"Sell Me A Landlord" Reducks

 I have this idea that I want to turn into a thing, some thing, that I've been testing and refining for quite some time.

The idea is "Sell Me A Landlord" where I try to get someone to pitch to me, the valuable service of a landlord.

In my mind, this seems like a really simple exercise, so what has been the result of stress-testing it so far?

Most people I challenge to sell me a landlord, find the concept unintelligible. Like really smart people, cannot comprehend the idea. This is not to say that they do not have a crack at it, but inevitably they wind explaining to me why I want to buy instead of rent.

In current iterations I set it up like this:

• I have $2 million dollars in cash, so if I want I can buy a house.
• I am moving to a town where I have a ten-year employment contract, and I've got a family so we need a place to live.
• An alternative to buying a home to live in, is renting one.
• What are the advantages of having a landlord?

Now, I wouldn't ask of people anything I wouldn't do myself. I do think there are likely going to be scenarios where having a landlord is a service of value. For one, in a University town or area, where there's a population that only are going to live there for 3-4 years, they may drop out or transfer and signing some leases to sharehouse is preferable to buying and selling a house.

The other, is Aged-care facilities, where companies do literally sell the landlord as valuable service except I don't think anyone thinks of it that way, but aged-care facilities are often saying "come live in our house, we've got nurses, water aerobics instructors, arts and craft, carpet bowls, a gym we maintain, really great services so come live and pay rent here."

But you'll notice from my scenario, that I've eliminated those two scenarios. This is a presumably healthy and mobile person in the middle of their working part of their lifecycle.

For example, in my locale a specific service that advertises, and makes a case as to why I should consume their services are funeral homes:

A woman's touch. Also, tax accountants:

They don't miss a thing. Also, lawyers:

No challenge too great. Also, companies that actually build homes:

Why indeed live anywhere else? Also, companies that lend money to buy a home:

Yeah don't just ask your bank. But you never see ads for people saying "come live in my surplus housing, I'm a great landlord, here are all the wonderful services I provide..."

Even on facebook pages where sharehouses advertise rooms for rent to potential housemates, the posts tend to focus on amenities and maybe nearby features before listing a fuck-tonne of demands about shit a successful housemate will be expected to tolerate or refrain from. Then 60 to 120 people apply regardless because everyone is so desperate and it costs nothing to apply.

Why does it matter?

The point of the exercise is, that if you can't make a sales pitch for a landlord, then you can't justify landlords providing a valuable service or social good. 

Hilariously, everyone who I've challenged to this hypothetical scenario, has wound up, quite quickly trying to convince me to buy instead of let.

Most recently, I was presented with a very clever argument to point out that the difference between owning and renting on cash flow is so pronounced, that provided a tenant channels the savings into an investment (index fund, government bonds maybe even) then they are not at a loss compared to owning. He then countered this pitch (the landlord is assuming the investment risk for you) with the argument that most tenants don't invest the savings, they spend it, where a mortgage forces ordinary citizens to commit their income into what is essentially a forced savings scheme. This was very similar to what I have heard Scott Pape say.

But I cannot say that landlords are not a valuable service because of the intelligibility problems I have come across. It literally does not occur to Australian's that a landlord is a profession, and a service at that. I am more confident in saying that based on my experiences thus far, to most Australians a landlord is simply a fact of life, and landlord is not so much a job title, as a title like the "Laird" of established titles.

The overwhelming sentiment I get is that landlords generally dislike their tenants and tenants dislike their landlords. Almost like it is a dirty job that somebody has to do.

I live in a district where the Liberals (Australia's conservative major party) are campaigning hard, not with respect to the fact that they lost a long held safe seat of former PM and longest serving PM Robert Menzies to an Independent in the Teal wave because of long standing frustration and dissatisfaction and are now trying to show the constituents that they have listened and learned and want another chance. But by spending a lot of money and putting a kid up who is some descendent of a former Victorian premier, running an absurd scare campaign and hitting non-sensically vacuous talking points.

One of which is that they are going to address housing affordability. This is incongruous though with the central complaints of what I infer to be their prime voter-base, complaints about how high land tax is.

When I first heard these grumbles I got fucking curious, because this is something organizations I have been involved in have been lobbying for, for a long time, and I mean over a century. So I looked up the rates that are causing so much ire. 

Acknowledging that I am a weirdo, with beliefs on the fringe, I don't think a land tax rate comparable to our marginal income tax rates are outrageous. Particularly since I would be advocating that land tax replace income tax, so you cut taxes on wages, replace the lost revenue with land tax. 

But putting myself in the head of an ordinary, largely economically illeterate land owner, what kind of rate would I expect to be outrageous? something between 8-10% would get someone with a property portfolio clutching at pearls I reckon.

If you clicked through that link though, you would know that what has landlords up in arms, is a land-tax of 1%, and it more-or-less trebles to 3% or maybe 4% on your beach-house. The term used is "absentee owner surcharge" and I will plead ignorance as to whether this applies to properties let by the owner in the case of an "investment" property.

What has the landed gentry up in arms, really is actually the price of houses. Because a $30,000 tax bill sounds large to a peanut like me who doesn't own a $3M property. But this is less than a medium wage. If somebody sitting on a $3M assett can't afford to kind-of-pay for a part time civil servent, why does the tax burden fall on my wages and 10% of my goods and services consumption. $90K sounds like a big tax bill, until you realize that that is for a landlords spare $3M property that they use for 14 weekends a year during daylight savings time. They are only paying $50K on the $5M house they live in.

Housing is considered affordable when the cost of housing is less than 30% of your pay, I'm not sure if this is take home or net pay. Australia has pretty good salaries in general, but this is largely because our overvalued property prices have forced them up, like the casual wage is somewhere between $24.10 an hour, which compared to California's $16.50 USD is roughly on par with the world's 5th largest economy. (Australia is in the G20, not the G7) and many people earn more than the minimum. Australia also has "casual loading" which is intended to compensate for the lack of sick leave and annual leave under that employment arrangement. 

Holding those wages constant though, if the median house price was set to one where a 30 year mortgage at 6.5% interest was = to 30% of the median take home pay, I calculate that an affordable median house price being $447K.

In a country where the Australian median wage in an urban center like Melbourne could be used to purchase an affordable house and pay it off over 30 years would put the median house price at $447K and the land tax would be $5K. 

Now the thing being, that if a landlord is not in fact a service that anyone values then why the fuck does Australian tax policy in fact, encourage people to invest in housing, which is to say buy a business where they can provide the services of a landlord?

That's the relevance. I won't go into negative gearing, capital gains tax concessions and the fact that a landlord can break a lease contract to enable them to sell their investment asset at any time (with whatever the notice is that tenants have to get the fuck out and find somewhere else to live nearish their job and schools and whatever.)

That's the significance.