Why We Should Be Arguing About Rent

by Alexander Ferrer

Rent is a concept that has been taken for granted for so long in the context of housing policy discussions that its definition has become invisible. The questions of housing policy, to be sure, are often conceptualized and argued along the lines of rent: rents are too high; rents are too low for housing to be repaired adequately; rents capture too much of tenant incomes; rents are theft; rents must be frozen, abolished, cancelled. Today, particular concern is directed toward the lowering of rents, given the unprecedented magnitude of the housing crisis. The question of how best to do so is endlessly divisive. I argue that one cause for this division is a divergence of understanding as to what rent actually is between parties that are earnestly interested in solving the housing crisis – a rift that is under-discussed. These divergent conceptions of rent, what I am terming here ‘economic’ and ‘relational’ approaches, lead to different conceptions of the housing crisis and tend to emphasize different solutions for what is generally a shared set of priorities. Placing the divergent conceptions of rent into conversation with one another has the potential to enrich our understanding of the origins of and solutions to the housing crisis.

The basic fault lines dividing planners, urbanists, tenant activists, housing advocates, and others who are interested in the housing crisis are well known. The catastrophic convergence of Coronavirus induced economic disruption and the housing crisis has brought these issues to the fore in especially poignant ways. The purpose of this exercise is to interrogate and compare two distinct ways in which rent is understood and the implications of these understandings for housing policy.

Mainstream housing economists do not ascribe any particular significance to rent, at least in the way that rent as payment from landlord to tenant is typically understood. Instead, mainstream economics considers rent to be simply a transactional exchange: payment for the housing services the landlord provides to the tenant, with the price of payment determined by conditions of supply and demand. There is no qualitative distinction made between rents and housing prices. The residents of owner-occupied housing are also conceptualized as tenants, albeit of their own property. The language of ‘tenant’ and ‘landlord’, in fact, is meaningless in economic approaches, which construct a ‘consumer of housing services’ and ‘producer of housing services’ in its stead. Where economics is concerned with rent as an object of analysis, it is primarily concerned with “economic rents” or “monopoly rents”, that is to say, rents that accrue to housing service producers under conditions of constrained supply and imperfect competition. Otherwise known as economic profit, these “rents” are simply the excess payment that a landlord procures.

Counterposed to conceptions of rent as ‘payment for housing services’ are relational approaches, which are often rooted in critical social science and political economy. Relational approaches center (unsurprisingly) the relationship between landlord and tenant, as mediated by the ownership of property. Informed by Marxist formulations, relational approaches typically hold that through the ownership of property, landlords extract a portion of the value tenants produce through their labor (or have redistributed to them from socially produced goods). In other words, rent is an appropriation, by the landlord, of value produced elsewhere in the economy, which is made possible through the property relationship.

The economic relationship between tenant and landlord is not the only, or sometimes even primary, concern of relational approaches, however. Of fundamental concern is also the imbalance of power that exists in the relationship, which is fully backed by the power of courts and cops. For many advocates, relational approaches to rent have been internalized and underpin their understandings of the lived experience of especially low income and racially marginalized tenants navigating the housing system, who are often forced to deal with considerable caprice, harassment, inconvenience, discrimination, and other forms of harm enabled by landlords’ relative power over them.

The divergence of economic and relational approaches to understanding rent has significant implications for how each perspective defines and addresses the housing crisis.

A basic issue that underpins these diverging conceptions of rent is whether or not landlords are actually providing a service. The position of mainstream economists on this issue is clear. Landlords are housing service providers who produce housing as a commodity that is priced and sold in the market. Rent is the price of the services generated by the landlord, and in the case of homeowners, these services are captured in the concept of imputed rent, which is paid to oneself. This argument is often framed through the claim that landlords are simply business owners like any other and are dispassionately pursuing their own rational self-interest. Naturally, landlords will seek to maximize their profit under any conditions, and work to defend advantages that accrue to them, such as housing scarcity. The relationship between tenant and owner itself is not problematized, only the terms of the exchange, which given prevailing economic conditions favor landlords. Taking steps to alter those prevailing conditions is sufficient to rationalize the exchange and solve the problem of excessively high rents.

In the relational approach, by contrast, landlords are not seen to be the producers of anything. Landlords are merely owners of a property relation that entitles them to the appropriation of value produced elsewhere, usually from the tenant’s own labor, returned in the form of wages. Consequently, in this formulation, rent (for existing homes) is not the price for a housing service that results from a system of commodity production, but rather a form of extraction emanating from a power imbalance.

Advocates of a relational approach, moreover, often have a moral objection to the terms of the rental relationship itself which stems from this analysis. The objection is often twofold. First, tenants are exploited under the conditions of the landlord-tenant relationship, and if they had a choice in the matter they would not submit to the extraction of value on these terms. Second, according to many adherents to this view, earning money from nothing but ownership of an asset is inherently wrong, as wealth generated without production is objectionable. Of course, this represents the extreme formulation of a view that is almost universally moderated in practice and which centers around seeking more equitable and ethical terms of the relationship (better repair, more protections for tenants, etc.). Nonetheless, the relational perspective also predisposes adherents to advocate for the abolition of the rental relationship itself.

The most extreme political contention that manifests as a result of this rift pertains to the issue of housing supply. Participants in the housing policy debate who subscribe to a relational approach to rents accord much less importance to the construction of new supply, especially of market rate housing, than those who base their perspective in mainstream economics. Economics based formulations, which are unsurprisingly concerned primarily with the optimal operation of housing markets, view economic rents which accrue to housing providers as a deplorable inefficiency caused by imperfect competition and artificial scarcity. The construction of new housing—any new housing—is therefore paramount because it will break the monopolistic power of existing providers, reduce economic rents (ideally to zero), and lead to a general fall in housing prices relative to incomes. While the relational perspective can often lead to a moral objection to the collection of rents, an economic perspective has within it a moral objection to economic rents, though framed in the language of efficiency rather than exploitation.

Formulations rooted in a relational approach to rent are often less enthusiastic about the construction of market rate housing because it represents a solution which wholly reproduces the general power imbalance between landlord and tenant. This imbalance, the primary concern of relational understandings of rent, is mitigated to some extent in covenanted affordable housing and potentially erased in social housing, the production of which advocates of this understanding tend to privilege. Of course, Marx himself was also concerned with “economic rents”, which he theorizes in a manner not entirely divergent from that of contemporary economics as the “absolute rent” that accrues to owners of assets under conditions in which the free flow of capital is impeded (cf. constrained supply).

The degree to which each understanding of rent predisposes its adherents to somewhat different fundamental objectives, however, is significant. Economic-based approaches position market optimization as a means of causing a general decline in prices as the fundamental objective, while relational approaches tend to focus attention on mitigating or destroying entirely the imbalance in power between landlord and tenant which makes rental housing precarious.

Consider, for example, the recent issue of the use of eminent domain to preserve subsidized housing with expiring affordability covenants in Los Angeles. Tenants of the Hillside Villa apartment complex, an affordable housing development subject to covenant agreement that expired at the beginning of this year, were facing massive rent hikes as the owner sought to bring the units to market rate. Tenants unionized in response to the landlord’s actions, refusing to pay the new rates, and were promptly served with eviction notices. Supported by community organizers, tenants have since successfully pressured the city council to attempt to force a sale of the property through eminent domain.

Tenants and their allies see this as a clear-cut case of using public powers (and funds) to preserve a public good in an affordable housing complex. It serves to protect tenants, many of whom had lived in the building for decades and paid subsidized rents for the duration of their tenancy, from the whims of a landlord whose drive for profit would uproot the lives of low-income people, destabilizing their housing situation and potentially unhousing them altogether.

Others saw the willingness of the city to use eminent domain as an issue that would pose a long-term problem for affordable housing production. The Los Angeles Times editorial board, for example, issued an op-ed in which they reproduced the landlord’s argument that seizing the property would deter developers from constructing covenanted affordable housing in the city in the future. Some prominent housing experts concurred, noting that the use of eminent domain could produce a chilling effect on affordable housing production, as developers relied on the post covenant rents to make projects profitable

It is important to note that these fundamental points of disagreement rarely rise to the level at which the divergent understandings of rent are explicitly articulated. In fact, the lack of analytical precision in the deployment of terms like commodification or exploitation, for example, significantly diminishes the possibility of excavating the fundamental disagreement about rent’s nature. Furthermore, many participants in debates about housing policy are not consciously aware of the conceptualization of rent from which they are operating, though I would argue these two approaches are deeply ingrained in their formulations.

Of course, divergent conceptualizations of rent are far from the only sources of disagreement in housing policy. Divergent constituencies, deep seated distrust and enmity, contention over the role and construction of expertise, disagreements over the proper use of state power, the role of homeownership, political participation, and many other factors also limit political consensus on the construction of and solutions to the housing crisis. The issue of the fundamental incompatibility of conceptualizations of rent itself, however, remains an under-discussed rupture.

Suffice to say, the economic understanding of rents is hegemonic at present. It is the perspective that is held by the majority of empowered actors in housing policy debates. Certainly it is the perspective that any planning student pursuing a degree from an accredited institution will be exposed to. It is also, as is evident from even this brief intervention, a highly limited perspective that is surprisingly counter to the way that rent is popularly understood and experienced by tenants. In flattening the relationship between the tenant and landlord into one between housing consumer and housing producer, it invisibilizes the social qualities of that relationship which differ significantly from that of most market exchanges. Planners should be obligated to understand and critically engage with relational understandings of rent if they are to be agents in crafting just housing policy.

Alexander Ferrer is a movement-based planner and researcher focused on how increasingly financialized housing impacts tenants. He is currently studying for a master’s degree in urban and regional planning at UCLA.