Dear Landlord: Please Heed These Words That I Speak

Sunday, 22 September 2013 12:11 By Lambert Strether, Naked Capitalism | Op-Ed
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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

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. …

This 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?


* 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.

** 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?

This piece was reprinted by Truthout with permission or license. It may not be reproduced in any form without permission or license from the source.

Lambert Strether

Lambert Strether is a contributing author at Naked Capitalism and blogs at Corrente.

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