Why Rent is NOT Theft

So there has been this thing going around the interwebs that has been gaining traction. Rent is theft, often followed by "Landlords are parasites," "Housing should be free," and "Arrest them all." And you see it almost everywhere. You see it on Reddit, on Facebook, Twitter, even see it on far-right areas like 4chan. So what the heck is going on here?

The sentiment is understandable. At least, the rent really is too darn high. In fact, there is an entire political party dedicated to it. Rent has skyrocketed in the USA in the last two decades, and while most people's earnings have unfortunately largely stayed the same, it's frustrating. It's annoying. Nobody likes paying rent.

Unfortunately, this has led to many people misplacing this blame on landlords when it should really fall on government incompetence. The Federal Reserve and big banks agree. But to understand why this is, first off, we need to explain why rent is not an inherently unfair transaction.

Instance, take the following scenario. This dude is Todd. Todd has been saving up by working a soul-crushing desk job that he hates for the last 15 years and would now like to buy a house. Todd puts money down alone to buy land and pay some construction workers to build his dream home. Now, if you are like most people, you probably don't see anything wrong with this transaction. He paid some guys to build a home. Both parties benefited, so no problem, right? But here's the thing. If you understand this, you actually kind of already understand why rent is not theft. Find out why. Let's continue.

Five years later, Todd's job forces him to move to another state. But he still owes money on his mortgage, and he can't afford to pay the upkeep on two places at once. So Todd now has a choice. He can either sell his home to another buyer to pay off his mortgage and move on, or he can rent it out. Todd decides to keep his home, and so he rents it out to this dude, Carl.

This is where we run into the outcries. The argument goes that because Todd is not actually providing Carl with any kind of labor, he is just leeching off Carl by holding the housing as a commodity, often alongside risk and investing isn't real work or it's not valuable. Except that statement is total nonsense. And to find out why, well, first off, investing absolutely is valuable because if Todd didn't invest into paying the construction company to build the house in the first place, then Carl wouldn't even have it as a place to rent because the house wouldn't even exist in the first place. Todd is therefore just a proxy for the construction company, as they would have no incentive to work to build his house for free. That's why if you understand why there's nothing wrong with that transaction, you, in a way, understand there's nothing wrong with this transaction.

It's similar to if you had bought a car and then five years later decided to sell that car. Then some prospective buyer comes along and says, "Hey, you weren't the specific worker who put in the labor to build that car, so you should hand it off to me for free." It's completely ridiculous and ignores the obvious fact that car manufacturers wouldn't build cars if people didn't buy them. The entire point of money is as a trade medium so that people don't have to be the specific person to provide the labor for every single transaction. Imagine how annoying and inefficient that would be if we did have to do that.

Also, moving back to Todd, he actually did do work. He was only able to put money down to start that investment into this house because he was saving up for years from his actual job. Should Todd have also done that work for free? This is the general problem with saying that things of value should be provided to you for free. It isn't actually free. Somebody eventually down the line has to pay for it or do the work for it. The fantasy of free rent would therefore not really be free. Somebody would be paying for it.

Then there is risk. Risk itself isn't actually work, but it is absolutely an important factor in work, and to ignore this is insanity. For instance, if you are a farmer and don't consider the risks involved with a bad harvest, what happens to your harvest? Oh yeah, that happens. Risk association itself is very valuable, which is why people will pay others to take it instead of themselves. Think about it. If risk had no value at all, the entire insurance industry wouldn't even exist, as their entire business model is around others paying them to take on risks that their clients do not want. So saying that risk doesn't equal work is completely missing the point.

But let's say you still aren't convinced and hypothetically, you could make charging rent illegal. What would happen? Well, it would quickly become a buyer's only market since you would lose money on the upkeep letting others stay on your property rent-free. So people like Todd, rather than having a choice to rent out or sell, would effectively really only have one choice, and they would just sell their home. Todd would just sell, and Carl wouldn't have a place to stay.

What about apartment complexes? Well, that's even worse. The construction and management of apartments are generally supported by entire teams of investors. They would have no incentive to continue this at all, so they would liquidate whatever property they have left, and no one in their right minds would build new ones in a market where rent is considered illegal. As the low-cost housing market then erodes, we would quickly find out that risk does indeed provide value to society because, as it turns out, building properties isn't free. So, in other words, making rent illegal really just means requiring everyone to sell on ownership. And the stupidest thing about that is that since renters are generally people who can't afford to buy, this broken market could end up hurting the poor the most.

Now, at some point, that guy with the funky hairdo is going to stand up and shout, "But private property is exploitation! All private property should be abolished and communally owned!" And thus, the mask comes off. The whole "rent is theft" thing is just another spin on the ridiculous old Marxist narrative that private property should be owned by some collective force. I've already made a video on this explaining why socialism and communism just result in a totalitarian state. A link shall be in the description below. In short, it won't actually be the collective that owns the private property, but the government. And our so-called free housing will more likely be just a government-mandated cockpit alongside our government-mandated 12 hours a day slave job. Yeah, hard pass.

This idea that we can fix the low-cost housing crisis by swapping our entire economic and political system for one that has a track record of complete failure and dictatorships is also pure insanity. The conclusion to this is that when someone says "rent is theft," they are basically saying that either construction workers should work for free, or people should take on risks and investments for them for free, or the government should just own everything because that's totally not an idea that has been tried and failed before. Oh, actually, it has. But guess what? Demanding someone give something for free to you is called, oh yeah, that's called theft. So not only is rent not theft, but demanding someone give you their private property for use for free is theft.

So now that we've gone over why rent is not theft, that leaves us the question: If it's not the "land chads" who are at fault for the housing crisis, what is? To some degree, it's pretty simple: supply and demand. Ever since the housing crisis of 2007, brought on by banking greed and government ineptitude, the housing market has been in chaos. There isn't enough supply of housing despite very large demand. Therefore, price goes up. Pretty simple.

So why is it then that the supply does not rise? Why don't people just invest into more construction? After all, the best time to get into business is generally when there is a demand for it. Well, that's where we run into the wall of failure. It's not any one person or agency's fault, but rather multiple layers of government overreach, incompetence, and corruption.

First off, you have the government disincentivizing the construction of low-cost housing with ridiculous fees that must be paid to start any new development. These fees can easily reach into over a hundred thousand dollars, and for apartments, these fees are often on a per-unit basis. This isn't the cost of construction; this is legit just the government telling you to pay up. There are also zoning laws and community restrictions that are often overzealous and unnecessary.

Then, from the side of incompetence, the permit process for new development from cities is often ridiculously slow and inefficient, sometimes lasting years to get anything approved, making the investment even riskier. You also get inept people who propose ideas to fix the housing crisis that don't actually help, such as progressives whining about gentrification despite the fact that even left-wing publications these days admit that the impact of gentrification is well overblown. The idea is like rent control as well, which can help in the short term but have a long-term effect of disincentivizing development because it targets the symptoms, not the problem. These are pie-in-the-sky ideas that waste time and don't actually help in the supply of housing.

Lastly, you get issues of corruption and greed. You see, everything I just mentioned is not really that hotly debated among economists. Nearly all of them agree. So why the inaction from Congress to loosen restrictions and make things easier? Well, a sad part of it is because not everyone wants to fix the housing crisis. Inflated housing costs are good for people who just want to park billions in real estate, so a lot of lobbying and backroom deals goes on that but often prevents Congress from moving their butts.

In conclusion, the irony here is that the problems leading to the rent spikes are largely to blame on government, and yet the claim that "rent is theft" generally comes packaged with the idea that we should abolish private property and give the government full control of dividing it out. When it's exactly that kind of thinking that gets us into these messes. Thank you for watching.