It’s a commonplace among right-wing critics of rent control that such policies lead to housing shortages; when rents are capped, landlords do the bare minimum maintenance and milk old buildings for whatever rents they can bring, without putting any new money into them.
But it occurs to me that rent controls may well be of no benefit even to current residents. When rents are capped, it’s in the interest of an incumbent tenant to hold onto her lease indefinitely — regardless of whether she actually lives in the apartment — and sublet it as a source of profit. So in rent-controlled buildings, you commonly see actual residents at the end of long chains of subleases, paying rents far higher than the original rents charged by the landlord.
It also occurs to me that, to whatever extent the state’s ceiling on rents actually lowers them, it does so only as a secondary counter-measure to its primary action of putting a floor under rents.
Think about it: The state’s collusion with landlord is probably the oldest system of class exploitation in the world. The first states were controlled by the people who owned the land, in order to extract rents from the slaves, serfs and tenants who worked it. This was true from the Patricians of the Roman Republic right down to the Whig landed oligarchy in the British parliament of the 19th century.
Today, real estate developers are the most powerful influence on just about every local government in the United States. Most local governments are showcase properties of the real estate industry. Government not only enforces artificial title to vacant and unimproved land held out of use for speculative purposes, but actively colludes with developers to promote a sprawl-based, monoculture model of development. The result is to drive up rents in older, centrally located neighborhoods and gentrify poor residents out of there.
So what the state does with its left hand, through rent control, is a feeble effort to partially offset what it already did with its strong right hand. It’s another example of the state breaking your legs and giving you crutches.
Our friends the Georgists — a venerable branch of left-wing free market thought — are pretty good at grasping the problem of rents and land monopoly; they’re just bad at understanding the root cause of the problem, and what to do about it. They advocate shifting all taxes onto the site value of land, in order to socialize artificial scarcity rents and make it costly to hold vacant land out of use. But most monopoly rents on land, arguably, result from state intervention.
Even holding vacant land out of use is a lot cheaper for land speculators, thanks to the state. As Scott Horton mentioned in a recent interview with C4SS board member Gary Chartier at Antiwar Radio, “you can be an absentee landlord for decades, and the sheriff will keep off squatters.”
One of the biggest points of dissension between different schools of anarchy is on the proper basis of land ownership. Lots of anarchists, including market anarchists in the individualist tradition like me, favor some sort of usufructory, or occupancy-and-use, basis for title. Some are Georgists, who want the community to own land in common and charge rents on it. Most of the folks at C4SS are Lockeans, who think that once land is legitimately appropriated via labor homesteading, absentee landlordism or simply holding it out of use is perfectly fine.
But once you remove the active role of the state in subsidizing absentee landlordism, much of the disagreement among us becomes theoretical rather than practical.
Even in a theoretically Lockean system, I suspect occupancy-and-use would be the default in relatively sparsely populated areas, simply because the cost of excluding squatters would exceed the likely income stream from the land. A stateless society with fully internalized security costs would have, in many ways, nearly the same effect on the cost of holding land out of use as a tax on land value. The divorce of ownership from occupancy and use is something that carries an economic cost — and that cost is currently borne by the taxpayers rather than by those who profit on divorcing ownership from occupancy.
Instead of minimal efforts to correct the side-effects of state-enforced privilege, we need to strike at the root of the problem and break the unholy alliance between state and landlord.
Citations to this article:
- Kevin Carson, Rent ceiling: Abolish the state floor under them, Goa [India] Herald
In Britain it is even worse, if possible. We have "Housing Benefit", a welfare payment to people with an income below a certain amount to top up, or pay entirely, for their housing costs. Since there isn't enough public sector housing for all these people (which would at least contain the subsidy within the state sector) this sets an artificial floor on private sector rents. A floor that everyone else, even if not entitled to Housing Benefit, has to pay. A floor which, because property prices are capitalised rents, and the rents incorporate this artificial floor, means that everyone wanting to buy a home pays above this floor.
The only people who actually gain from Housing Benefit are people with more than one house, or people who have finished paying for their own home and whose next step is to trade down to a smaller home when the family flies the nest or whatever. The £25bn that Housing Benefit "costs" from us as tax payers we pay all over again in our rent or mortgage payments.
I'm a georgist and I see it this way: If you base land ownership on the first method you cite, occupancy-and-use, who decides who gets the best land? Why does one group get the best land and not another? Do they fight for it? Is it just finders keepers? Does a judicial body determine the merit of their claim? Not only is this unfair if we could reset all property rights, but in the world we actually live in we have property rights that people expect to be honoured!
The third method, where ownership is instituted by use and then absentee ownership is allowed, basically says "I was here first so this land is mine". That's the system that we have today, where you can own land at virtually no cost.
The second method you site, the Georgist argument, uses the market's assessment of the value of different plots of land, then charges the owner according to that value. If the earth is our common heritage, as Georgists assert, people should pay the community in proportion to what they take. It also doesn't have to disturb existing property rights since we already charge property taxes and it wouldn't challenge people's right to the exclusive use of the land they currently own.
Your article doesn't fully understand the Georgist analysis of land rents. Charging a land value tax wouldn't just penalize holding land out of use, it would also raise funds for public use without raising the rents that landlords could charge their tenants. Taxes would be paid out of rents, not added onto them. There are a lot of ways to describe this phenomenon, but let me first appeal to authority by saying that economic theory and analysis is not in contention on this point: the supply of land is perfectly inelastic; it is in fixed supply; they are not making anymore of it. If a landlord could charge their tenants any higher rents, they would be doing it already! Furthermore, raising money through a land tax would allow you, ideally, to reduce other taxes that fall on the poor or whatever else you want to do with it.
Of course, none of this is consistent with a stateless society; you would need a state to collect taxes and enforce property rights. The heart of Georgism, however, is to identify all the values that are created by the community itself, and insofar as those values are already commodified (of which the site value of land is the major one but natural resources, licensed monopolies, legal privileges, inherited knowledge, intellectual patents also come to mind), Georgists seek to capture those values for redistribution to the community. Without a state or some kind of organization or institution you couldn't do that, and individuals would be free to privatize the community created values once again.
The idea of the state evolved straight from some of the largest private landlords, so I often fail to see the difference in attacking the state vs attacking landlordism. It is all just feudalism and tyranny.
Furthermore, if one believes in a universal conception of justice regarding the right not to be murdered or robbed, then the idea of value capture and the Citizen's Dividend could be conceived of as falling directly under that, as per the Law of Equal Liberty.
Setting that up on a local basis seems like an exquisite solution for Free Cities given that value capture has proven successful in places like Hong Kong. It would achieve prosperity and justice, and provide the access rights necessary for liberty to be meaningful.
One cannot be free as a trespasser on the planet!
DeanBC-
Nock via Oppenheimer defined a "state" as being different from legitimate "governance".
In his view, a "state" is specifically set-up to allow rentier classes (landowners, bankers, & owners of capital) via privilege to plunder the labor-based wealth of those excluded by the privilege. Legitimate governance protects life, liberty and labor-based property in a negative liberty framework.
Most market anarchists define a state as having a monopoly on force within a specific territory.
In a non-proviso Lockean world, what is the difference between a landowner and their definition of a state?
Hi! One of your Georgist friends here. I'd like to offer three points in response.
1) Your discussion of rent control suggests, but doesn't quite state, one point — that if a leaseholder is allowed by law to keep a rent-regulated lease indefinitely, rent accrues the leaseholder. Many a New York City landlord has paid substantial lump sums to get people to give up the leases to their apartments.
2) Monopoly rents on land don't result from state intervention, unless you would consider the state's protection of secure title to land an "intervention." Monopoly rents on land result from the fact that land sites are unique, and some sites offer more productive potential than others.
3) A society that collected land rent for public revenue would experience dramatic "in-filling" of valuable unused and underused land in and around cities. This would leave a substantial amount of rural land without market value. In that case, your occupancy-and-use model would work just fine. I argue, furthermore, that the rent fund would be quite sufficient to maintain basic public infrastructure in such sparsely-populated areas. That would be a very cost-effective anti-poverty program!
Kevin… you are awesome.
To go off what Lindy said, I find that mutualism handles absentee ownership pretty well, but either doesn't acknowledge or downplays the role of locational rents that accrue to current residents. Absentee ownership is a relatively small issue compared to underuse of land. If you build a big parking lot in the middle of Manhattan, that's still using the land, but it's still preventing it from being put to its optimal use, and still ends up pushing people further out onto the margins. It's not just that valuable land should be used — it should be used as efficiently as possible so as to free up other land for less intensive purposes. Otherwise, you still have the problem of rent. To really understand the Georgist critique, you need to understand the margin of production. Google it if you haven't already. I'd be very interested in hearing how mutualism addresses these issues, but I have yet to see anything so far.
Rent control actually increases rents on properties not covered by it (including I assume, most state-onwed properties). Consider, everyone who actually pays the lower rents has an incentive to occupy more land than they otherwise would, consuming more supply of land despite there not being any more real demand. It would be interesting to compare the political influence of landlords who's properties were covered by rent control with those whose properties aren't.
Wrong. That only applied once land became the limiting factor among the three traditional factors of production. Before that, and whenever it again ceased to apply, control was exercised through whichever of the other factors was the limiting one. See the work of Evsey Domar, e.g. as discussed by Brad Delong and Paul Krugman.
That’s a misunderstanding arising from supposing that all Georgists’ ideas and their applicability corresponds to those of current Georgists. The ideas haven’t changed, but they were a far better match to the circumstances of the late 19th century western states of the U.S.A. than to anywhere today, or indeed to most of 19th century Europe (where the ideas briefly caught on for reasons unrelated to their applicability). A much emptier California had land held back in anticipation of future but imminent population increases raising the market prices naturally; this led to prices above those that the supply and demand of the time would have produced, if only those conditions had been anticipated to continue. So the Georgist ideas really fitted, up to a point, but they failed to account that such withholding was a market response to actually anticipated population changes. And their approach would have defeated the premiums raised by a similar mechanism in the colonisation of South Australia organised by the likes of Edward Gibbon Wakefield, that were not applied to private gain so much as to developing the infrastructure of the colony and bringing in settlers. It worked, too, apart from not building an enduring land rental and capital revenue base on the back of that; Wakefield had thought that a tax base could largely be avoided.
If you do not treat occupancy and use as a basis for title so much as a (rebuttable) evidence for something that is a basis – an outward sign of inward grace, as it were – the conceptual disagreement vanishes and you get a framework that helps you resolve particular cases. That “something” is the intimate involving and connecting of a person in and to the thing that makes the thing physically inseparable from the extension of his person, an extension of his person that is what “property” conceptually is (and no messing about saying “her” – that suggests a reference to a specific person mentioned earlier rather than a person in general, and so breaks the flow by making me backtrack for at least an instant to look for the missed reference that isn’t there). To give a specific example, absentee landlordism based on past acquisition of this sort is theoretically possible, but voluntary absenteeism could often be taken as (rebuttable) evidence of a separation of that personal connection, reversing the process of acquisition. Clearly, though, conquest (imposing absenteeism on the conquered through exile) does not in itself create a better, later title and destroy the earlier title – though, with the effluxion of time and the vanishing of any truly connected sequence of heirs and successors, that may still happen. More specifically still, compare and contrast the soundness of claims of various peoples to Palestine at various times, allowing for how those soundnesses changed over time and with circumstances.
I may reply to some of the other commenters later and separately, hopefully after comments are fixed so they go in with correct dates and get placed properly in the sequence. For now, because your damned fool system often thinks I am posting comments from 1999, let me tell readers that I am really posting this in the early hours of 23.12.11 (in Victoria, Australia).
I have had a long-running dispute with Georgists for several reasons. One, it practically requires a State, which is a negative in my opinion. I do not want a State collecting the so-called "full land rent" for their nefarious purposes. Second, if they achieve their goal of making all land equivalent in cost, there will be no basis to compute the best use of land.
Third, as you have mentioned, the problems attributed to landlords are largely problems which should be laid at the feet of the State.
Lastly, even in a Lockean world, provided that there is no State, absentee landowners would bear the full cost of defending their property. If it isn't worth defending, they'll stop occupying it. The Georgists' major objection will simply vanish.
I do think so that they should put a ceiling on Liverpool apartments. It's very restricting because it's business in the first place.