The debate surrounding the lifting of the eviction ban has generated grumbling from landlords that they are being demonised. Is there merit to their complaints?
Karl Marx had little sympathy for rentiers, which will hardly come as a surprise, but less well known is that key proponents of capitalism were pretty cutting about them too. Adam Smith observed that landlords “love to reap where they never sowed”, while John Maynard Keynes looked forward to the “euthanasia of the rentier”, which he believed would be achieved by low interest rates. To Keynes, making a living from controlling property or other assets was synonymous with “the cumulative oppressive power of the capitalist to exploit the scarcity-value of capital”.
In his 2020 book Rentier Capitalism, Brett Christophers says a “significant and striking” feature of orthodox economic thinking, as exemplified by Keynes, is that rentierism “is a marginal, residual or ephemeral phenomenon within capitalism”. But since Keynes died in 1946, the rentier class has continued to grow in wealth and international reach, buying up not just housing but all types of assets that the rest of us rely on – from communication networks to energy grids.
In his latest book, published this month, Our Lives in Their Portfolios: Why Asset Managers Own the World, Christophers takes up the global money trail, highlighting how investors have been quietly buying up critical infrastructure in Europe and beyond. At the heart of the book is the housing crisis, and there are several references to Ireland. There has been “barely a whimper” from certain governments such as the British and Swedish about growing asset-manager investment in housing, writes Christophers, while Ireland is mentioned along with Germany as a country where “moves to arrest the trend have ultimately come to little”.
Christophers, a professor at Uppsala University in Sweden, here talks further about the book and Ireland’s part in a wider economic phenomenon.
Is there anything wrong with being a rentier, or a landlord? Or is the problem more to do with the capture of the economy by this particular actor?
“The word ‘wrong’ is an interesting one, and that’s because the critique that is often levelled at actors of a rentier nature is often a moral critique that has a very strong normative dimension that absolutely sees something very wrong – to use that word – with being a rentier. The position I take is not a normative or moral one.
“Personally I don’t think there is anything necessarily wrong with being a rentier. The way I would prefer to see it is that there has been a kind of explosion of rentier-type activities as a rational response to an irrational set of incentives that have been put in place by generations of policymakers that make it very attractive and potentially very profitable to be a rentier.
“I would never criticise someone for wanting to secure personal long-term economic security through, say, owning a second property and being a rentier. I would much rather level critique at the policymakers who put in place the conditions which made that a rational, profitable activity ... I think that comes down to things like taxation policy, policies around property rights, policies around security of tenure.”
Do we need institutional investors in the housing market, as governments often claim?
“I can’t see any necessity for institutional investors in terms of attracting them to be owners of existing property … There is no argument there. I think where the argument is typically made is in terms of attracting investment for new-build property, and I think the argument of the Irish Government, and governments in other countries, including the UK, is that there is a need for new rental property and that institutional investors are needed because otherwise there will be a shortfall of capital to build that new property.
Private sector investors warning government about making changes that might scare away existing or new investment has been part of the playbook for as long as anyone can remember
“Whether that is right or not in pure economic terms, I’m not sure. But the problem is institutional investors are clearly not going to have any interest in bringing forth new rental property unless that promises a very strong economic return for them and by its very nature that precludes new rental property that would be affordable by any reasonable measure.”
Defending its decision to lift the eviction ban, the Government here argued that the moratorium was driving landlords out of the market. It goes to a point in your book about the modus operandi of asset managers – that “selling is as much a part of the business model as owning”. Should it concern us if landlords, or institutional investors, are selling up?
“I would say a couple of things about that. In any sector where government plays a significant role in setting the parameters and conditions for investment, there is a long history of private sector investors warning the government about making changes that might scare away existing or new investment. That has been part of private investors’ playbook for as long as anyone can remember … That’s the first thing to say.
“The second thing to say is: no, of course, for many reasons there is nothing to fear about investors saying they would sell up if that happened. If we think about it, what happens if they do sell up? They have to sell to someone, and either they are going to sell to another landlord, in which case nothing really changes, or they sell to someone who actually ends up living in that home, which is presumably something the government would actually be happy about because the government is very invested in an ideology of home ownership.
“And the other thing is, if there is a move to sell, potentially that would have a depressive effect on housing prices … and some form of correction that makes housing more affordable especially for young home buyers would be a very good thing rather than a very bad thing.”
How would you respond to the argument that the problem is not rentiers but supply? If there was sufficient housing supply would it matter if a large chunk of it was owned by asset managers?
“The supply question is really interesting and very important. Clearly it’s not only an Ireland or Dublin problem – you see it in London, you see it in Stockholm, you see it in other major cities and there are all sorts of different factors that play into that.
“A lot of people on the left will turn up their noses when economists say the problem is planning regulations and limits on the ability to build new property on green belts, or protected regions. Personally … I think planning regulations do often play a stymying effect, and it can be very difficult to build new property in major cities. But the main thing I would say here is that it’s very important to understand that existing landlords want supply shortages. They benefit from supply shortages because supply shortages push up rental prices.
“If you read what major corporate landlords say to their investors … one of the things you hear repeatedly is that they actively look for geographical locations where there is a supply shortage … and the last thing they want is any long-term correction.”
What would you advise governments to do to avoid asset managers capturing society?
“If we are being totally honest about this, the only actor with the potential to own and control assets like housing and energy infrastructures in such a way that they are designed to provide public utilities at affordable rates is through public ownership. Or communal ownership, I guess, is another alternative on a local, small scale.
“And I think it’s really worrying for the long term, not just the short term, that large-scale public ownership of housing and of essential infrastructures remains so far out of the realm of existing political possibility.”
Our Lives in Their Portfolios: Why Asset Managers Own the World by Brett Christophers is published by Verso Books
