I'm just trying to think through the implications of the theoretical scenario of disallowing the renting of housing. My goal would be to reduce wealth inequality - as rent is generally a wealth transfer from the poor to the rich - but this would pull on so many threads in the economy that I wanted some other opinions. So a builder or investor could own an apartment complex and sell the individual apartments, and the buyers could pay in installments that would be essentially the same as renting, from the perspective of the person living there, with the difference being that after 10 or 20 or 30 years the occupant would own the apartment and not owe anything but taxes and maintenance. If someone knows that they are only going to stay someplace for a year or two then the buying/selling process would need to be much simpler and cheaper to avoid all of the transaction costs and paperwork. How to distinguish apartments from hotels is another question.
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1$\begingroup$ Welcome to Economics:SE. Thank you for your question; please consider revising it to be more in line with our community expectations. Like many other stacks, we expect questions to provide evidence of prior research. That helps us to understand the question, and avoids our repeating work you've already done. Our help center, and other stacks provide additional resources to assist with revisions. $\endgroup$– 1muflon1 ♦Commented Mar 18, 2021 at 16:55
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$\begingroup$ Note that paying in instalments is called a mortgage. $\endgroup$– Criticizing Israel not allowedCommented Mar 19, 2021 at 17:08
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$\begingroup$ Sounds like you answered your own question -- instead of paying 'rent' people would pay 'interest.' It's true that in the latter case you eventually own the place, but you also pay more than the renter. $\endgroup$– DanielCommented Mar 19, 2021 at 22:18
3 Answers
If the required downpayment is substantial there will be fewer households if renting is illegal. This means the average number of people per household would be greater. Some people would be living in larger households as they save for a downpayment. If the required downpayment is zero then price volatility would imply that some home sellers have a debt from an earlier home ownership experience. If experience shows that debtors tend not to pay then the required downpayment will be substantial. The most likely outcome is substantial required downpayments and a greater average number of persons per household.
When there is an attempt to control the market in this respect, there must be a determination to make the control total.
The effect of outlawing landlord and tenant relations - which I think is what you have in mind by the "disallowing the renting of housing" - would be to force the majority out of relations of landlord and tenant, and into relations of mortgage-lender and borrower instead.
Rent would still be extracted, but it would be conceived of as "interest" - the charge levied for the rental of pure capital, which is used by the borrower to purchase the house - rather than as a charge levied for the rental of the house directly. It is also not necessary, with a mortgage, that the principal sum is ever repaid, so this path does not necessarily lead to ownership.
Already, through "buy-to-let" mortgages, the majority of rent is ultimately extracted not by the landlord, but by the mortgage-lender to which the landlord accounts in turn.
The main problem we currently have is that there is an absolute shortage of housing units relative to the number of households [1], allowing the asset-rich to benefit at the expense of the asset-poor, and any solution will involve forcing up the supply of units dramatically.
I too would be interested in gaining a fuller understanding of why such supply is short - shorter in many respects than might be expected in a functioning market, let alone relative to what state planning has been shown capable of delivering in the past.
[1] http://commonslibrary.parliament.uk/research-briefings/cbp-7671
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$\begingroup$ Hi, welcome to Economics:Stack Exchange. Please consider improving the answer by adding references from reputable sources. As many other science stacks we encourage links to external sources. See our help center. $\endgroup$– 1muflon1 ♦Commented Mar 21, 2021 at 18:17
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$\begingroup$ @1muflon1, what exactly is there to source, except maybe the claim of a shortage (which at least in the UK, is as obvious as that the sky is blue)? commonslibrary.parliament.uk/research-briefings/cbp-7671 $\endgroup$– SteveCommented Mar 21, 2021 at 18:45
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$\begingroup$ In this particular case the paragraphs 1, 3, 4 and 5 $\endgroup$– 1muflon1 ♦Commented Mar 21, 2021 at 18:48
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$\begingroup$ @1muflon1, yes I anticipated that 5 could be sourced (although I scarcely see what it usefully adds), but I'm struggling to understand what a source would look like for the others - for example, is the OPs question so common that there will be an external source that specifically says it is possible for the rich to exploit the poor by loaning capital at interest as well as from leasing housing at excess rents? $\endgroup$– SteveCommented Mar 21, 2021 at 18:59
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$\begingroup$ That’s up to you to find you are the author of the answer if there is no such source then the answer will stay with the post notice and other users are encouraged to edit out unsourced parts of vote to delete the answer $\endgroup$– 1muflon1 ♦Commented Mar 21, 2021 at 19:02
Outlawing renting would be a disaster for the economy and moreover, banning landlords from renting out their properties wouldn't reduce economic inequality. For starters, not everyone who rents an apartment or house rather then owns one is poor, many middle and upper class households also rent. These demographics tend to rent for the convenience of it, as the landlord (or the landlord's management company) is the one responsible for the upkeep of and repairs to the property. Also, such a law would not only harm tenants of regular rental homes, but also residents of leasehold mobile home communities and floating home marinas where homeowners own the structure, but rent the land (or boat slip) the house sits on. Not to mention, economic inequality in itself is not a bad thing. Some inequality is inevitable, as not everyone gets a decent head start as children, not everyone has the same priorities and passions, some people have more drive to succeed and hustle than others, some are better at certain lucrative things than others, people have differing abilities, etc. The only time such inequality becomes a problem though, is when large numbers of people are starving in the streets cause they can't afford to meet their most basic of needs, and at least in the food front, the percentage of people generally starving due to lack of money is rather low, as even the most destitute homeless sleeping on the side of the road will usually obtain food somehow (typically through begging, minor shoplifting, foraging, dumpster diving, or via a soup kitchen). By and large, people should have the option of whether they want to rent a dwelling, or they want to buy one.
