapse: The Soviet Experience and American Prospects”) is most informative in understanding next step after the collapse of the “ownership society” and the reversion to a renter/debt slave class relationship.

    According to Orlov, one of the key factors that enabled the Russian people to survive the collapse of the state and its system of economic organization was the fact that very few people in Russia owned their own homes as most housing was owned by the State. Although they frequently were depressing and cramped Soviet style apartments, when the State collapsed very few became homeless— they just stayed in their places of residence because there was nobody with the authority or motive to force them out. Heating and utilities were centralized and in the main continued to function and small private garden plots expanded to become life-saving sources of food.
    By contrast, in a capitalist society where housing is but another commodity, when the occupants of a building are no longer able to pay rent they are forceably evicted and all services cut off. Within a short time the house is stripped of all merchantable plumbing and wiring by thieves, and the former occupants left to live in their automobile or roam the streets with a shopping cart.

    1. Lambert Strether Post author

      That, and stuff like Soviet-style refrigerators being, granted, incredibly ugly, but also built like Soviet tanks, in contrast to all our household infrastructure, built with tissue-thin metal stampings and circuit boards imported from China and designed to fall apart in three years.

  5. diptherio

    You make a good point that the tenant-landlord relationship tends, by its very nature, to be adversarial; unfortunate though this is. My best friend owns a couple of rentals thanks to pre-crisis NINJA loans and well-timed refis. One property, now up for sale, just had to have well over $10,000 in repairs due to the last tenants and their rather careless lifestyle. He bought the place thinking he’d be a cool landlord, provide some housing for other poor folks, and maybe make a little dough on the deal…HA! It’s been a massive money pit…if the PLA ever shows up, maybe he should ask them for a refund!

    I’m an advocate for ownership based on occupancy and use, as those seem to me to be the only natural bases of ownership. I think absentee ownership is not only a raw deal for those who end up renting from slum-lords, it’s also (often) no treat for the absentee owners themselves, especially if they’re just small fry like Lambert or my buddy.

    The question though, as always, is how to get there from here. Trying to convince most people that ownership of land is unethical and philosophically indefensible (you got the Almighty’s signature on that land-title somewhere?) is hard enough, much less convincing them that houses should be thought of in the same way.

    Random thought on Detroit: they should pass a new Homesteading Act, guaranteeing anyone who moves to the city one abandoned building and an acre of land, tax-free for five years (who’s paying taxes anyway?). That would draw folks like me there, and also allow the current residents a means of taking ownership of what, by rights, should probably belong to them anyway…just a thought.

    1. bobw

      I lived in Detroit until I was 21…haven’t been back since the 70s. NW area (Schaefer & Fenkell) – It would take more than a free house and an acre to get me to go back there. And I’m speaking as an underemployed, near homeless person.

  6. Yves Smith

    Rentals may be a classic example of how capitalists get in their own way. Cities like New York and San Francisco that have tough housing regulations are depicted as offenses to the natural order. Yet as Lambert points out, the state of nature is an adversarial relationship between tenants and landlords which in a lot of ways is not so hot for landlords.

    As I’ve mentioned, I live in a rent stabilized apartment. The monthly rent from the outset was above the level where it was eligible for decontrol (it was rent stabilized because it had previously been rent controlled, an even more restrictive and tenant-favorable category, and the path out of rent control is through stabilization). Yet the landlord didn’t even bother taking the most basic step to see if he could “destabize” the apartment until last year, and has not tried again this year. My landlord appears to prefer to have tenants who pay like clockwork even if he isn’t maxing out his rental income. The landlord (a property management co for the estate of a middling mogul who heir is schizophrenic and thus can’t manage his affairs) was also extremely accommodating when I wanted to sublet my apartment (which I did when I went to Oz).

    My building still has a lot of tenants I imagine are like me. There are four other apartments on my floor. I’ve been here 20 years. 2 tenants were here when I moved in, and one moved in shortly after I arrived. One of the newer tenants on my floor moved out…to a bigger unit in the same building when she had kids.

    Alan Grubman (the biggest entertainment lawyer on the east coast) has an entire floor, was here when I moved in and has spent a lot on renovation and decoration. The Morgan Stanley exec who has the penthouse (again a full floor) and has been here for at least 15 years has finally broken down and renovated his place.

    Why is my building like this? First is property rights. I believe a lot of apartments are still rent stabilized. If you are in a rent stabilized apartment, you have property rights. The landlord cannot deny you a lease renewal if you are current on the lease. As a result, a LOT of people in the building have fixed up their apartments. I have, along with neighbor who moved in right after me. One woman on the 14th floor spent over a million dollars on her renovation. In my case, I renovated because the math worked. I figured I’d break even relative to the cost of renting if I stayed in my apartment five years (as in this apartment was cheaper but not something I’d be willing to rent ex my modest fix-up; the sort of apartments that were acceptable were more expensive, so it was a straight-up financial analysis). The second reason is that this building is one of the few rental buildings on Park. Co-ops in good Upper East side locations severely restrict how big a mortgage buyers can take. Many are “all cash” (no mortgage); the most liberal you see is 50% cash, and they ALSO require buyers to show a LOT in the way of liquid assets (very large multiples of the annualized maintenance charges).

    The irony here is that if you give tenants property rights, you get “better” tenants, in terms of level and stability of income. Someone like Grubman in theory ought to be in a co-op or a condo. But in practice, co-ops restrict entry (they require a board interview) and a lot don’t like celebrities (Madonna was rejected by a lot of boards). Condos don’t have this problem, but virtually all condos in NYC are new construction, and the space (even for lavish buildings targeted to the wealthy) is not as grand as what you find in co-ops.

    Tenants in NYC also have BETTER property rights regarding sublets than “owners” do. The law is that a landlord cannot “unreasonably withhold” a tenant’s right to sublet, which is 2 years out of any 4 of rental. In practice, a lot of landlords do by dragging their feet in the approval process. But people who own apartments have it worse. Co-ops and many condos restrict sublets to one year. Co-ops also require a board interview, which makes it pretty much a non-starter (boards meet monthly and most prospective tenants don’t have that sort of runway).

    1. Dean

      NCY rent rent stabilization has a loophole for landlords so big you can drive a garbage truck through it. If a rent stabilized tenent leaves, the landlord can gut renovate the apartment, and voila, get market rates forever after.

      1. Yves Smith

        That does not obviate my discussion. A rent stabilized tenant can’t be thrown out if they are current on the rent (there is a limited exception in small buildings if an owner wants to take an apartment for his own or an immediate family member’s use). A rent stabilized tenant can also get relatives and spouses on the lease (they do have to co-habit).

        Your point re vacancy is that landlords can reduce the stock of rent stabilized apartments, which is a different issue.

    2. PeonInChief

      Fixing up a place in which you have a leasehold interest (which is what rent control and just cause eviction provide) makes a lot of sense. Fixing up a place where you have a month-to-month rental agreement with no eviction protections is just stupid. That said, most tenants have done minor fix-ups–replacing the cheapo “landlord special” towel bars with ones that don’t fall off the walls etc. But if you have a more secure tenancy, you’re more likely to replace an old cooktop or a funky fridge, even if a million-dollar renovation is not in the cards.

  7. down2long

    Lambert, since you went out on a limb here as a rentier, I, who am a housing provider in Los Angeles, land of confiscated personal property, will weigh in.

    As a former TV producer, actor, I set out to buy small charming run down buildings in Silverlake/Echo Park before Echo Park especially became hip. Los Angeles is a rent control town on all buildings built before 1979. That has turned out to be a boon for politicians – they constantly squeeze the Mom and Pops on the older buildings, while giving their developer friends (and campaign donors) city land and subsidies to build on/with, provided they toss in a couple of “low income” units. (Renting for $2K or so, as compared to $3K) The politicians continually tighten the noose on the little guys, constantly changing the laws to provide lifetime tenancy for rent controlled tenants who will continue to vote for them.

    My plan was to restore buildings to their former glory. At the time, the city allowed housing providers to pay tenants to move if you were going to spend at least $10,000 on Restoration with permits. Paid $2600 for single tenants, $6500 for families or qualified tenants.

    I paid all my tenants at least twice the city mandated rate in order to avoid the city nightmare (trust me, with historic buildings, the Housing Department and its rapacious inspectors, and the L.A. Dept. of Bldg. and Safety, you want to try to cut down on trouble.)

    I told all my tenants I would help them buy a house or a condo on moving. In one building, only one family took me up on my offer. I got them financing, wrote letters, made a huge contribution to the down. An $8.00 an hour baker with three kids bought a three bedroom house. We remain friends still (he being the exception that proves the Mark Twain adage that if you help a dog, he’ll be your friend for life. If you help a man, he’ll be your enemy.)

    I saw Geronimo recently and he told me he was buying another house for his brother. He said he was “following in my footsteps.” Having just emerged from bankruptcy, I told him after this next house, to please stop following.

    I bought five properties total. I sat on the police boards,, organized the neighbors in neighborhood watch, got rid of the gangs, usually greeted by the drug dealers as “Watch out White Boy.” I knew them by name and told them, “Look, Luis, you have everything you need to make lots of money. You are out here at 6 am every day dealing meth. You know marketing, you have a stream of cars every day. You look good, you are smart, You are not troubled by conflicts about your product. You should be on Wall Street making big money.” 40 people would sling dope across from my building. A little girl got shot dead by a stray bullet. Someone got shot dead in the back of my building. The police were very slow to respond so I went to our prosector. One time, when our beat cop was away on one of his many vactions, we had a new beat cop. I worked with him and one month he made forty arrests. When the big guy came back, he said to me, “David, you weren’t making it up. They made forty arrests across from your building last month.” And so it went. For ten years. Doing beautiful restorations, getting some new tenants (by now the city had decided that you couldn’t pay rent control tenants to move.

    I continued my rehabs even though one of three of my tenants was paying way below market, less than $500 a month for one bedroom apts. One tenant has occupied two units in a house for forty years. He’s a drummer and a gigolo and has lived off the women who came to that complex since 1974. I kid you not. Reminds me of the old joke: Q: “What do you call a drummer without a girlfriend.” A: “Homeless.”

    He tries to rule the roost. One time he told another tenant “David acts like he owns the place.” She told me she just looked at him and said, “He does.”

    While I was restoring the buildings, (myself and my seven man crew and I do mean I was doing demo, and actual work. I was too leveraged to sit on my ass. Here in L.A. people would stop – it’s rare to see a white guy stripping shingles off a roof.They couldn’t believe I was the owner.) At night and on weekends I worked as a cater waiter/bartender. This went on for years.

    Finally, it all came crashing down. It began in 2006 when I was doing a small addition on a building without permits. (It was a whim, I had three other projects languishing in City Planning awaiting the bureaucratic rape, and I thought I’d whipe it out.) I did have electrical and plumbing permits.

    An inspector saw the work and asked if I wanted him to red tag me or would I get a permit. At this point the triplex was vacant. I told him I’d get a permit. Three months later I brought the plans, permits, and calcs – done by a licensed engineer and architect – to the City Building and Safety dept. The plan check guy told me he didn’t like the engineer and would not approve any plans by him.

    I knew I was toast. I tried to go to my original engineer but this was the peak of the frenzy, and he couldn’t help. The building sat vacant, I went to try to finish the other projects before I went broke (fighting with the City on such nonsense on whether the 50 pairs of wooden French windows, which were what were orirignally there, and with which I was replacing the ugly aluminum someone had replaced them with, could be double pane to cut down on energy use. The city said no, no way, must be single pane. the dividers between the glass would be 3/8″ of an in wider, and thus unaccptable. Furthermore, there was no double paned glass at the turn of the last century. Case closed.

    Anyhow, fast forward. The crisis hits. The banks go crazy. They try to foreclose. WaMu puts a receiver in on a five unit building who takes all the rents (unheard of in the old days – a receiver on a tiny building.) The bank’s attorney proudly tells me “We’re taking buildings fast these days.” He was right about getting the building, but it took him six years.

    The new owners are absentee landlords. They care not a whit about the area. One owner took out the garden in the front yard of my home of fourteen years – which included fruit trees that the neighbors were always welcome to (loquat trees which the Central Americans loved) and took out the 80 foot ash tree to make car parking in the front yard. Croation white trash. It comes from everywhere I guess. In both cases the new owners somehow managed to circumvent the rent control laws and get rid of at least one tenant (they withheld rent checks, trumped up charges, etc. The City applies its rent control laws capriciously, so they won.)

    On the five unit, in the last six months they were in charge the bank let the bulding get so into disrepair the second time they took it over, the city filed criminal neglect charges against ME since I was still on title (although not in control.) I had to go to criminal court to answer for charges that should have been filed against the bank. (Not for nothing I was furious they hadn’t filed the charges sooner – Nothing gets a judge’s attention like the person managing the property letting the collateral “waste.” On that alone I could’ve gotten the building back – maybe. But boy was that judge crooked. Judge Sandra L. Klein has never met a debtor at whom she would not throw the book, and a bank whose cock she would not suck.

    Being a renter in this town in a rent controlled apartment is a dream come true. I tell people you can always tell the rent controlled tenant in a building because they drive the nicest car. (Mine is 16 years old, but I’m happy with it.)

    What I am getting at, I guess, is that we are going to reap what the banks and our governments have sown. Last week the NY Times did a breathless piece about how no one is happy with all the new rented houses owned by absentee landlords who care not a whiff about the areas.

    Once again, the other homeowners will suffer (but blame the unfortunate tenants instead of the scoundrels whom the Feds bulk sold and financed these homes to). It is America in 2012: Always blaming the victim.

    The center will not hold.

    Wells Fargo refused my legal payments on one building ever since six months after the bk. Intermittent legal skirmishes. Legal Expenses beyond belief have piled up over six years.

    The bank tried to cart off gigilo tenants’ items, without a NOD or any legal action. I called the bank off – three times.

    Now my gigilo tenant – who owns a house San Pedro – is worried again. What’s going to happen to us? I will spend thousands trying to keep the property, but under L.A. law, since the tenant has lived there for

  8. down2long

    Oops, I thought I edited out that last bit. If anyone was kind enough to read that far, you’ve had enough.

    But I will finish the though. Under rent control laws, if you have lived in a rent controlled apt for more than ten years (even if you just use one for storage, as this guy does)or are over sixty two you cannot be evicted even for the owner to move in.

    Of course, since everything in L.A. is done capriciously (I have that on good authority from a city D.A. lawyer friend of mine who finally quit because she said she couldn’t stand defending city employees who do whatever they want, whenever they want, regardless of the law.)

    I will advise the tenant to get a lawyer. Although I hired a lawyer to defend a tenant I ultimately moved into my triplex, while I still owned it, and that didn’t help much. A little delay was all.

    The real rentiers ALWAYS win.

      1. down2long

        Hi Lambert – You always get to the meat of the matter. I think I was trying to tease out that I am a housing provider as compared to a rentier. I am trying to make the moral distinction between a stakeholder, one who lives in the community and tries to make it better, who landscapes, who tries to be an addition to the community, as compared to someone who is purely extractive. I actually enjoyed cleaning up neighborhoods. People (not – of course – the dealers) appreciated it and let me know. Many of them were from other countries and they were really scared of the police AND the dealers. I was the crazy white guy who blew in and made change happen. It was challenging and the end results were positive.

        I frankly do not consider myself a rentier. I provide a very good product at a good price with excellent service (I do my own repairs mostly, and they are almost always accomplished the same day, or the next day at latest.) I provide a service and people are happy to pay for it. I am the guy who cleans the shit out of your toilet. If you prefer to do that yourself, then don’t rent from me, because my snaking out your toilet within a couple of hours is built into my price. You want to wait, go down the street to a cheaper dive.

        As has been noted elsewhere in these posts, the large firms are taking over California, especially LA and San Fran and there is starting to be a lot of tenant pushback, longing for the good old days when your landlord was a PERSON. I get tenants from downtown where the city fathers gave away the store to real rentiers, who are purely EXTRACTIVE, and do nothing beyond their front door to make the community better, and the tenants hate these scoundrels. They double your rent every chance they get, (we are not talking reasonable increments here) You have problem paying rent, you are out, pronto, your credit will be ruined, just as a bank will ruin your credit first mistake. Fixes can be slow, but the fixtures are relatively new, so that may take a while to see.

        These are real rentiers. I am, as you stated, an unreal rentier. I am a housing provider who cares about his tenants. If I am to be only one or the other, I shall choose “unreal rentier” to those in commentariat, a “housing provider” in my own mind and in most of my tenants’ minds.

        1. Lambert Strether Post author

          I was in haste and should have thanked you for the long essay, and now another one. I understand what you are saying about being a “housing provider who cares about their tenants”; I try to be the same way. That said, I’m uncomfortable with leaving the discussion at “caring” — the good master cares about their serfs, after all.

          If you had to embody your vision of a humane landlord/tenant relation in law (and, as Alexander proposes, outlaw other varities) what would you propose?

          1. down2long

            Hi Lambert. I’d like to address this in more detail later. I just had a response written, but accidentally erased it. (The dangers of posting in a prone position.)

            Now I must get my lawsuit against Wells rolling and finish up the paperwork with my hard money lender to pay 10% interest to save my home.

            And people say the credit crisis is over. What a RIOT!

          2. down2long

            As Aussie F said, “You’re never free until you hang your landlord.” Perhaps I could volunteer?

    1. skippy

      @down2long

      Almost married into one of the property dy-nasty’s of L.A. CA. across girls backyard was LA’s biggest slum lord – too boot. I believe the term of reference for people like you was “chum” like attracting fish in the water.

      Chin up mate, your out of the pool now or with less profile to their jaws, they could have swallowed you hole.

      skippy… sure would be interesting swapping salty tales with you… might even have a laugh or two.

      PS. damn those Westlake girls befuddling my head!

      1. down2long

        Good golly miss molly skippy you are a trip. Yes, I was chum, but with principals. My BK lawyers used to mock me “that’s right, you have principles.” To which I would respond as only one can to a bk lawyer, which frankly, is full of some of the most disgraceful lawyers in the bar, and that is saying something about a subset of humans who are already rapacious “David, All I have are prinicals.”

        Skippy, the slum lords in Los Angeles give so much money to the council people, they are immune. Most of their buildings are “Master Metered” for electricity. The city utility will not turn off the electricity of a tenant, so the slumlords never pay their bills. Ocsassionally they will settle a $10 million dollar bill for $1 million or so, with the help of the council member.

        I have used this trick myself. When the city shut off my electricity to my house years ago in the middle of dispute, I ran an extension cord from my triplex, where I pay (ahem) the tenants’ electrical bills. Works like a charm for years.

        I always said about L.A.: since you control how much money I can make, since you constantly inspect my buildings (which are always in good repair) and make outrageous demands on me – WE – the City and I Are Partners in this enterprise. And sometimes, partners got to pay up. SO they are paying my electric bill for now. Seems only fair after they cost me a building and caused me untold heartache. It’s amazing what one can accomplish with a simple exterior grade romex extension cord and a circuit breaker box that has been disconnected from the utility.

        I give the City of L.A. credit – they have made me VERY ingeneous.

  9. Jess

    “People will only feel comfortable in their houses, if they can change their houses to suit themselves, add on whatever they need, rearrange the garden as they like it; and, of course, they can only do this is circumstances where they are the legal owners of the house and land.”

    Things are not exactly as utopian as the author portrays. People generally can’t entirely change their houses to suit themselves, nor can they garden as they please. Most community have zoning and building regulations that must be adhered to, such as minimum setbacks from the property line on all sides. In my city and many others there is a thing called FAR, Floor Area Ratio, which sets the maximum square footage of the house relative to lot size.

    Other regulations to avoid the appearance of “bulk” — boxy fortresses, as it were — limit the maximum height and number of stories a house may have, as well as mandating certain second floor setbacks. My community and many others prohibit front-facing triple garages on lots less than a certain width.

    Interior rooms must have a certain minimum size and all rooms must have an egress window meeting certain dimensions and maximum sill height above the floor. To insure adequate natural light and ventilation rooms also have to have windows that are a percentage of the square footage of the room.

    There are also numerous regulations regarding the required number,type, and placement of electrical outlets, and limits on how many outlets can be connected on any one circuit. If your remodeling plans go past a certain point, you may end up having to install a new, larger electrical panel and rewiring some existing circuits.

    You can’t have a garden in the front yard of any community that I know of. And in most communities you can’t park a vehicle in your front yard. The maximum height of fences, esp. in front yards, is usually around 44″, give or take.

    Not to take anything away from home ownership. I own my house free and clear and wouldn’t trade that sense of security (and personal freedom) for anything.

  10. Aussie F

    They had a great expression during the French Revolution:
    “You’re never free until you’ve hung your landlord.”

  11. Foppe

    In Switzerland, homeownership rates are at 22%; I don’t know about the historical emergence of of German attitudes towards renting, but I imagine it has something to do as well with the way mortgages are set up (slower to mature at lower interest rates).
    Now, allow me to quibble a bit. Yes, it is in the short-term interest of rentiers to minimize maintenance; however, is it really true of the US that replacement costs after 20 years are lower than maintenance costs over that period would be? I don’t get why the relationship is necessarily adversarial, except insofar as some rentiers will want to set rents as high as possible (though I know of more than enough people who are willing to not ask for the maximum simply because they want a certain kind of renter to live there, who might not be able to afford that; of course, this doesn’t apply to high-turnover rentals such as student housing as strongly).
    A short intro to the Dutch housing market: we have decent social housing, though trouble might be coming depending on how the mismanagement of a large number of the largest housing corporations that has been allowed to go on since quasi-privatization in 1994 is dealt with; at the moment the sector as a whole is in rather deep shit because of derivatives sales, but I am hoping the govt will be forced to step in given the importance of the sector for the housing market as a whole. The dutch local govts have been busy since roughly that time to keep the acreage of residential housing small, so as to drive up land prices. This has led to quite a bit of cannibalization (smaller houses being replaced by larger more expensive ones even though there is already a shortage), and this in turn has forced a lot of people to buy houses who, had it not been for the cheerleading, probably would’ve been a lot less keen on buying a house than they otherwise would’ve been. Non-rent-controlled is of course ridiculously expensive, but this is in part thanks to the housing bubble, so i’m not sure who to blame there.

    As for my experience as a renter: I grew up in a lower middle class household, lived in a neighborhood that consisted of >75% renters. Most people treated their house quite well, without there being a need for idiotically high deposits (though you were of course personally liable for any damage caused, but this seemed to be enough for the system to work). I do not know, though, how much culture matters: people here hate gouging rentiers just as much as they hate them anywhere, I suppose, and bad stuff of course happens to renters at times, but it’s mostly in the private sphere; the quasi-governmental corporations are fairly well-liked, even if they might be badly run, and even though their image might suffer a few more blows in the future.

    1. WorldisMorphing

      I would be curious to know what kind of rental homes you lived in. Were they single detached buildings, a townhouse à la Europeen, apartments ?

      If they were apartments, how was the soundproofing ?
      How were the building structurally built ? What percentage have concrete flooring ?
      Do the Dutch, Swiss and German (and the rest of Europe) have a building code with structural soundproofing requirements for apartments ?

      You see, although I personally would prefer ownership of a small detached house (since I value control of one’s living space, in addition to finding it –”natural”);I would not label it as an essential if it weren’t for the fact that where I live, (Québec, Canada) the rental business is a slumlord business, made all the more worse by the fact that the slumlords seem not to be aware of what they are.
      A slum doesn’t necessarily look like a Brazilian favela since you can easily hide the mediocrity of a structure.

      The devil is in the details. The question of rent vs ownership is absolutely unanswerable until we factor in objective quality criteria.

  12. ScottS

    Home ownership is a trap. Why renting is better:

    1. Job mobility.
    Renting means with 30 days notice, I can be off to somewhere with better job prospects.

    2. Right-sizing your home.
    Renting means I can have a practical 1 bedroom (or studio) when I’m single, a nicer place as a couple (married or living in sin), and a big house with a nice yard when I have kids, and back down the ladder again as those things change.

    3. Avoids Speculation.
    Rents are much lower than total cost of ownership (more than just mortgage!) for the same property because of speculation. Buying just isn’t a bargain.

    4. Avoids Real Estate Agent Full Employment Tax.
    Renting means I don’t have to pay some community college drop-out 7% of the value of my house to sell the stupid thing thanks to arcane legalese in the real estate laws. I just pay U-HAUL roughly $100 so I can pack up my things and scram.

    5. Not being a wage-slave to your employer.
    If my employer knows I have a mortgage, that’s one less bargaining chip I have in salary negotiation, (unpaid overtime) hours negotiation, etc. Renting means I can simply put my stuff in storage or sell it and crash at a friend or family member’s place until things get better. Selling an underwater house or going into foreclosure is much more traumatic.

    6. HOA nonsense negates the customization advantage
    Most home owners I’ve seen are bound by draconian HOA rules, or self-impose them because they are worried about resale value. Most rentiers make the kind of upgrades you would want 99% of the time anyway — at least in moderately upscale rentals.

    7. No one knows their neighbors anyway.
    Most home owners complain bitterly about their neighbors and seem to be in some perpetual cold war with them. As a well-behaved renter, I’ve found that I’m above those petty grievances and get along with others in my neighborhood even better than the owners do with each other.

    Not that I’m totally down on owning. I could see it happening. But it’s similar to owning a car versus using public transport. A car means freedom to roam anywhere there’s a road (and parking). It’s also an obligation to maintain and worry about when you are out and about (is it being broken into, stolen, abused by valet, etc) and pay extra for. Public transport is liberating in that, within certain boundaries, you don’t have those car worries and can simply explore areas where generally cars can’t go.

    I wonder about children, though. Does the rootless nature of renting stunt their emotional growth? I’ve known a few army (or, really, state department) brats who moved around a lot and they are very social, outgoing, extroverted and intelligent. It’s certainly possible to be rootless and well-adjusted.

    1. reslez

      Here’s another:

      8. When you rent you’re not at the mercy of pond scum banks and courts to respect your nebulous property rights. Your mortgage servicing company wants you to fail: illegal fees, paperwork scams, employees instructed to lie. The lender can sell your loan at any time to anyone and throw you to the sharks. In a country where you can pay on time or not even have a mortgage and still be foreclosed, homeowners don’t “own” anything. I’d rather rent, the thieving is more honest.

      1. ScottS

        ResLez,

        You put your finger on what I couldn’t quite articulate. You’re definitely right — even buying a house for cash means nothing to the banks and their divine right to grab anything they can.

        Also:
        9. The landlord is my 24/7 handyman.
        He’ll see through maintenance issues as if it’s his own property because it is.

        1. ScottS

          By all means, please continue to pay tens of thousands in depreciation and use your leased car very gently so that I may buy a virtually new car at a great discount.

      2. Ms G

        When you rent in a non rent-stabilized/controlled apartment you are at the mercy of the landlord’s freedom to kick you out any time he/she wants and to do so by doubling or tripling the rent from one month to the next (assuming the lease is over).

        So really, six of one half dozen of the other.

  13. Jim

    Lambert:

    Your essay raises some extremely important issues(beyond landlord/tenant issues) about the contemporary crisis of the left

    Earlier in history, populists of various types, tended to view property ownership as necessary for developing habits of responsibility and for giving individuals the necessary independence to function as citizens(for example the Jeffersonian citizen farmer) in a democracy—in essence widespread property ownership was once considered to be indispensable to the success of democracy.

    Was a key defect of the communist/socialist left its furious resentment against property?

    Furthermore, was the communist/socialist left also wrong about the introduction of an anti-idealist hierarchy of supposed reality where the base (understood as the economic-political foundation) had more supposed power to bring about effects than other spheres( such as the State, the legal system, education and culture itself) all of which had to be content with the role of simply superstructure– largely determined by this base?

    More specifically, did the demotion by the communist/socialist left to the secondary status of superstructure for the State–make the left incapable of seeing and then analyzing accurately the rise of such powerful (and perhaps largely independent from the base) bureaucratic forms as the National Security Agency?

    1. JTFaraday

      What’s that, his fall reading list? You didn’t expect him to actually answer, did you?

      Anyway, my bemusement at this entirely opaque list of questions did get me out of bed this morning.

      Certainly, any careful consideration of the plight of the disenfranchised and the simultaneous dilemma to democracy posed by those Lambert declines to call “the masses” could start with a survey of local electoral practices in colonial America and end with those philistines today, wealthy politically connected elites and economic dependents both, who would both viciously destroy any tradition of intellectual inquiry that doesn’t lead directly to a job, “jobs” (heavens, what a word) being the alpha and omega of all human existence before which all else must whither away.

      And it is true that one should be a comparative political historian in our contemporary global economy, so I suppose a tour through the reactionary economic determinism of narrow marxist ideologues that rendered democratic politics unnecessary in the so-called soviet union– while technically not necessary here because we do have the apostles of Lord Keynes to consider, who are much closer to home– wouldn’t hurt either.

      That probably won’t get him “a job” though, never mind one that will keep his nose tethered to the grindstone 40, 50, 60 hours a week revving up the economy, so I think you’re probably just wasting your time.

  14. Alexa

    Thanks, Crazy Horse, for the mention of Orlov’s account of the collapse of the Soviet Union.

    I remember Orlov giving an account of the same “excerpt” on the Thom Hartmann Radio Program several years ago.

    No doubt, the same circumstances here would be much more dire. (Although since the 2008 financial/banking crisis, the numbers of homeowners here has steadily declined. I’ve heard numerous so-called experts (on C-Span) predict that the numbers will (and should) continue to go down substantially.

    IOW, “owning a home” should no longer be part of “The American Dream” for many folks.

    As a matter of fact, some stated point-blank that millions of Americans today would no longer qualify for their mortgage loans (even if they’ve never missed a payment, nor had difficulty making their payments).

    I agree with allowing renters to have quite a bit of “leeway” when it comes to making a rental “their home.” We tend to do so, except for one house that we “co-own,” and this matter is always a bone of contention between myself and Mr A, and the other co-owner. Our feeling is that it’s okay to allow custom painting and other minor decorating changes, so long as there is an adequate deposit on hand to return the house or unit to the original condition (if the “changes” are outside of traditional decorating norms.)

  15. craazyman

    faaaaak Lambert you’d have thrown me in jail.

    I lived upstairs in an old house my last few months in college with a few sorority girls downstairs. The kitchen was so infested with cockroaches we hardly ventured in. Nobody cooked and the door stayed closed.

    Sometimes the roaches would crawl out into the living room and up the walls. For entertainment, if a few of us were home, I’d take an aerosol can and put a match in front and send a 3 or 4 foot flame right at the roach.

    it would leave a black ash circle on the wall where the roach used to be.

    In hindsight, this seems utterly ludicrous and embarrassing. That I would do something that insane frightens me, now.

    But not then. It was a lot of fun. I guess it was good for the painters too, after we left.

  16. Lambert Strether Post author

    Brutally summarizing, I’m hearing, rental with ownership rights a la Germany, the Netherlands, Yves, and the 9 (?) reasons. But who’s the “true” owner? (It’s almost as if the maintenance function should be socialized, since that’s the only real function of the rentier. Why not use the Jobs Guarantee to do that, and throw all the banksters out of the equation entirely? It would be irresponsible not to speculate, as Nooners says.

  17. Ms G

    ” … systems of home ownership and rental that “allow people to form stable, self-healing communities”?

    Yes, in this country. New York rent stabilization and rent control ensured stable middle class communities for decades. The aggressive shredding of this system since the early 1990s has resulted in multiple diasporas of previously stable communities and ensured that none will ever replace it (except for private equity RE investment funds who are taking over RS and RC properties with the goal of churning tenants to keep raising rents (which are illegally high in most cases)) and then “market-rating” etc. Likewise, none of the transient tenants could care less about the property except to ensure it suits whatever level of “quality of life” they need while they are there. There used to be a sense of stewardship when tenants knew they had a guarantee of a life-long tenancy so long as they did not live elsewhere and become mini-rentiers themselves, or deal drugs in the apartment, or pay rent on time.

    The idiots who have always parrotted the ideological (and false) claim that RS and RC increase rents bla bla bla helped the process along. It’s clear as day that the opposite is true. And now we have massive diaspora of stable residents and the take over of the city by transient “creative classes” or transient finance types or transient RE speculators or permanent Point O One Percenters who live in manses and own several properties elsewhere (to “summer” or “winter” at).

    From what I hear the RC/RS system in Santa Monica has worked very well and has not been gutted to the same extent as the one in NY. San Francisco also has rent control, but I know nothing about how that has worked out for tenants and stability, etc.

    Read more at http://www.nakedcapitalism.com/2013/09/dear-landlord-please-heed-these-words-that-i-speak.html#Ih6GHXD6xCs8Gc3A.99

    1. Ms G

      This is not so much as system of home-ownership in the literal sense, as a form of regulation of property rights to prevent predatory RE speculation causing the unaffordability of housing, ergo, the creation of unstable communities.

      Not that different from the purpose of Glass Steagall in the context of our economy (preventing speculation with people’s money, and the destructive instability with which we are now so familiar).

  18. Ms G

    “Someone like Grubman in theory ought to be in a co-op or a condo.”

    The rich and famous know a bargain when they see it, same as everyone else. Grubman could have gotten a condo or a coop if he wanted. But why would he when he’s got a rent stabilized *floor* that he’s allowed to renovate for less than the cost (upfront or over a decade) of buying a coop/condo and all the headaches and taxes that includes.

    It does seem surprising that Grubman would still be a rent stabilized tenant given the decontrol provisions that automatically decontrol a tenancy once the tenant’s income is over (I believe) $200K.

    1. Yves Smith

      Grubman was rumored to be paying $9000 a month when I moved in. He’s NOT stabilized.

      I’d hazard he’s paying at least triple that now. The issue is that he’d have trouble getting anywhere near as much space in a comparable address. He’d have to put up too much cash.

      So it is a bargain, but not for the monthly burn, but the all in cost (as in the opportunity cost of tying up that much of his own capital were he to get anything approaching comparable space). He’s traded a less tony address (and not so hot public spaces and less spit and polish building maintenance) for a bigger pad in the city. He does own real estate, but in the Hamptons.

  19. Ms G

    One very successful model of *affordable* (for working people) cooperative ownership was the housing built by trade unions, e.g., the Amalgamated housing complexes, of which there are several in New York City. But then that would never happen today because unions don’t build really nice housing that is a priori affordable compared to the real wages of its membership.

    Here’s a good article on Wikipedia re. this subject. http://en.wikipedia.org/wiki/Cooperative_Village

  20. habenicht

    Although I have never owned property in the US, I did own a condo briefly while living in Germany. I can still recall the curiosity and disbelief the locals had when I told them I wanted to buy a place so I did not have to rent. They simply did not see any reason or advantage to buying over renting, but that did not stop me and my American dream! USA!!

    So further along in the story, I had to sell the place in less than 5 years and probably lost money in euro terms on the deal (so the German locals were right!). The whole experience of having that American dream challenged and critically reviewed really changed my perception of homeownership returning to the USA. (those sensible Germans!) The land title system currently in disarray via MERS shenanigans is not getting me warmer or fuzzier to the idea of buying something here despite all time low interest rates.

    Still, I actually had a lot of respect for the whole condo buying process in Germany (this was around the turn of the century – assuming it is still current). My understanding is that there is a land office with a big book with every property in the town listed in it. If your name is in the book for a certain property, then you own it. Very Simple. Change in title all occurs in this big book. You get a copy of the page with the line item of the place you own with your name next to it as a kind of deed once you buy the place. (I did not have a mortgage which simplified the process for me)

  21. TomDority

    This article spells out what our neo-economics has done. These very discussions were had over 100 years ago and, re-emerged in the 20′s.
    Our revenues system (taxes) plays a very gigantic roll in the inequality we have and it does come down to land/property in the classical economic vocabulary. Neo-economics has erased the distinction between land and capital – another words, neo-economics has only two legs of production where three used to exist. Labor/land/capital. Also, confusion exists between the terms “money’ and ‘wealth’ – the two terms are not even close.
    Wealth requires labor in it’s creation. Money is an aid to transactions…a placeholder of value.

    So, we go about taxing labor and the wealth created by labor… we go further, we un-tax speculation, un-earned income, carry trades, arbritage trades and other predatory practices —- it is this unjust revenue system that favors the speculators and rentiers… in a neo-economic structure that has driven communities apart and destroyed the alternative public financing.

    It does not have to be this way – it can change.

    Read ‘Tax Facts – published in the interest of sound economics and american ideals’

    Tax Facts came out in the 1920′s

    Also a more contemporary paper ‘Neo-classical Economics as a Stratagem
    against Henry George’
    Mason Gaffney

    Finally a quote from Tax Facts

    ‘Legal Gambling
    The gloom is fading from the real estate situation. More nibbles during the last few weeks than the last three years. If January brings us good rains, this next year will open the door to the sunshine – a case of rain bringing the sun.
    It is to be hoped, however, that there will never be another boom. The crash of the boom of 1923 was due to the same causes that wrecked the wall street stock market. People sold what they did not own. They made a payment down in the hope of getting the property off their hands before it began to burn. Real estate fell into the hands of sharp-shooting gamblers who had no interest in land. To them it was just a pile of blue chips on a roulette wheel.’

    “In spite of the ingenious methods devised by statesmen and financiers to get more revenue from large fortunes, and regardless of whether the maximum sur tax remains at 25% or is raised or lowered, it is still true that it would be better to stop the speculative incomes at the source, rather than attempt to recover them after they have passed into the hands of profiteers.
    If a man earns his income by producing wealth nothing should be done to hamper him. For has he not given employment to labor, and has he not produced goods for our consumption? To cripple or burden such a man means that he is necessarily forced to employ fewer men, and to make less goods, which tends to decrease wages, unemployment, and increased cost of living.
    If, however, a man’s income is not made in producing wealth and employing labor, but is due to speculation, the case is altogether different. The speculator as a speculator, whether his holdings be mineral lands, forests, power sites, agricultural lands, or city lots, employs no labor and produces no wealth. He adds nothing to the riches of the country, but merely takes toll from those who do employ labor and produce wealth.
    If part of the speculator’s income – no matter how large a part – be taken in taxation, it will not decrease employment or lessen the production of wealth. Whereas, if the producer’s income be taxed it will tend to limit employment and stop the production of wealth.
    Our lawmakers will do well, therefore, to pay less attention to the rate on incomes, and more to the source from whence they are drawn.”

  22. Olivier

    As luck would have it there is an excellent letter on this very topic in the July 18 issue of the LRB. Check it out: http://www.lrb.co.uk/v35/n14/letters I live in Germany and can attest to everything in it; the same is true in France. OTOH I also spent 7 years in the US and the (as I perceived it) degrading renter experience there was a big reason for my return to Europe.

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