I was born in 1948, at the foot of an enchanted mountain whose spirit enjoins me to rise higher

Ordinary citizen, empathetic contemplator (maybe a little too empathetic to be fully comfortable in the world, as it is). Don't look for academic credentials; this guy has none, save those gained over the course of many interesting (and, at times, difficult) life chapters, spent surviving on a shoestring budget.

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Wednesday, August 6, 2014

THE GROWING SCOURGE OF EXORBITANT RENT, ITS EFFECTS ON THE LOWER EARNING CLASSES AND YOUNG ADULTS, AND WHAT GOVERNMENT CAN DO NATIONWIDE TO UNDERCUT THE TREND


In April of 2013, I sat down and composed the following ad, which I intended to put on Craigslist.org:

“THE NEEDLE IN A HAYSTACK WE'RE LOOKING FOR:
If you have a house with modest-sized yard and you need it to be taken care of for a few months, my wife and I have the experience and home care skills needed for that task. As interim stand-ins for you, we'll perform the role of resident managers, taking care of your house, your yard, your indoor plants, et al until you return.
We’re also happy to pay you whatever rent seems fair, provided it accounts for the fact that we’ll have none of the usual rights of domestic expression while we take care of whatever you want us to.
There is this catch, however: after a decade of doing that sort of work, and more, on our own ticket at the house we’re in now, we finally realized that the unspoken quid pro quo of mutual concern we thought we had cultivated with our landlords did not, in fact, exist. Taking the advice of their accountant, they socked us with an increase in our rent of $200/month in early 2013 – an amount twice as large as our total monthly food budget, and a 14% jump in our rent, even though the taxes on the property had actually gone down owing to the Great Recession – not because they needed the extra cash but because, in their words, the market warranted it.

We’d prefer to be thought of as human beings, not mere elements in a game of market opportunity.

So tell us why what you have to offer might be a better deal for us than our current situation. We’ll give it serious consideration and if we think it fair, and a propitious interim step for us to take, we’ll reply with more information about us and our situation.”

That was the ad. The reason I never placed it was partly because the ad itself took on a life of its own and grew into the following essay on new ways to look at the roles and decision-making involved in setting rent, and partly because new developments motivated us to change our plans in a very radical way.
And thank Heavens we did, because in 2014, they followed up with notice for another $200/month increase, to take effect in July of 2014 – a combined leap in our rent of 28.5% in the space of just fifteen months!
It may interest the reader to know that, a few weeks after we had received our most recent rent increase, a Seattle Times report based on federal data showed that, while total employment in the city had increased 3.7 percent in the year following the third quarter of 2012, average income had only risen 1.6 percent during that same period (with the majority of that gain going to people at the very top). 2014 has been no better than 2013 for gains in earnings at the lower end. The facts clearly show, these egregious rent hikes are not being offset by a rise in general prosperity among those who must rent. Ironically, the exact opposite is true. Even as rents soar, lower end income remains stubbornly fixed. This sudden eruption of naked mercenary bullying has taken many old-school Seattleites, proud of the city’s reputation for civility, by surprise. Nevertheless, as little as they may care to acknowledge it, greed has always been a latent part of the ethos behind how this town really works. All that is needed is for the right set of social and economic conditions to arise and, bingo, it’s back to the fore again.
This time ‘round, in response to a long existing effort by city boosters to tout Seattle’s lifestyle assets, a flood of ambitious, mostly younger, people has moved in. The influx has led, on the one hand, to a glut of jobseekers willing to work for low-paid interim employment while they look for positions better suited to their aptitudes and aspirations and, on the other, to too many willing to pay almost anything for any kind of place to call their rented home. This represents the worst of possible scenarios for the majority of those trying to lift themselves up by their bootstraps!
I feel obliged to warn those who, from afar, see the prospect of making their mark in Seattle through rose-tinted glasses to look twice before they leap. It’s no Shangri La for those whose skills are not in high demand, apparent attractions notwithstanding, especially those beyond the peak years of their vigor. Nor, once invested in living here, is it easy to leave. A very real possibility exists for one to be trapped here in the years of declining employment potential, even as costs for everything rise around you, most especially rent. The product of that math can be seen in the ever-growing number of Seattleites needing public assistance to survive. Sometimes it’s hard to see the intense hope that once fueled the dreams that long-term Seattle residents followed in coming to the city, now that they’re old and on the dole, but as sure as day and night, that hope once existed. Hope and hard work, alone, will not save you here. You need the luck of the draw as well. Life in Seattle is like a great big poker game, replete with lights, music, fancy drink, good looking people and entrancing surroundings: everybody antes up, and the winners walk away with everything, including whatever the losers borrowed to stay in the game to the bitter end. The only difference is, with poker you’re playing for money, whereas in Seattle, you’re playing for your life.

Though changing circumstance precluded placing the ad, I found my motivation to dig into the philosophical basis underlying modern renting practices sharpened by the experiences that had led me to draft it.
I think it only fair to warn the reader that this is arcane stuff. Initially, at least, you might want to forego a top-to-bottom read in favor of just dropping in at random points in the essay for a quick mental snack. If that succeeds in piquing your interest sufficiently, you may indeed decide to dig deeper and acquaint yourself with the full sequential logic and conclusions of the essay.
Admittedly, as a paper, it is hardly a compelling read and most probably not something that anyone without a strong interest in social equity should try to wade through. On the other hand, for those who are as concerned as I am about the social disequilibrium that the growing wealth gap in America is causing, and who feel their vote still counts, the perspectives offered could prove very useful. Certainly, if you happen to be a renter who chafes under the slowly tightening grip of conditions in the current rental market and psychology of subordination behind it, the investment in time spent reading this will almost certainly leave you more mentally empowered to protect your interests and your hard-earned money, and, dare I say, the more ready to use what you glean from this when discussing with others the subject of renting.
One upfront clarification here: the woman referred to as my wife in the following essay is actually my common law wife. We’ve been together as a couple since 1993.

THOUGHTS PROMPTED BY COMING UP WITH THE AFOREMENTIONED AD:
Don’t get me wrong, as a renter of freestanding houses for many years, and having sub-rented to my housemates for decades, I’m not prejudiced against landlords, per se. In fact, I’d like to see many more property owners enter the business of renting out. Society gets great value out of having an abundance of freestanding houses available for rent, and for that to happen, you have to have an abundance of owners of such homes being willing to enter the supply side. The blanket characterization of landlords as innately greedy only works against that goal, because some who might have the property to rent might not care to run the risk of being looked down upon in that way.
Intrinsically speaking, landlords are no greedier than you or I. God bless those who are not. We’re all just folks. Whether, as a group, they’re largely generous or largely greedy, in any given area, rests primarily with the degree to which local government participates in trying to make its surrounding rental market a better sector for all concerned, both in terms of dwelling condition and in terms of affordability.
But given the social damage that occurs when landlords become greedy, it’s nothing to be nonchalant about. When rents rise to a level where they are clearly undercutting social equity and disproportionately advancing the interests of the few at the expense of the whole, as is the case in Seattle, social pressure for corrective action is needed.
That process of correction is best begun with exhaustive intellectual scrutiny into how far existing practice diverges from what would be considered best practice in an otherwise optimally integrated, and optimally functioning social complex, fully capable of discharging its public responsibilities with ease (clearly not the situation we have at this time).
There’s nothing immoral about taking advantage of market developments, as long as you do so in a manner both respectful of people and cognizant of society’s overarching need to constantly improve and evolve - that’s how civil society and capitalism were integrated to build the America we know today.
On the other hand, if taking advantage of market developments means resting content to grind your weaker brethren underfoot - even if they comply under the influence of convention, and even if your actions are technically legal - you’re preying on society, plain and simple. In that role, you daily cannibalize the lives of people around you, unconcernedly trashing the bonds that join you and them under social contract. That kind of approach to making money may once have been socially acceptable, back in the days when it was legal to own and work other human beings for personal profit in America, but it isn’t now.
Societies that turn a blind eye toward areas of social predation, regardless of type, do themselves no favors, and only weak, corrupted and ineffectual ones, lacking the will to improve, surrender to such activity as being endemic to their culture.
When a landlord drives rents to the limit, just because he can, and is joined in that practice by many other landlords, it inevitably leads to a runaway indenturing of the poor and near poor that grows unchecked in scope and intensity behind the smoke screen of day-to-day activities, slowly degrading society. That’s a classic form of predatory economics at work - extractive, as opposed to contributive. In essence, and in effect, it’s no different from the kind of life-sucking deal that Third World garment moguls and First World pimps impose on those too poor and too powerless to be able to refuse, only - because it has become so ubiquitously prevalent here - less newsworthy.
Within Americncial extraction feeds so much fuel to the growing resentments smoldering under the crushing weight of the nation’s growing wealth dichotomy and, as contributors to that trend, landlords and their agents, in Seattle, are prime offenders.
The Seattle I first arrived in 39 years ago was very much a town for the common man. It may have been a little rough and ready around the edges but, at least, it was minimally infected with the kind of coveting of personal wealth and status you see now that lies at the heart of unreasonable rent extraction. There was open disdain toward avarice. One might have harbored inclinations toward greed, but you kept that side of yourself under wraps, because you knew it didn’t go over well with most Seattleites. Under that umbrella of civic modesty, the whimsical, the fragile, the just-hatched, the newly-arrived and the worn-out all had a place, spared from the etiolating drain of rapacious monetary demands. Cheap digs were everywhere. Even the largest of houses held to an elegant restraint in their architecture and lot footprint. Suffering, such as there was, was a burden that was shared by the first families of the city, in the considerable patronage they extended to the hard-up. In some way, we all belonged to one another; we were connected. If nothing else, the city exhibited an earnest determination to be modest, polite and reasonable, lest that connectedness be strained. We were the Queen City then, not the Emerald City - more warmth and grace, less glitter - and we hadn’t yet begun to covet the kind of international prestige accorded San Francisco or Los Angeles, at that time. All of that came later.
In the tolerant, affable and very affordable milieu of those times, the lowest rungs of the ladder of upward mobility were closer to the ground. I paid $13 a week for my room in the Elliot Hotel – equivalent to two and-a-half hours of work as a general laborer. What savings I managed to glean, I put toward things of greater inner worth to me than merely being housed. In short, you could arrive here as a political refugee, with nothing but native intelligence and grit, and not be denied the opportunity to start the climb upward. I know, because that’s exactly what I did.
That spirit of coexistence was exemplified by the wide range of news printed on paper, the tone of which, though not lacking in substance, avoided the kind of personal exposure attack so prevalent in today's trendy media.
These days, it’s a very different story. Outwardly, Seattle is like a city on steroids, with a bad case of wanting to be noticed, and a short attention span; superficially, the neighborhoods are all gussied up and the buildings downtown are tall and shiny, but underneath, the city’s character has grown coarser and more fixed on material gain.
When I came, there were two vigorously competing daily newspapers, The Seattle Times and The Seattle Post-Intelligencer, the former issued in the morning, the latter in the evening. Today, only The Times remains, and we are the poorer for it, notwithstanding the emergence of electronic media.
Addled by the petty tyrannies of the daily struggle to keep up with rising prices, growing life complexity and the press of others everywhere, the citizenry has become a lot more fixed on mammon and class, and correspondingly less on creative liberty, than they used to be. A great many of them are newcomers, stoked with narrow financial ambition – some with means, many without - who know almost nothing about the city’s prior reputation for reason and restraint, or its historic struggle through bleak times to establish a social complex rooted in mutual concern, along with structures that protect one and all from abuse, blight, disease, crime, natural calamity and personal destitution. Nor do they care. Blind fixation on getting more money is not just the main reason they're here; it’s the only reason.
Egregiously ostentatious, oversized houses of maximum allowable footprint, are plopped down at grade – seemingly overnight – where perfectly adequate starter homes of modest proportion stood for generations, with no regard for loss to either neighbor or nature around them, and sold at equally egregious prices to buyers who troll the neighborhoods in late-model luxury vehicles with piles of cash, ready to scoop up such architectural oddities, precisely because they do stick out.
It’s as if the winners in the game were determined to kick the losers out of the game altogether and turn the city into a private playground for the new rich.
The result has been a subtle, but growing, disaffection between people, along with a form of class stratification that is resistant to the leveling effects of empathy, reason and common cause. Despite a huge leap in overall wealth, the number of those in financial distress persists undiminished, of which organized encampments and panhandlers at major intersections are only the visible tip. Where did all that wealth go, one might ask? And why is the public purse so empty?
Over the past quarter century, as the money involved in private dealings got bigger, a new breed of top dogs muscled their way into the limelight. Gradually, cold-calculating self-sorters with degrees, a penchant for financial risk-taking, and seemingly bottomless pits of investment backing began to dominate the tone of the city, while colorful, old-style, rule-bending worthies and do-gooders with larger-than-life character, who’d come up the hard way and liked to give people a break, faded into irrelevance or died off. Gradually, as the city grew, a juggernaut of impassive process replaced the personal touch, and the unclaimed corners of opportunity, where a young man might start from scratch without capital in a laissez faire way and succeed, were gobbled up by bigger players.
Under the new rules, people in Settle are valued most for the financial opportunity they embody, collectively referred to as 'the market'. To the eyes of those who are in the business of renting, an influx of newcomers looking to get rich and needing housing - but lacking the means to buy - is like sheep begging to be fleeced, and fleeced they surely have been. The way rents have outpaced the earnings of those who must pay them is, without doubt, the most substantive example of our collective drift away from old-time civic comity and patronage and, equally without doubt, the most relentless killer of life prospect for those who become trapped, decade after decade, in that dismal loop of cause and effect.

Given the size of the future liability this trend portends for all of us, you might think city luminaries were hard at work, looking for ways to counter factors that have contributed to making exorbitant rent socially acceptable. To be fair, there has indeed been a recent increase in the level of discussion regarding the affordability of rental housing in Seattle (thanks in no small part to a populist backlash that ushered a couple of intrepid defenders of the public interest into elective office). But, so far, the talk has led to nothing that could bring the price of rents to a place where one could say that they were congruent with efforts to advance social equity.
The fact that we must compare ourselves to even worse offenders, like San Francisco, New York and Boston, to dredge up some sorry remnant of moral defense from the muck of our collective culpability in this form of market-based extortion, makes the situation even worse. Doing so only contributes to the spread of a twisted form of rationale, among both perpetrators and victims alike throughout America, that because everyone else is doing it, it must be normal practice for those with excess property to make fair game of those who have none.
I cannot begin to count the number of times I have heard people, confined by profession to some narrow band of expertise, lament the incredible rents prevailing in the few cities where the skills they struggled mightily - or paid dearly – to acquire were marketable.
Think for a moment how generously the public sector chips in to help the young gain these specialized skills. Now visualize a huge chunk of the earnings derived from those skills being siphoned off into the hands of a small minority who actually take pride in investing as little time and money as possible in the management of the real estate they own. We do ourselves no favors by wanting to believe that those two realities are unrelated. They are indeed related. Should the public be content to help fund the education of the young, when an unhealthy proportion of the earnings subsequently derived from that education go toward furnishing a minor sliver of society with a big fat lunch ticket, while the young barely scratch by? Is that what we should feel obliged to accept as one of the inescapable compromises of life?
Personally, I don’t think so. What I think that we, the public, want is for the lion’s share of the payback from the education we helped provide to go toward enriching the life prospects of the individuals educated through that system – not their landlords.
If you’re thinking that I’m referring exclusively to university level education here, disabuse yourself of the supposition. Of even greater importance to the nation, in my opinion, is the basic fundament of enlightenment laid in the mind in the years between kindergarten and graduation from high school.
There are those of us who, for one reason or another, did not go to university. I happen to be one. My worth to society, and my own self, is not determined by a piece of paper; it is determined by what I’ve managed to manifest in my life. Accordingly, I am grateful for the handy chest of intellectual tools I ended up getting over the course of those early years.
But that gratitude is burdened with a dark reservation, directly linked to having been a lifetime renter. There is no doubt in my mind that during those years when my rent claimed the smallest portion of what I earned, I was able to do much more with those tools than during more recent years when a significantly larger portion went down the rat hole of rent.
There are millions like me out there - people educated at society’s expense to the level of graduating from high school, now similarly hobbled so that the few who live well might live even better. Society sees the wastage of its investment, and then responds with a giant collective shrug and lets the issue slide.
This form of complaisance might be understandable if the government were taxing the gain in net worth derived from renting to a level where government agencies would have the funds to provide protections and amenities that renters in the more developed European nations enjoy. But legislators here in America are loath to tackle the issue of raising sufficient revenue through adequate rates of taxation, head-on, lest the most well-healed of election expense sponsors switch sides in retribution.
Since much of what landlords earn is plowed straight back into other capital instruments, the overall impact on tax receipts from this sector, as a whole, is lower than it would be if income from capital gains were considered as ordinary as the income that service professionals, office personnel and factory workers receive.
How can any of the above be good for social equity? Still, some might ask, “Why does social equity even matter?”
Well, this is why it matters: Think, for a moment, about an efficient modern sedan with plenty of power, great fuel economy, an excellent safety rating and a wonderful interior that isn’t cramped. For it to be like that, the geometry, strength, weight and physical properties of every single part have to be precisely calibrated to relate in exquisite integration with every other part in the whole. Compromise of even the most abstruse consideration – like the source for a single computer chip, for instance – can render the whole thing useless to its intended purpose if the part fails to perform at the same level as all the other parts.
Well, the general economy is much like that. In 2008, the whole system nearly collapsed. Why? Because in the brains of a few pivotal people, a small mismatch in the connections between dendrites used in the perception of risk created misperceptions about reality that led to a few errant decisions, the destructive consequences of which rippled outward through interlinked economies to the furthest ends of the world, compounding the destructive power unleashed and leaving massive losses of economic worth and a great deal of social distress in their wake.
Right there, you can see what kind of knife-edge the whole system is balanced on. For the entirety to really work efficiently, the flow of money between the billions of parts we call people has to be both efficient and precisely distributed. All the while, it has to be constantly adjusting and recalibrating itself. Over-payment for anything, at any point, is like the fuel injector to one cylinder of your car that runs too rich or too lean, compromising overall performance.
OK, I know that there are lots of people who’d just as well not be asked to reflect on how efficiently their car might be running. We see them everyday down at the auto repair shop where my wife keeps the books and I do the (easier job of) filing. For want of a stitch made in time, they end up paying for nine. Wanton neglect of the necessaries is no way to manage one’s ownership of a car. Neither is it any way to run the largest economy in the world. An intimate awareness of how parts, great and small, work together as one is absolutely essential for those who would presume to sit at the helm of our nation’s civic affairs.
The operative phrase here is CARING ENOUGH TO PAY CLOSE ATTENTION. And just as paying attention to the needs of your car will make it run much better while saving you a lot of money, paying attention to the needs of people, great and small, will make society run better while saving a whole lot of public money.
There are some who believe that we little people aren’t worth worrying about, that we’re just here to fuel the battle for hegemony between titans of the economy. I say, to hell with that idea; we’ll see you in the court of public opinion!

HOW HIGH RENT REALLY STUCK IT TO US:
Like other Seattleites in the lower earning classes, we tried to counter this tide of upscale change the only way available to us - by trying to swim against it.
The lynchpin of our approach was to lower our monthly outgo by first finding a partly run-down, 3 bedroom house to rent, fixing it up at our own expense, and then renting out the two extra bedrooms, under a contract of sub-tenancy, while taking full responsibility for the overarching management and chores required to keep the property in good repair and looking decent. That way, we could afford to live on a property directly connected to the immediate environs around it – a garden, street frontage, an adjoining neighborhood – and have some place for me to work with my tools. That way, we could afford to live a little bit like our parents did when they were our age.
At first, we tried subletting on a long-term basis, but after a couple of trying experiences that seemed interminable, we switched to providing short-term accommodation to junior housemates. This approach had the side benefit of occasional periods where we were with just one another, which, though expensive, allowed us to relax a little – like a normal American couple of our average age.
At the same time, we held down multiple part-time income roles to build our savings.
Ironically, the easier years for us came during economic slowdowns - they tended to keep a lid on rent and a cloud over the temptation for the owners of whatever house we were in to sell it out from under the home we had created – a calamity we had experienced twice before at great material and psychological cost to us. Also, the pace at which we could grow our own savings during such slumps more than kept pace with general inflation, because those slumps kept prices on everything we needed in check.
During downturns the ambitious, who had leveraged their economic bets and taken a loss, would have to lay low while their financial wounds healed.
But lately, the tide of high-stakes speculation has picked up again and we are too old, too tired and too disillusioned with our prospects for establishing our own home in this town to keep swimming against it any longer.
One of the more efficacious tricks of surviving a war lies in knowing when to quit the field of battle, regroup and shift the contest to ground more favorable to your cause. That’s how George Washington won the War of Independence. The time has arrived for us to do just that.
I spent 36 years deluding myself that this town had a future for me, but however conscientiously I applied myself, the work I was doing – making custom wood windows and doors - only fed the relative gap in wealth between me and those who could afford what I made. Even as I helped them improve their equity positions, health security and contentment, my own steadily declined as a direct result of the pressure and inimical conditions involved in the work I was doing. If I raised my prices, better-financed competitors – factory outfits with superior equipment and deep capital reserves – would outbid me.
Even though I knew that I could make much better money from what I was doing if I could apply it to property I actually owned - as opposed to other people's property - I couldn’t get a loan to buy my own property unless I made much better money. Very frustrating.
In time, I figured out what made my clients different from me in the game I was trying to play. It wasn’t creative intelligence, vision or grit: it was the imbalance in access to capital and financial consideration accorded those on the inside track in a deeply entrenched financial environment, those with useful connections, esteemed degrees or existing wealth, none of which I had access to, nor was ever likely to somehow magically acquire.
I was forty-four when the premises under the wood shop I had struggled for 15 years to build were sold, leaving me in too poor a cash position to be able to set up shop elsewhere. The fact that I had come alone to this country with no money, no tertiary educational degree and no connections made starting over again an impossible challenge. It was only with the help of my ex-wife that I had been able to manage the initial effort of going into business, anyway, and she had left, mostly because being schlepped into helping a struggling entrepreneur stay afloat was seriously at odds with the lifestyle she had always aspired to enjoying as an adult.
That grim decade indelibly colored my view of Seattle and made me receptive to the idea of moving elsewhere. Indeed, the majority of my former coworkers – very talented people - had done just that. None had returned to the city. Instead, they had all bought homes in other communities in which property was cheaper and the prospects for social advancement were more accessible. During the time I was grimly hanging on in the city, serving the designs of the wealthy, they were raising children who, today, are adults. I was never in a place where becoming a father seemed like something I could realistically take on and succeed at. It’s a missed opportunity I often reflect on, especially when Thanksgiving and Christmas come around and family connections, outside of my own, are celebrated.
In time, I came to share the view of my erstwhile colleagues that the game here was inherently stacked to advance the interests of the few who were already financially favored, at the expense of a majority who were lured here by hopes of realizing their varied ambitions and the convenience of a climate more temperate than in most of the rest of the country. This fresh, motivated workforce, having been attracted, was then induced to stay by the dangled carrot of a plethora of pleasurable distractions and comforts that served to offset concerns about not really getting ahead in life (specifically, by getting out of renting and into a home of their own where they could store and build equity). In the meantime, this spellbound majority would shop from the company store, so to speak.
I also realized that the way things were was not the product of callous intent but, rather, a combination of moral passivity on the part of the winners’ circle toward an important aspect of community life, and the tendency of people to learn to cope with the imperfect, rather than fix it.
But realizing why things occur does not erase the fact that continuing to accept them will bring you a steady stream of grief. To make the situation better, you have to act.
So, in due course, we’ll be leaving Seattle and moving to work on two properties – a large buildable lot and an idled café - we could actually afford to buy (with borrowed money) in a corner of the Blue Mountains of Oregon too remote for developers to be interested in spoiling. What we now own might be humble and need a lot of work, but at least it’s solidly and uncontestably ours to possess, use, steward, and ultimately sell, as we see best fit, with the unrecoverable load in taxes and interest being about one fifteenth of what we now experience in the form of rent.
In 2013, our time line for leaving moved up considerably when the opportunity arose to buy the café. We jumped on the chance because, while we had land to build a house on, we still needed a way to make money to live on, and the prospects afforded by fixing up the café appeared favorable. With the help of a loan from my wife’s sister and brother-in-law, we were able to close the deal.
OK, so it's not going to be the life that either of us had once envisioned, (does that ever happen?) but it's a huge step up over meekly submitting to rent slavery until we die.
What we’re trying to accomplish is no different from what the average undocumented worker who sends part of his or her paycheck home is doing, namely, turning insignificant savings here into significant purchasing power elsewhere.
If want a place a place to live, we will still have to have a house on that lot, and unless we come into some money, we’re going to have to build it ourselves, piece by piece – not an easy thing to do while you’re trying to run a café, to say the least; perhaps impossible. Just relocating there will be a big project. I can’t help reflecting on how nice it would be to have retained some of the quarter million, plus, the two of us gave away in rent over the past twenty years while we tried to get ahead here. We sure could use a little hired help right now.
A quarter of a million dollars! Just thinking about it opens a hole in my gut. And for what? Nothing but the shoddy remnants of a downscale life - a few pieces of second-rate, salvaged furniture, the vehicles to move them in and a sack-full of broken dreams. That’s all we got for 40 years spent working our butts off in Seattle.
Contrast that with the fact that both the land and the fully equipped restaurant, together, in the Blue Mountains, cost just $75,000, (the bulk of which we still have to pay off, mind you).
Still, let’s not bitch too much. We found a way out of the maze. In that, we're lucky - luckier than most of our renter friends here who will remain on their respective treadmills until they either decline and die or decide, like we did, to move to somewhere where fully paid off housing is more attainable.
Though the impetus to actually place the ad (quoted at the beginning of this essay) was undercut, it was supplanted by the determination to craft something potentially useful out of the many thoughts and discussions prompted by our years of experience, not just as tenants, but also as people who had sub-rented to around 190 short-term house guests over a 12-year period so we could afford the rent on the house that held our home.
Maybe a pearl of wisdom could emerge from the irritated oyster of our discontent.

THE IRRITATED OYSTER OF OUR DISCONTENT -
FACTS, FIGURES AND FALLACIES:
Being socked with a purely opportunistic rent increase when you're on solid financial ground is bad enough. When you're between jobs in a time when employment is hard to find, it's a catastrophe. During such times, some landlords, in the interests of civic fraternity, will give their tenants a break. Not ours. They knew full well that my wife had recently decided to leave where she'd been waitressing for the past ten years so she could look for employment more befitting her age and her mild temperament and that she still had not found a job. They also knew full well that, at 64, in this employment market, the optimal course for me was to continue on in my role as full-time backup for my wife, co-manager of this shared household and keeper of the property – an unpaid, but necessary rendering of service from which our landlords ended up deriving more cash-out value in the form of equity improvement than we did in temporary occupancy value. Furthermore, the tax on the property had gone down considerably after the implosion of the property market in 2007, and their maintenance expenses on upkeep (the replacement of a water heater, in greatest part), averaged out over the time we had been renting from them, had dwindled to a trifling $8.20 per month or .46% of what they wanted in rent, by the time we said, "Enough!".
So was it the burden of property maintenance that necessitated a price increase? Well, as far as the record goes, in all of the 4,567
days we will have lived here by the time we leave, they themselves will have contributed precisely three man-day's worth of actual work on the house and grounds, combined. That’s when the husband helped us paint the garage, and when, on one other occasion, the water heater failed, and he stood around watching the men from a local company install a new one. Further, when we exit, the property will be a better, cleaner and more aesthetically pleasing dwelling to rent than the one we encountered. You've got to admit, that's a pretty sweet deal for them.
They'd have to be financial deadbeats not to have been aware of the above, and so we were stunned when they upped the rent on us a full 14%.
Along the way, the owners often stated they valued having us as tenants. Who wouldn't? In addition to acting as free property managers, we subsidized all of the ongoing monetary responsibilities connected to buying and holding the property for them for twelve and a half years. Our rent payments wiped out all 30 years worth of the interest on the original loan and all of the taxes levied against the property during our tenancy, with $6,650 to spare.
You’d think that, for that kind of input on our part, they'd have rented to us a property that was in very good condition.
Hardly.
Upon moving in, we found ourselves having to remove miscellaneous discards that included a car engine and a small dump from behind the garage. The front lawn was a mini wasteland, barren and ridden with weeds. Over the ensuing decade, we slowly coaxed it back to a vigorous state, restoring both beds and lawn with weeding, aeration and compost amendments.
That was just the outside.
With respect to the living area, another huge challenge confronted us if we wanted to live in a desirable abode.
What we had moved into originally was a very basic house, built in 1918, in an advanced state of neglect, with single-pane windows in need of re-glazing that wept relentlessly in winter, obliging us to sponge them off into a bowl almost every morning from mid November until March. There was gloomy, 40 year-old paintwork in two thirds of the interior. The centrally situated bathroom could not be vented because there was no fan in it (use your imagination here). There was a tub in the bathroom but no shower. There were rats crawling in the walls and squirrels nesting in the roof. In the cold damp of winter, we had to fight black mold that appeared on the walls of a very crudely enclosed, uninsulated, slowly sinking, back porch that we used as a utility room. Every time it rained, water would drip though the beaded ceiling of the utility room into buckets we placed there to catch it. (I was able to date the work on the enclosure as having been done in 1931 from the newspaper that had been nailed to the wall as insulation in the crawl space underneath.) The forced-air heat to the bedroom against the north side of the house was barely functional. The first year we were there, the groundwater rose during a three-day rain, ran under the decrepit threshold to the basement door and flooded the basement from end to end, requiring a three-day cleanup on our part, at our own expense. Every window in the house was painted shut. Large sections of plaster in the kitchen and bathroom were disintegrating. An unsightly code-violating, unlit stairwell led down to the basement “bedrooms”. There was a semi-functioning 35 year-old stove in the kitchen with no overhead vent. At some point in time, someone had mounted the cupboard doors in the kitchen upside-down. Though the fireplace worked, the draw was inadequate because the grout between bricks courses in the chimney had completely eroded away in sections, so that every time a breeze arose, blow back would send great puffs of smoke roiling into the living room. The metal sheet garage roof was a disaster right from the moment of its ill-conceived installation; the very slight pitch of the roof was insufficient to prevent rainwater from backing up under it or around the roofing nails that held it. It leaked all over inside, forcing us to cover most of what we had stored there with plastic sheets while we tried, repeatedly over the years, to patch the leaks with roofing tar. In keeping with the above, a litany of other minor electrical, plumbing and cupboard hardware shortcomings were in evidence throughout the house.
To mitigate the above, I deployed my construction skills and shop equipment, and with countless hours of assistance from my wife, turned what was a nearly uninhabitable interior into a sanitary, aesthetically acceptable (though by no means upscale) home.
At our own expense, we dealt with everything but the inadequate heating system, the slump of the enclosure and the pitch of the basement stairwell. First we dismantled and recycled the abandoned engine block. The mixed materials in the dump were sifted and separated into usable soil, broken concrete pieces, recyclable metal and garbage. Our solution for the garage was to cover every single one of the 198 nail heads with a blob of bitumen and a bottle cap for protection and put a thick bitumen strip on the overlap between the two courses of metal sheeting. It reduced the leaking considerably but, try as we might, we never succeeded in stemming it completely. We upgraded the kitchen, bathrooms, the utility room and back stairwell, repaired the stove and, by moving the position of one wall in the basement, changed a not really usable bedroom in the basement into a bona fide bedroom – the one most often selected by our short-term housemates.
When we first moved in, our landlords had deceptively advertised the house as a four-bedroom, even though only two of the bedrooms offered both private access and sufficient floor space for a double bed. After our work, there were three bedrooms in the house that passed for being bona fide – a huge free gift to our landlords; when it comes to advertising a house for sale – a house that must pass a buyer’s inspection – there’s a big price difference between having three bedrooms and having just two.
We also redid the substandard paintwork in the bedrooms, the bathrooms, the kitchen and the basement stairwell and the utility room and completely restored the ten painted-shut double-hung and casement windows in the house to good function and condition.
Yes, our landlords have done very well by having us in their house. I trust they’ll remember that when it comes to giving us back the deposit we put down, though I can’t help but have misgivings.
Oh, did I mention the sump? I guess not. How could I forget? The sump is a hole in the stairwell to the basement. Its intended function is to collect rainwater that falls on the stairwell. Instead, during periods of sustained rainfall – we get a couple each wet season – the groundwater level rises in the sump and overtops it. The only way to prevent the basement from being flooded, whenever we have a protracted rainstorm and the ground water rises, is by bailing large amounts of water out of the sump and carrying it in buckets, 4 gallons at a time, to the alley behind the house. Last winter, we kept a log of the buckets, all 152 of them. That’s a little over 2.5 tons of water. It was either that, or allowing the basement to be flooded.
As I said, the landlords have admitted they valued having us as tenants, but somehow, not enough to stop themselves from levying that $2,400/annum rent increase on us last spring. Just stating you value someone's efforts is amounts to close to nothing; if you can't come up with some kind of substantive reciprocal, it doesn't stand for a whole lot.
So how much of their own money did our landlords actually chip in toward the materials we used in making all those upgrades? My wife and I went through our list of items they had compensated us for over the years– a $15 vent fan for the bathroom, a $25 gallon of primer and a $5 wax seal for the bathroom toilet. That makes $45. The overwhelming bulk of materials we used we either paid for ourselves, or salvaged from other projects over the years. Some deal for them, right?
Friends question why we put so much into a house that we didn’t own. The reasons are fourfold:
First, for the simple reason that it’s nicer to live in a nice house than a nasty one and if you’re going to live there for a long time, you might as well make it nice.
Second, to bring it up to the level where basic concerns about physical and psychological comfort, functionality, emergency egress, hygiene and energy and water conservation were adequately (though, by no means lavishly) addressed, so that the house could be considered up to standards expected in this century.
People living in a fast-paced and competitive employment environment, where they are required to be at their best when they come in to work cannot be expected to do so out of outmoded or degraded rental housing. This is just basic sense and something the Equal Employment Opportunity Commission should long ago have copped onto and raised concerns about.
Third, because this house, in its quaint uniqueness, despite its eminently fixable shortcomings, is nonetheless very serviceable and part of our collective civic heritage. It’s an anchor against the sort of neighborhood development that has no story to tell – the kind we’ve been seeing of late that dismays us. As such, this house exists not just for the benefit of ourselves, but for all around us and all who come after us. Even now, on the eve of our departure, we continue to work on it to undercut the landlord’s stated ambition to have it demolished and replaced with one of those maxed-out, in-your-face-middle-finger-up box houses you can sell to culturally unassimilated newcomers for a million plus because they haven’t yet learned to appreciate the role that tastefully restrained form and placement plays in lifting the overall cache of the most highly coveted neighborhoods of Seattle.
The fourth reason we worked so much on this house was because we were gambling on the fact that a landlord who knows and respects the law does not presume to own what his tenants have paid for to improve their lives while in the structure he rented out to them, when the contract between them, and the law under which renting falls, require only that they return the structure to him in the same condition it was in when he first rented it to them, short reasonable wear and tear.
Legally speaking, a landlord can only get default ownership of a tenant’s property 45 days after the last day of occupancy. This covers anything in a leasehold improvement not expressly ceded to the landlord by the tenant. He is obliged under law to make reasonable arrangements if a tenant wants to perform such removal. He may charge for storage, but he may not appropriate anything that hasn’t legally been transferred into his hands. This law normally covers things like pianos, furniture and appliances that belong to the tenant but could just as well cover tenant property like murals, paint surfaces, drapes, blinds, literally anything, the removal of which, upon vacating, ends up satisfying the terms of “original condition”.
If a landlord knows that he didn’t pay for –and therefore does not own – things that the tenant has installed to make his/her own life better, and he has a sense of honor, he won’t presume to have a right to appropriate those effects while the tenant occupies the property and levy some kind of rent surcharge based on those things to the base rent on what was originally provided for the tenant’s use. Sadly, honor seems to have little to do with the choices landlords make and implicit appropriation of tenant’s leasehold improvements as a justification for raising rents on those selfsame tenants is rampant in Seattle.
The only effective way to counter this rip-off is for the city to institute a rental registrar under which landlords seeking to be included on a roster of accredited properties must first be licensed as a business and agree to mandatory inspections, informed by tenant feed-back, that indicate the precise condition of structures prior to any new move in. There are three principal advantages to be had from this; first, so that prospective renters may have a standard-form record of precisely what it is they’re getting into and what hidden shortcomings may be included, and whether the rent being asked is fair; second, to diminish the frequency of damage deposits being stolen, without possibility of recourse; and third, to expose rent gouging based on leasehold improvements that tenants implement to make occupancy of said space more rewarding.
Only after a tenant moves out should a landlord be entitled to lay claim to any non-removable improvements clearly relinquished by the tenant. Even then, a tenant should have an opportunity to appeal to a rental court for compensation on improvements that he can show the landlord is using to gain a rent premium he would otherwise not have been able to take advantage of.
The importance of the landlord’s right to re-rent the property being conditioned on his first obtaining a precise status report and sign-off performed by a city-employed rental inspector, cannot be overstated. If it is imperative that a sign-off be required for electrical or plumbing work, why is it not equally imperative for the habitable condition of a rental to be on record? Fire and flood are graver dangers to society, one might think, until you realize that most fires and floods that occur in rentals are, in fact, attributable to the substandard condition of said structures and how people try to cope with those conditions.
Membership in this system would not be mandatory. Those who preferred to stay out of it could do so.
The rewards to landlords for being in this system would be many and varied. One of those would be free access to the credit reports and rental histories of those renters who opt to secure rental housing under the aegis of the city rental registrar. These renters, in turn, would not have to pay to have such checks run on them, as is currently the case, allowing a greater number of prospective renters to be on a waiting list for rentals they would like to have an option on, should they come vacant. A landlord could find a new quality tenant in just as much time as he/she took to reset the property and have it inspected, with no hassle.
On a less formal level, you would think that someone getting the benefit of free services and standing to acquire tenant-sponsored leasehold improvements when the tenant leaves would be inclined toward taking that into account when deciding what the rent should be.
Fat chance of that in our case! Apparently, the prospect of getting yet more money out of the already hard-up is more compelling to our landlords than fraternal solidarity.
Nevertheless, our faith in the usefulness of appropriate voluntary reciprocity remains fixed – both generous and severe. Those who practice it are the footings upon which the house of our nation stands. When I think of what is quintessentially American, it’s one of the first things that comes to mind.
The moment we were informed of the rent increase, we questioned the appropriateness of it, but our landlord was unmoved. When I pointed out that our accrued rent payments over twelve years had literally bought the house that our efforts had transformed into a much more valuable house – a house in which we were little more than volunteer property stewards - he simply shrugged and said, “Isn't that the way it's supposed to be?"
That presumptuous, openly classist response was the final nail in the coffin of whatever regard we still had for him.
Without hesitation, I disagreed. We knew exactly where the money had gone – the financial markets, upgrades on other properties of theirs, travel, a new Ford Expedition, a sleek new Mercedes Benz, treats etc. We may not have degrees in finance or enjoy the extra respect that owners get shown over renters, but man, it really gets under my skin when we’re presumed to be stupidly clueless about where our rent money’s going.
One recent evening, some six months after that encounter, while on her minimum-wage-plus-tips shift at the local restaurant where she works, my wife was somewhat unnerved, after approaching a just-seated table, to find it occupied by our landlord and his daughter and grand-daughters. Right there, in a restaurant we could never dream of going to, she could see her rent increase, her lately expropriated grocery budget, financing the landlord’s penchant for the kind of leisure dining she could never afford. Worse, in her capacity as a waitress, she was expected to be friendly and solicitous of his comfort, on hopes of him leaving her a tip that would lift her earnings high enough for her to be able to pay the rent! She just couldn’t do it and promptly ceded the table to a coworker. Being required to pamper someone who, from her point of view, was coldly stealing her blind, was simply out of the question, tip or no tip.
The way we see it, if you’re content to exacerbate the financial stress your renters endure so you can go out to fancy restaurants whenever you like, even as those same renters are helping to fund the social security system that spares you exactly the same kind of financial stress you’ve imposed on them, you’re not deserving of civic association with them, or of the many benefits their labors underwrite. Members of an elite club take care to treat one another well, or risk censure and perhaps expulsion. Nations are nothing more than larger clubs with rules of conduct to guide the actions of their sponsoring free citizen members. One has to question how elite a club the United States is if its members face no censure for having shown open disregard for conscionable and considerate behavior in a grub-eat-grub scramble for financial advantage over one another.
No, we most definitely do not endorse the view that that’s the way it should be here. The America my wife and I stand for is certainly not a bunch of people taking whatever advantage they can of whomever they can and excusing themselves by saying, "It's just making the most of business opportunity." Without the many who ceaselessly work to repair the social damage of precisely that ethic across this nation, it would long ago have sunk far deeper into rank materialism - the kind found in some developing nations where poor people live short, desperate and often brutal lives.
No, that's definitely not the way we think it's supposed to be here. The notion that renters are, by convention, little more than indentured straw buyers for landlords is both morally repugnant and sociologically unsustainable. By what perverted measure of equity should poorer Americans be bled so that wealthier Americans might live higher on the hog? How does society – in particular, the vital, younger growing half - benefit from that?

THE OLD MORTGAGE SWINDLE:
Aside from the patent unfairness of the whole idea, thinking that you can have millions of poorer people in a country buying expensive property for richer people, year after year, without it having a deleterious long-term effect on society, is just plain dumb. It defies basic math and it can’t go on indefinitely.
And yet, the all-too-oft-heard contention is that rent should be no less than the monthly mortgage payment, and if that isn’t happening, the landlord is somehow losing money. So many have repeated it so often that it’s almost become a social mantra. Not surprisingly, it’s a rule of thumb that slips most easily from the mouths of those with superior access to capital, experience and political representation who own, or manage, rental property - a convenient meme that focuses selectively on the short-term cash-flow picture to divert attention away from the long-term wealth-shifting from poorer to richer that goes on behind the scenes, the way an illusionist performs a trick on the stage. To date, this little semantic trick has fooled so many so well that it’s become an almost magical camouflaging of the unfair advantage taken of those in need of rental housing - mostly younger, capital poor, politically under-represented people who are naïve about how wealth is built.
One need hardly look any further than the mortgage argument to explain why rents always seem to rise way beyond the 30% of income level advocated by the FHA, regardless of what happens in the job market. Trying to fit the average mortgage into 30% of the income of the average renter is like trying to row a boat in a bathtub.
As I said, it’s a nice little meme, but oh so destructive of social equity, its effects can hardly be exaggerated.
The truth is, the assertion just isn’t true; the rent does NOT have to exceed, or even match the mortgage for a landlord to come out making damn good money over the long haul, and the long haul is what counts in life.
In fact, in some desirable areas like ours, no rent needs be taken at all for an owner to come out ahead on an astutely acquired, held and sold property. The rent is just gravy, as they say. In the worst case scenario, all that the rent has to do is exceed the net loss on the property that cannot be expunged through sale of the property, and since the prices on houses in these areas are so high, net losses of this kind are rarer than hen’s teeth. This grand, wealth assessing calculation must cover all costs and all income over the full course of tenure, from the first day of purchase to the final day of transferring the deed to the next owner. The correct estimate of that final reconciliation after sale, must take into account everything – every expense and every gain, including the monetary value of whatever other in-kind benefits were obtained during the course of owning the property (secondary rents, owner’s storage, equity growth, services rendered by the renter, and so on).
Why is that necessary? Because the real disparity in America is more about wealth than income and an enormous amount of wealth can grow invisibly within the context of owning a piece of property, whether lived in, rented out or just left vacant. When some people’s equity grows while the majority accrues none, society begins to buckle and crack.
The bottom line is that if you can’t afford to both live in one house and be buying another at the same time OUT OF YOUR OWN NON-RENTAL INCOME ALONE, and you’re depending on another (generally poorer) person to complete your responsibility towards the loan you took out to get that second home, you’re not really qualified to own that second home, but rather, taking a financial risk you might live – some might say, deserve - to regret. It’s like my stepmother used to say to me, “Don’t bite off more than you can chew and then come running to us to bail you out.”
Since 2008, there’s been a long train of people who fell into insurmountable financial distress as a result of thinking they could get renters to carry their mortgages on second homes that they themselves could not carry, and an equally long train of renters summarily chucked out of rentals they did not know were being foreclosed on.
Basic wisdom aside, there’s a more global reason to refrain from getting into the situation where some poorer person is carrying the cash flow burden attached to making you wealthier, and that is because using that tactic debilitates the social equity we need across this country for society to be healthy. It’s like doing laundry in a pond you drink out of – not a good idea. Though the tactic may be a popular way of getting wealthy in America today, the cumulative effect of it will be a growing tide of aging lifetime renters unable to find work, years short of being eligible to receive social security, who can no longer meet the rent of the place they’re in, or any other place, and end up turning to the charity of others or the help of government to avoid having to live on the streets. Ironically, this will be the very same population that once subsidized the wealth creation of others through the rents they paid. Everyone’s taxes will pay for dealing with that coming problem; make no mistake. And the price won’t be cheap. It’s either that, or having to put up with rising rates of misery and the crime that always attends such misery.
In our obsession to become individually wealthy, we’re like the glutton at a buffet whose one hand feeds his mouth even as the other reaches out to grab another morsel. As obese as he is, his overriding obsession is the unrelenting fear that he will somehow miss out on some fleeting moment of gustatory pleasure if he doesn’t keep eating as if life itself depended upon it. Indeed, he may die, not from hunger but, rather, from the absolute opposite: destroying his liver.
One of the maddening things about life is how a falsity perpetrated by those who seek to elevate themselves over others, repeated often enough, can take on the appearance of truth without its actually being true (one thing I learned only too well growing up under apartheid in South Africa). We have a term for such illusory assertions; they’re called truisms. We don’t always know how truisms first insinuate themselves into our minds, but we do know that taking them at face value can lead to grief – your own, or someone else’s. Unmasking a truism is a difficult thing to do. Galileo, the great mind himself, found out the hard way. All he was trying to put across was something that every six year old on the planet today knows – that the Earth goes ‘round the sun. But the big shots of his day – very learned and highly respected men - would have none of it. They considered the idea heretical and dangerous if allowed to persist.
The depressing thing is that truisms are maddeningly durable. The life we live today is shot through with every kind of truism imaginable – cultural, political, folkloric, moral, religious, informational, ideological and much besides - and in the end, they cause us no small amount of pain and inconvenience.
Deconstructing a truism is like mowing grass; you move on to other things, and straightway, it pops back up.
The way to tackle a truism is not by giving it a haircut; it has to be incrementally pulled up by its ontological roots.

So first, let’s deal with the implication that there’s some sort of moral duty that obliges a renter to carry his landlord’s debt burden. Well, to begin with, a landlord is just another kind of vendor and a renter is just another kind of consumer. There is no tenet in law or philosophy to suggest that there is any kind of moral obligation on the part of a buyer to offset any debt carried by a person that is selling him or her something, if he/she did not expressly participate in setting up that debt. The way a court would see it, the inherent motivation behind the seller’s decision to take on debt was not to advance the interests of the buyer but, rather, to advance the profit-driven aspirations of the seller alone. That single fact obliges us to conclude that we are morally absolved from having to share in the responsibility for repayment of debt we didn’t author, even if we do have the good fortune to end up benefitting from doing business with the one who took on that debt. It’s a state of legal insulation one might call buyer’s moral indemnity – something you enjoy every time you go the supermarket, unburdened by whatever financial challenges management is having to deal with. So why should the buyers of residential occupancy privileges, i.e. renters, not enjoy similar moral indemnity? Well clearly, they should.
Knowing that, why would a landlord accept 100% of the risk of servicing such a potentially ruinous debt obligation? Well, it should be obvious; because it consolidates the right to take, in full, such profits as arise out of having borrowed that money and insulates him/her from the claims of others such as employees, for instance, who might feel entitled to a share of said profits. All he/she has to do is responsibly service that debt. The potential to profit from some line of business and the responsibility to service the debt you take on to get into that line of business are comingled; you can’t have the former without accepting the latter.
After all, when it comes to renting houses, does the landlord concern himself with how hard it might be for you, the renter, to responsibly service whatever debt you carry, before deciding what your rent ought to be? He takes your first, he takes your last, he takes a big fat security deposit and rests content knowing that the most he can lose is the effort it takes to find a replacement for you if you fail to pay, as agreed, and have to vacate – a scant burden in a town as saturated with would-be renters as this one. Does it concern him how well you did last month? Not a bit. Say you have a bad patch and have to borrow money to make the rent for a month or two? Does it hang heavily on his conscience to take it? Of course not; from his point of view, none of that is any business of his and to suggest that it should be is simply ridiculous.
So why should you the renter be in any way obligated by such debt arrangement as the owner might have made with some bank, prior to having had any dealings with you, so that he could buy the house he’s using to advance his wealth interests?
Let’s take it one step further. What if he’d subsumed the original debt arrangement into a refinancing deal that had perhaps allowed him to take a vacation or two abroad, or some other thing unrelated to maintaining the property itself? Should you be sucked into helping to pay that off, as well, under some perverse principle of moral induction?
In the days of absolute monarchs, when landlords had vastly superior authority over renters, the answer might have been, yes, because if you didn’t agree, you’d be denied the protection and patronage that not only allowed you to survive, but offered hope for social elevation to your children. Today, however, those functions have become the province of the public sector that we all own collectively, allowing each of us to be legally sovereign and indemnified by social contract from obligation toward the needs and liabilities of other adults whose situations we did not help to create. Because of that neat fact, you the renter are in no way obliged to share in your landlord’s financial burdens any more than he is obliged to share in yours. Welcome to democracy.
But old traditions and thought forms die hard, and even today, there are still landlords who believe their renters are morally obliged to carry the full load of repaying whatever debt they took on to obtain the asset they subsequently rented out, as if occupancy itself were the only benefit attached to the ownership of said property and issues of wealth accrual were of no measurable value, and as if any value in the property, recoverable through resale, were dwindling to nothing. How telling it is then that those same landlords are invariably dead-set against dropping the rent once their debt is paid off, and dead-set against sharing a portion of the gains obtained from tenant-sponsored improvements made at resale.
Talk about trying to have your bread buttered on both sides without getting grease on your fingers! It makes a mockery of the seminal principle of being entitled to take the profit because you were the one who served the debt obligation. Instead, the renter is supposed to service the debt so that his landlord may walk away with the profits!
That, in a nutshell, is feudalism at its worst, with all the disadvantages and none of the advantages. At least, for serfs of old, the upside of the deal was that their lord was also their protector and patron, the sponsor of whichever of their children showed promise, the one who sent for the doctor, the principal donor to their church and school and the one who would make arrangements for a decent burial when they died. Very few landlords these days see helping their tenants as part of their moral duty. Tellingly, those that do, (and there are indeed some) normally charge a lower rent. God bless ‘em for that!
There are terms in the glossary of psychological pathology for believing that others should be willing to carry your life load for you. When you do it unconsciously, it's called responsibility transference - the inability to realize that the buck stops with you, owing to decisions you made. When you do it knowingly, without regard for the impact on the other, it’s called abuse of another person. Responsibility transference is something you generally rise above in going from childhood to being a fully responsible adult; abusing somebody can land you in a bunch of hot water, especially if you get caught doing it as an adult.
On occasion, our own landlords would drop by unannounced – technically a violation of the Seattle Landlord/Tenant Act – and, during conversation, refer to the mortgage on the house in a roundabout way, as if to imply that the rent we were paying was insufficient, and as if we didn’t know that they had used the house as a refinancing cash-cow to offset bad investments they’d made elsewhere and for other expenses and indulgences. Though we were intellectually forearmed enough to not be manipulated, it was still a disingenuous use of psychological leverage and a self-serving obfuscation of the truth. Granted, we all do it at some time in our lives, but not to weasel thousands more dollars a year out of people who are clearly struggling to put bread on the table, I’ll bet. Trying to pin it on their accountant didn’t go over big either.
And yet, one has to admit, they’re not unique in this, nor something premeditated on their part. Other landlords do it all the time, and those landlords learned to do it from landlords before them.
As to the financial merits of the plaint that mortgage payments on a house might be wholly dependent on the rent, because the money was lent to buy the property with the express purpose of turning it into a rental, well, that’s a stretch. Only a reckless bank, deserving of a lesson in basic financial prudence, would issue a loan based solely on assurances by the borrower that he would secure an unbroken string of renters for the full 30 year term of the loan repayment period, notwithstanding all the things that could go wrong with such an arrangement. Very few banks are that dumb, and if they are that dumb, that’s their mistake to learn from, not some unfortunate renter’s.
Whenever that misbegotten claim is heard, it should be challenged intellectually. Scratch the surface and you’ll find, most often, it’s either an inadvertent admission that the owner fudged his loan application and is taking a risky shot at trying to get ahead or, if he didn’t, that he’s just greedy and is quite willing to shift the burden of his expense habits onto the back of his renter so that he can happily indulge in luxuries which, in most cases, the renter himself cannot afford.
But the final nail-in-the-coffin of linking the rent to the mortgage payment is discovered when you start messing around with the payback schedule. Thus, if the original mortgage was a 30-year and the owner converts to a 15-year, does that mean that the rent should follow the mortgage payment up on the very same house? How about a 10-year, and so on? The answer, of course, is no. That’s a completely insane idea. No one but a fool or a wastrel, indifferent to being parted with his money, would pay such a rent. It’s an examinational approach that very deftly exposes the bogus logic behind blindly linking the rent to the mortgage payment.

THE COST OF INACTION:
Anyway, in the final analysis, if you’re one of those lucky enough to own a house these days, there’s no need, or point, to worrying about what you might have paid for the house, as long as the place is maintained adequately, and as long as you are well qualified to meet the mortgage out of your own resources, come what may.
Here I’m talking about that amount registered on the tax assessment log, quite separate from the interest load a bank might add to that to help you buy it. Why do I not include interest? Because payment of interest represents buying time while you use someone else’s money to get something you couldn’t afford on your own. It’s what you pay to have and to use that thing before you have fully paid for it. Clearly, while a renter may enjoy partial use of a property – specifically temporary occupancy - he/she cannot remodel it, sell it for a profit, use it as collateral, cash in the equity, or have eminent domain over use of that property, all of which are highly significant advantages that paying interest affords an owner. How can it be deemed fair that someone else, normally poorer, should carry your load for you so you alone may enjoy those advantages, unless you believe in a dog-eat-dog world where you and your kind are subject to the same rights of extortion by those above you in the pecking order?
As long as responsible stewardship of both property and mortgage occurs, and as long as we don’t have a replay of the once-in-a-lifetime events that led to the financial meltdown of late 2007, the odds are excellent that you will get, at very least, what you initially paid for the house when you come to selling it. And sell it you will, unless you intend to die before you sell it and will it to someone after you’re gone, in which case, none of that will matter to you. Assuming you do sell it before you die (we hope that’s the case), anything you might get over what you put into it is just gravy, and with the way real estate is going these days, the gravy appears to be considerable.
Admittedly, there are exceptions to this rule. Houses in failing cities and in areas subject to a rising threat of natural disaster or other negative developments do lose value. Seattle isn’t one of those places. Interestingly, since those negative factors oblige landlords in those areas to really compete for tenants, the rents on them are typically much lower than for houses of similar size and utility in better areas. And still, the owners of such properties seem to do OK in terms of wealth. Right there, you get some idea of how much rents on comparable structures in Seattle are inflated over what one might think of as truly competitive.
It’s easy to see why individual landlords use the truism of rent needing to meet the mortgage to get a psychological edge over renters – the temptation to be financially self-serving springs eternal in human beings, especially when the form of self-serving activity involved is invisible prior to the end point of a cash-out and, therefore, not likely to be challenged by others who might be unwitting, passive accomplices in that activity.
More troubling, however, is that governments that should be wise to this and looking out most for the weakest they serve – and, in that sense, looking out for themselves - don’t just do nothing to counter such misperceptions; they willfully look the other way. When property tax revenues follow assessments up, and the money rolls in, the temptation is to let sleeping dogs lie. As long as the renting public remains politically fractured, largely ignorant and sufficiently compliant, why bother to push for higher social objectives?
How big a problem is this? In a word, HUGE. In 30 years of grappling intellectually with the issues behind the institutional barriers to lowering rates of disparity in America and other developed economies, I’ve come to the conclusion that lack of due diligence on the part of government to promote agility, transparency, reasonability, and social accountability in the rental market contributes greatly to needless overcharging in rent, which, in turn, results in a massive rising drain on the ability of people to build savings that would allow them to escape the treadmill of renting by getting into home ownership and building equity of their own. Inasmuch as this worsening situation undermines the life force of the American middle class, government inaction toward making the rental market more efficient and leaner undermines the life force of the American middle class.
Any form of mischaracterization that is left to spread unchallenged by government that puts the average renter in an adverse position with respect to rental prices, has substantial negative consequences for society at large. Ongoing government torpor toward those negative consequences has to end if the condition of America’s middle class is to reverse its current downward slide.
Furthermore, since the continued lack of effective government action on the rental market permits the single largest subsidy of richer people by poorer people to continue unabated, government must inevitably be held greatly responsible for the rising tide of class resentment linked to the country’s wealth disparity, as well as the public sector’s growing inability to help those left behind in society’s chaotic rush toward the uncertain times that lie ahead.
I won’t, at this point, get into the specifics of what I think government can do to improve its performance in helping to make the rental market more balanced and transparent, save to say that waking up to the negative effects of exorbitant rent, and the harm that those effects do to society’s long term prospects for upward mobility, is long overdue.
My more specific objective here is to derive a cost/benefit dissection of what should be applied to the price of rental housing and what should not, so that the theoretical break-even rent on any given property may be more precisely gauged. Against that yardstick of a relatively precise break-even rent, it can then be seen whether the rent actually being charged on any given structure is a good deal, normal or over-priced. After that, it is a relatively easy thing to use the auspices of government and market mechanics to induce a drop in rental prices across the board, as part of the overall effort to improve social equity in America. More specifically, I intend to show that that can be done without undermining the sense of purpose and security that every landlord supportive of greater social equity deserves to enjoy.



GETTING A NUMERICAL GRIP ON THINGS:
So, the challenge now arises: is there any metrical approach that can be derived by which to gauge whether the rent on a house of any given set of characteristics is either a good bargain, reasonable, overpriced or simply an outright rip-off? (Obviously, I believe there is; otherwise, why would I be devoting so much time to this analysis?)
The logical way to begin is to separate out the constituent elements of value involved in an overall cost/benefit analysis of owning a rental property. Actually, it isn’t as complicated as that may sound.
First, we need to recognize that there is no single standard approach to setting or assessing rental prices but, rather, three different approaches – the Greatest Good approach, the Market Opportunity approach, and the Reductive approach.
You’ll hear the first two approaches being used as a discussion basis at a town meeting on rents because they’re easily verbalized and most people are familiar with them. The third way – The Reductive approach - is for those who are more interested in the math and demographics behind the data than the rhetoric. The downside of the Reductive approach is that it involves more thinking and it’s difficult to get listeners at public meetings to pay attention when they have to think about what’s being said. The difference between results rendered by these three approaches can be considerable, depending on what’s going on in the housing market and what I will attempt to show is that the investment of a little bit of thinking can make a huge difference to what is considered to be a reasonable, price-competitive rent.
The Greatest Good approach follows the rostrum that society’s needs should be the final arbiter of whether any given rent is fair or not, because unfairness undermines social cohesiveness. From society’s point of view, the best price is that which leads to the highest sum satisfaction of both buyer and seller – the one that best preserves general satisfaction and the common cause that binds the various levels of collective together. That amount, it can be argued, lies somewhere close to the mid-point between charging too little to be able to stay solvent and too much for almost any buyer to accept. Just where, depends mostly on the influence of competition and the nature of the relationship between the seller and the buyer. Followers of the Greatest Good approach sometimes advocate for rent control when rents rise too high or too fast to be socially reconcilable, even though the track record of summary rent control is not very good.
The Market Opportunity way, by contrast, seeks the highest return for the sellers of occupancy privileges, exclusively – owners and their agents. Followers of the Market Opportunity way invariably advocate for as little regulation as possible, ostensibly because it will increase the supply side, thereby holding down prices. That approach, itself, hasn’t worked as well with rents as it has with most consumer goods, even when there is an apparent over-supply of housing, because those on the demand side lack the time flexibility, the logistical means and the will to make it work to their advantage. You can’t exactly hold off buying from the providers of housing like you can from the providers of, say, appliances or cars. What are you going to do, live under a bridge somewhere? Not likely. So, to a considerable extent, renters are a captive market group – a fact that significantly undercuts the credibility of those who claim that the Market Opportunity approach to setting rents is socially equitable.
During times of general economic stability, the Greatest Good approach and the Market Opportunity approach tend to generate roughly equal conclusions with respect to what rent should be, because the tempering forces of supply and demand don’t have to chase after rapidly changing circumstances and are given time to work.
When the approaches begin to produce divergent results is when the general economy experiences upheaval, or some sort of social disruption causes a rapid change, up or down, in the number of people requiring housing. During a recession, the Greatest Good approach suggests that rents should fall, in a bid to follow the lot of the average rental seeker downward, so that the burden of the pain may be shared between tenant and landlord, while the Market Opportunity approach ties the rent to the perception that moving to a cheaper place is too expensive and too onerous for it to be a realistic option for the renter to exercise on a dime, so to speak, and so why drop the rent? Sure, the renter is going to be hurting more, but so what? In the words of our landlord, isn’t that the way it’s supposed to be? After all, people losing their homes to foreclosure will pay anything for a place to rent, so why try to be competitive?
Conversely, during a recovery, while the Greatest Good point of view suggests that only rents that were lowered should be allowed to rise, and then, only to pre-recessionary levels, Market Opportunity adherents take immediate advantage of any upward psychological current from the low point to raise rents, even those rents that remained fixed during the downturn, so that once the economy reaches its pre-recessionary level, rents will claim even more of a renter’s discretionary income than before the recession began. This is called ratchet pricing, and it’s why market opportunists thrive when social disruptions of any kind occur. The primacy of the Market Opportunity approach today explains why the past two recessions have been so bad for renters and, in part, why recoveries in renter-dominated areas languish long after areas with higher levels of owner occupancy have got back to normal.
Traditionally, at a government level, we’ve tended to assume that the best thing to do is to allow these two primary methods of price establishment to wrestle one another to exhaustion. In the past, that government approach worked well enough for consumers, because the geographic distribution of economic opportunity throughout different areas of the country, generally worked against price trapping. The most notable exceptions to this felicitous condition were in geographically constrained residential areas that had formed around financial centers like New York, San Francisco, Seattle, and Boston, for instance. Today, across the country, a much higher proportion of the population consists of big city dwellers. The price of rent in these areas takes a larger slice out of a typical working person’s pay than from someone working the same job in a city like Houston, for instance, where economic forces and unconstrained terrain have allowed the city to grow away from its point of origin. In addition, a hefty slice of these trapped renter populations declined to own a car, because owning a car in the bowels of a densely packed area poses both bigger challenges and higher costs. Ironically, not owning a car, itself, is a factor that tends to depress a worker’s wage prospects, since the things a worker has to pay for form the basis of how much employers are prepared to offer. Lower rates of car ownership tend to both add to the trapping effect while simultaneously depressing wages, further adding to the trapping effect.
Today, the situation for urban renters is even worse. More and more states now show a trend toward becoming increasingly urbo-centric. In part, that change is the result of a concentration of economic administration through mergers and acquisitions in every economic sector and the cash flow created by the urban banks and financial institutions with all the spinoff industries that both attend that sector’s needs and the consumer appetite of the better-paid who work for them. Equally consequential is the booster role played by the metro media in creating an inflated impression of accessibility to all things pleasurable, exciting and culturally rewarding available to those who live in the city – things that, in reality, only a minority can afford as they feel inclined and the majority ultimately learn to live without. And then, of course, there is the natural tendency of people to be attracted to apparent employment opportunity without giving equal attention to the presence of the increased competition for those job slots posed by all the other people who’ve been similarly motivated. You can see how that might help employers, but it’s hard to see how those seeking decent wages come out ahead, much less those having to pay proportionately higher rent per square foot of living space.
When all of the above has to play out in areas that are rigidly confined by topography, the negative consequences for those at the bottom of the power pyramid are greatly exacerbated.
But it’s not just the clash between geography and demographics that creates the density that rent gouging feasts on. There’s the effect of the growing wealth dichotomy to consider. Those with much greater wealth enjoy huge psychological and existential advantages over those with much less wealth, or no wealth to speak of, and when it comes to real estate they’re not shy about taking advantage of it. When push comes to shove, the rich will find a pack of lawyers to press their advantage home. It’s the proverbial “sword of Damocles” that always hangs over the head of the poor and it has as little to do with justice as the “trickle down effect” has with general prosperity. I don’t have to prove this; I lived it in South Africa where those who worked the hardest got paid the least and had to live in the worst, most overcrowded conditions.
A greater and greater proportion of the best use of everything desirable is being monopolized by a smaller and smaller proportion of the population, concentrated in ever-smaller regions, leaving the rest to duke it out with one another for a piece of whatever is left on the outskirts.
Under a scenario like the above, the natural balance between the Greatest Good adherents and the Market Opportunity adherents, with respect to rents, breaks down, and price gouging takes off.
It is a well known fact that renters become trapped in these high-rent clusters as they grow older - the inevitable result of not being able to save enough to buy one’s way out of renting in that area and into the relative financial safety of home ownership and being increasingly fearful of not being able to arrange both housing, and sufficient employment to be able to pay for it, elsewhere. It is further compounded by the long-term renter’s tendency to gradually lose faith in the idea that personal potential exists beyond those geographic bounds in which one has made a place for oneself and to which one has become so habituated, over time, because venturing beyond those bounds to see what lies elsewhere is either difficult, psychologically intimidating, or just flat-out impossible because you don’t have a practical way of doing so (as in not having a car).
Once trapped, every one of those people will reach the point where they’re no longer employable. It is the reality of aging. At that point, they will not have the income to continue paying their high rent, nor the property to cash out, and will be compelled to seek financial assistance, normally from government.
Given the current fiscal difficulties governments at every level are trying to deal with, you’d have to conclude that being obliged to help growing numbers of renters falling into this particular form of difficulty would make government nervous about how it intends to find ways to mitigate this future headache. So far, however, I haven’t seen sufficient evidence of attention being focused on this subject to prove that such is the case.

Fortunately, for both renters and government, there is that third approach to analyzing rent - the Reductive approach that I referred to above - that is much harder to manipulate because it is based on concrete facts and figures and not market emotionality. As such, it offers promising potential for introducing greater stability and economy in rental prices, regardless of what the broader economy is doing and, with that, real potential for diminution in the regional wealth gap wherever that approach to setting rent is encouraged by government to take root.
As implied, the Reductive approach depends on reducing both ownership and renting to their basic financial components of value and tracking those components over the full course of buying, holding and selling a property. Markets tend to work better when more rigorous, long-view financial control permits sellers of services to sail closer to the wind and the tendency toward blind, copycat pricing is reduced.


THE REDUCTIVE APPROACH, STEP BY STEP:
Basically, the Reductive approach to analyzing rent involves answering a short series of simple investigative questions. The answers to the first set of questions lead to the next set of questions and so on, until the whole series is laid bare and mathematical conclusions can be drawn.

THE OWNER’S HIDDEN WEALTH ADVANTAGES:
Even though we’ve seen that the original list price of a consistently well-maintained property is normally covered by the sale value potential, that still leaves the dark horse of the interest load to have to deal with - traditionally close to 125% of the amount borrowed, on average, for a 30-year repayment schedule. If the buyer put down 20% and borrowed 80% of the amount needed to pay for the house, payment of 5% interest over 30 years basically doubles the original cost of the property.
That’s a lot of money.
So what is it that would make a buyer intent on actually living in the house content to shell out that extra premium in interest? Basically, there are three principal things to be gained:

*Firstly, because owning confers eminent rights of domain – the right to shape the property as you see fit within the bounds of zoning limits, and absolute immunity against being evicted by any other than government itself (as long as you pay your taxes, don’t become a felon, and don’t fall victim to an order of eminent domain in the interest of a greater public good). A renter enjoys no such security.

*Secondly, for the occupancy benefits, such as they may be – optimally, a pleasant, safe neighborhood, with satisfactory access to employment, shops and recreational opportunity, for instance. This is the one asset a renter can enjoy.

*Thirdly, because owning offers certain long-term investment potentials that can go far beyond just being a hedge against inflation. The return on even modest investments in home improvement can be dramatic. Gentrification of the surrounding area can occur, doubling, tripling or even quadrupling the market value of a property over a typical 30-year mortgage period. Further, one can use the accrued equity in the property as collateral for a loan. New employment opportunity in the area can drive demand for housing, similarly lifting prices. (All are wealth-building potentials not afforded a renter).
Also, because a renter pays his rent (including that portion of it earmarked to cover mortgage interest) with money left over after having paid income tax, while a homeowner pays the interest on his home with before-tax money, there’s a significant wealth advantage built into the dollar spent on interest by the owner over the dollar spent on rent by the renter. (To get an idea of the hidden effect of this tax differential, consider this: if my wife and I had been able to pay just that portion of our rent earmarked to offset our rightful portion of the interest load under the Reductive approach with tax-free money over the past twelve years, we’d have been able to save around $5,500).

Those three areas of consideration are the most widely shared reasons an owner/occupant would be prepared to pay such a hefty premium in interest over the term of the mortgage. One could reasonably split the overall benefit picture into 30% for eminent domain, 50% for the advantages of occupancy and 20% for investment purposes.

Broken down like that, it becomes a lot clearer that there is around twice as much comprehensive value to be gained from owning the house you live in than simply renting one, even if it does come with a large accrual of interest over the course of a thirty year repayment schedule. Also, it shows that even though a landlord cedes the right of occupancy to a renter, he/she still retains much in intrinsic benefits, over and above the rent, in simply being the owner of that property - roughly equal in cash value to those enjoyed by the renting occupant. Given the reality of that fact, we begin to understand why the owners of some 10,000 of the 275,000 single-family homes in Seattle feel they can afford to have them sit vacant. The homes are kept up but no one lives in them and they’re not rented out. Nevertheless, their owners still seem to think it’s worth holding onto them. Go figure.

THE NEED FOR SOCIAL EQUITY IN RENTING:
If preserving social equity in America is what we really want, we cannot allow this or that activity in society to casually erode it. Whether the activity is legal, or otherwise, matters not.
Since the inception of the republic, we have expended trillions of dollars and close to a million lives, all told, defending what we thought was right, at home and around the world. Having paid so dearly in pursuit of this precious thing called equity, are we now supposed to sit idly by while self-serving action in our communities thoughtlessly squanders it? I certainly hope not.
When it comes to renting, a decent respect for social equity demands we seriously question what overall good is obtained by expecting the renter – in most cases, a poorer person - to cough up the full interest load on that portion of benefits exclusive to the landlord – in most cases, a richer person – when, quite clearly, fully half of the benefits conferred through owning are the owner’s to enjoy exclusively? The very idea borders on fraud, when looked at from the point of view of the authority that is obliged to underwrite the social enterprise – specifically, the People, so loudly proclaimed in our constitution. Fairness in society is vital. Indifference toward unfairness rots the common understandings between people that are the lifeblood of financial structures we subscribe to and put our trust in. Those financial structures don’t just facilitate the growth of the middle class; they also build common cause among people. When grievous disparities in wealth open up between people, that sense of common cause tends to evaporate, and citizens pull away from one another. Denied the catalyst of common cause, the better objectives of society suffer. The raising of sufficient public revenues to properly steward public responsibilities becomes more difficult, or even impossible. Social conditions then decline, leading to cynicism about the common good and common decency, even toward the idea of fairness itself, creating a negative feedback loop that spirals downward, further eroding the economy and social equity. Hopelessness, criminal activity and substance abuse fill the void left and a process of wholesale urban decay sets in.
Fairness isn’t just a nice, feel-good notion. It’s the backbone behind the sense of interpersonal trust that allows a free economy like ours to be dynamic, diversified, inventive and flexible. If people think they’re being taken advantage of, they withdraw their commitment, enthusiasm and participation. A trust in fairness is why Scandinavian countries prosper and have longer human life spans, while their Slavic neighbors to the east, with superior natural resources, but less faith in institutional fairness, struggle financially and have shorter lives. Russian and Ukrainian first-generation immigrants to America are everywhere you go; their Danish, Norwegian and Finnish counterparts are hard to find. People vote with their feet when it comes to quality of life.
The only answer I can come up with as to why some people might think that a renter should be expected to carry the lion’s share of the purchase of benefits that he/she enjoys no part of is because they might consider the renter socially inferior to the landlord, making the renter a social supplicant whose presence on the owner’s property constitutes an implicit inconvenience indulged under sufferance. The price the renter must pay to offset this inconvenience - a kind of modern-day tribute to the owner – is thus arbitrary.
Obviously, I don’t share that classist view. It’s a relic left over from the days of feudalism and so at odds with modern economic reality that it’s almost laughable. Any self-respecting, freedom-loving middle-class person paying tens of thousands of dollars out of his pocket every year isn’t going to stand for being looked at that way.
From a legal point of view, today’s middle-class renter is a class A consumer and must be valued as such. In the act of renting, that consumer buys exclusive rights of access to, and use of, a given property, equal to those enjoyed by any who own the homes they reside in, short the right to alter (unless required to bring the property into conforming condition under local law). If the seller of those rights wants certain restrictions to apply, then they have to be clearly stated in the contract and not implicit, and agreed to by that renter, with signature appended, otherwise the default legal understandings must apply.
Logically speaking, it’s incumbent on the state attorney general’s office to protect that consumer’s rights. You might ask, well, do they? With the purchase of hard goods and professional services, yes, but when it comes to renters’ rights, I can’t recall a single case of action to protect. The reason for that may be that they consider renters to be a class distinct from ordinary consumers; that renting a house is somehow different in principle from renting, say, a car. Given that half the voters in the nation are renters, it’s high time they got better representation in government.

SOCIAL EQUITY: IT’S NOT JUST A FANCIFUL NOTION:
All arguments aside, there’s a time to own and a time to rent, and since people will want to rent, rents must be set. So the obvious question that follows is this: can one do so in a relatively precise way that clearly shows that neither party is being shortchanged?
Whatever the activity involved, if we feel we’re being taken advantage of and getting less out of the deal than we should for what we’re contributing, we get very upset. The reason for this is simple – it’s in our DNA to become agitated whenever we think someone is getting one over us. Implicitly, it’s all about social rank. In taking from you what you feel is more than reciprocity merits, and doing so with apparent impunity, a taker demeans you, daring you to resist. If you don’t resist, you feel that something larger than material alone is being stolen from you. And you’re right. It’s that inner comfort you get from knowing that others respect you enough to avoid straining the social bond between you and them, that they think that you might be good to have around when difficulty, danger or want threaten.
For the first 100,000 years of our existence as homo sapiens, one’s status in the group was a critical thing to be assured of. Nobody without it got a good shake in the division of tribal providence. Those with more esteem enjoyed more dependable access to what it took to survive and better access to potential mates. Men, particularly, took terrible physical risks to raise the status of themselves, their families, tribes and nations. Often, they faced death, injury or sickness in the course of great hardship, but the potential gains to their collectives and their personal standing within those collectives, were deemed worth the price involved.
The genes of those who secured higher tribal rank had a better chance of being carried forward and those who were more driven in that regard had a better chance of ultimately securing higher rank.
The trait of worrying about loss of status – of being sent down in the pecking order - is evident in many other animals, and for much the same reasons. Broadly speaking, at a deep psychological level, loss of status infers being moved closer to the edge of the gene pool plate and the void of genetic extinction. The distress experienced at being demoted isn’t so much intellectual as visceral, to the degree that people who perceive themselves as having been denied social rank die, on average, at a younger age than those who are comfortable with the rank they feel they’ve been accorded, all other stress factors being equal.
So why, exactly, should the sense of having been ripped off monetarily, in particular, translate so intensely into a sense of having been disrespected and robbed of honor? Well, if you look back in time, you can see how this linkage evolved.
In the simplest sense, allowing another to take what you didn’t want him take, without a fight was construed to mean you lacked the courage to stand up to him. In the primitive mind of old, in stealing something from you, he gained respect from others and you lost it. The respect of others is, broadly speaking, the same as honor.
For primitive tribes, stealing providence from other tribes to benefit one’s own tribe was a way of life, and whoever stole the most general providence from outsiders in raids was accorded the most honor.
Over time, as tribes began to unify into larger social compacts and such raids became an offense on the compact itself, acknowledgement for deeds of honor shifted to other forms of community usefulness. These deeds were rewarded with articles of appreciation that carried some sort of seal of the realm. To be useful as objects of value, they had to be respected. To be respected, they had to be difficult to replicate while being widely accepted geographically. For that to be possible these tokens also had to be durable and easily carried on one’s person. Inscribed metal tokens were the optimal choice for common trade. Gold was the least corrodible and most widely valued, but it was heavy. Within given jurisdictions, a piece of paper carrying an official seal, tying the note of indebtedness to the bearer alone, would suffice just as well and be more convenient.
The point of these tokens lay in acknowledgement of your worth to society. Having such tokens in your possession gave you access to things you needed – food, lodging, goods, et al - even among perfect strangers, far and wide. In a way, they symbolized the part of you that was both good and trustworthy. The more you had, the better person you were presumed to be, provided you came by them honorably. To that end, tokens of tender worked just as well in acquiring what you needed as acknowledgements of honor would when you were among those who loved and respected you.
That old view on money perhaps explains why thieves and forgers were dealt with so harshly in olden times. Money acquired dishonorably was an offense against the code of conduct that made life work better for all.
So, in some sense, since they worked the same way, money and respect of personal worth became interchangeable commodities. It’s a reality that persists today, and the grey area between love and money can be problematic social territory, at times.
Inasmuch as all natural providence is considered to be a gift of an original creator’s beneficence, and since money can buy as much of natural providence as anybody could reasonably want – with the notable exceptions, perhaps, of the true love of another person and things that only time can deliver – it isn’t hard to understand why so many just naturally assume that those with a lot of money are intrinsically more special than those who have far less of it. Nor should we be surprised by the fact that being regarded as wealthy is a pretty effective way of getting others to do what you want, oddly enough, even those who don’t stand to get any of your money from you. Being the recipient of that kind of respect bolsters a person’s self-confidence, and having greater self-confidence adds to one’s chances of enjoying a more rewarding and longer life.
It stands to reason then that anybody who casually relieves you of a portion of the money you’ve worked to earn, without satisfactory justification, harms you in three ways: 1.) he is effectively stealing a portion of the reserve by which others gauge the degree of consideration they feel they ought to show you; and anybody who steals that, threatens your ability to get what you need to survive and prosper; 2.) he shows you up as being powerless to prevent him from doing that, which makes you feel bullied and impotent; 3.) he walks off with the money that could have helped you in bringing your latent potential to fruition.
So it’s not hard to see. Meekly submitting while somebody relieves you of an unjustifiable portion of the money you’ve worked hard to acquire is, quite literally, a triple loss of things dear to you; it’s a loss of immediate material means, a blow to your self-confidence/respect and a loss of future personal potential.
OK, so we all take a random knock now and then and, mostly, we recover. Having to endure a long-term landlord levying that combined drain on you, month after month, for years on end, with complete impunity, however, is a different thing completely. It diminishes you by increments, and may well rob you of that slim margin of chance you have to prosper, live long and die fulfilled. Bit by bit, the courage to take on the risks you must, if you are to succeed in life, drains away. Year after year, you defer acting on your aspirations until, at some point, it begins to dawn on you: the chance has passed you by and the window of opportunity has closed for good.
Make no mistake, that kind of courage to act isn’t precious to you alone; it’s the fuel our national economy needs for money to move around in society, broadly referred to as consumer confidence. Any loss of it to you, the individual, is a loss to society, as a whole.
It’s the very same belief in self that fuels the willingness to take risks and persevere in the face of potential disaster, on the chance that fortune, and perhaps fame, will be won. Today, because of what that capacity drove people to attempt in the fields of science and technology, we do things that, only one human lifetime ago, would have seemed utterly impossible, like being able to watch a movie, or work on a laptop computer in a plane traveling at 600 mph, 40,000 feet above the surface of the mid Pacific in the company of three hundred, or so, other ordinary travelers who don’t think twice about any of it.
Stunt the aggregate quotient of belief in self in the nation, and it will inevitably lead to a stunting of the nation’s progress in a rapidly changing world.
As long as we are content to stand by and watch a small minority grow rich on the backs of cowed renters, we will be a nation content to watch a sizable proportion of its population submit to living smaller lives.
To get an idea of the overall cost of how that might be affecting the nation, one needs only look to the China of today, in which most people have some savings and are encouraged to make something of themselves, and compare it with China’s neighbor, North Korea, in which the overwhelming majority have no discretionary income and personal ambition is held tightly in check. Not so long ago, these two countries had roughly the same standard of living. Today, they appear so different that it’s hard to believe this dichotomy in living standards opened up in the span of a single generation, and yet that’s exactly what did happen. In that one example alone, we see how the thwarting of personal dreams can hobble the potential of a nation.
Just knowing that others respect not just your person, but your potentials as well, nurtures within you that essential willingness to dare that is so fundamental to economic evolution. No man should presume to damage another’s capacity to be bold in life by casually ripping him off, just because convention allows him to, without expecting to be held accountable for having damaged society in the process.
That’s what the excessive portion of rent amounts to – a straightforward rip-off. Not the reasonable portion; just the excessive portion. Even if you can afford the overcharge, it gets your gore to have to pay it. The enormity of billions of people feeling that way all around the world, at least once a month, into perpetuity, is a sad thing to contemplate.


A NEW WAY TO GO:
Most people assume that there is no way to objectively gauge whether rent is actually excessive, that there is no scale of relativity, that no basic unit of fair exchange can be conceptualized and that the question is hopelessly open to subjective opinion. In point of fact, that’s just one more convenient truism landlords and their agents use to conceal just how far over the break-even point they’ve grown accustomed to operating.
If there is one thing I’ve managed to glean from life, it’s this: the fairer the deal a man is giving you, the more ready he is to explain why he has to charge what he’s asking for a certain thing and, conversely, the more he’s gouging you, the quicker he is to resort to some form of free market blandishment to conceal the extent of his greed. Transparency is the enemy of greed.
Using the Reductive Approach offers us a rational way to pick apart such blandishment and lay bare the excessive portion of rent. The approach is simple: we apply math to readily available information and, in so doing, give all parties involved the tools needed to know not just whether the rent being levied is indeed a fair exchange for the components of value being offered, but also whether the profit margin being delivered compares rationally with profit margins in other forms of business of comparable complexity.
If you think that’s too complicated, consider for a moment, the utility bill you get each month. The component costs are clearly laid out, so the final tally makes sense. It’s called an itemized bill. You don’t have to understand it, because you’re satisfied that somewhere, someone competent, acting in your best interests, does. It’s the utility’s way of letting you know that, to them, you’re not just a paying customer, but a respected one as well. This courtesy is standard practice, mandated by state regulators, even when there is no competing utility to contend with.
The rent, by comparison, is normally many times larger than the utility bill. Should the rental contract not show, just as clearly, on a standardized form, issued but once for any given rent period, what charges apply to what expenses incurred by the owner in relation to the property? We’re not talking about small potatoes here. No. What we’re talking about here is the biggest outlay close to half the people in the nation will ever make in their lives.
Would you expect any lower standard of cost accountability from a contractor, a plumber or a healthcare provider?
One thing I know for sure is that if my wife and I want to be reimbursed by our own landlords for expenses we incur in taking care of their property, their accountant insists on getting an itemized explanation and receipts and, further, that my hourly rate be no more than half market rate.
Why then are we not equally deserving of the same degree of trouble taken to show why the rent is what it is, or why our rent is going up 14%, just like that? We, too, have money affairs to manage. That’s simple business courtesy. Further, anything we deserve, every renter deserves.
The important element of consideration that’s missing here is that we all have equity to protect, not just the guys at the top. To be sure, no semantic effort is spared in rental contract writing to protect landlords from any loss of equity beyond that attributable to normal wear and tear under responsible use by the tenant. What comparable measure of semantic rigor applies anywhere in Washington state to protect the assets of renters, such as bank accounts and common stock, from being casually wiped out by exorbitant rents or rent hikes, without proper justification consistent with the goals of social equity? Those assets are as critical to the futures of renters as any property might be to a landlord, perhaps more so. Those, like my landlord, who are content to appropriate the assets of their tenants because a general climate of regulatory and moral permissiveness gives them license to do so without a shred of justification, are no less guilty of offense than tenants who casually ruin the properties they occupy.
One of the most glaring confirmations of this double standard comes in the form of that performance bond called the security/damage deposit. The tenant must pay one to protect the equity interests of the landlord, but the landlord gets a pass, with respect to any interests the tenant has. Normally, to be valid, bonds may not be held by those parties whose interests they protect; the temptation to steal the bond, without cause (simply because the bondholder knows that he can make reclaiming it an arduous task for the payer) is just too great. Nevertheless, thanks to the legal bias enjoyed by more powerful people, landlords are not obliged by legal action to hold security deposits in escrow accounts. Nor are they obliged to put any kind of performance bond under escrow to protect the tenant against failure to deliver, violations of rental law, nonconforming changes of use, illegal trespass, or unwarranted claims on rental deposits.
Any state truly wedded to the idea of social justice would mandate a single standard for both tenants and landlords alike.
It sounds like a no-brainer. That level of respect will not be handed to renters on a plate, however.
Change begins at the conceptual level.
First, all parties have to know that such an itemized account is possible. Next, local government has to rise to the occasion and institute a system of best practices, accountability control and outreach under the auspices of which tenants and landlords would be informed that rental bonds must be bi-lateral and registered on a standard issue form to be legal. Finally, any tenant has to be given the legal right to demand the required forms, properly filled out, at any point in time deemed appropriate under law.
All of that can only happen if government acts in a resolute way to make it so.
Clearly, present practices are woefully inadequate to the task of rebuilding social equity. For all the talk about whether the minimum wage in various places across the country should be raised, one has to wonder: what good will any of that do if, within a few years, all those gains are sucked away by the top in the form of even more onerous rental conditions imposed on those at the bottom?
If your car had a gas leak, there’d be two options for dealing with it. One, you could undertake to get it fixed, which would be expensive in the near term but good in the long term, or two, you could just put more gas in, which would make sense in the short term, but be more expensive in the long term. The wisdom behind one course or the other depends entirely on how long you expect to keep the car. Similarly, if you don’t intend to keep civil society around much longer, why do anything about the bleeding at the bottom? On the other hand, if you want civil society to be around for the indefinite future, there is no option but to stem that bleeding, post haste, and the best way of doing that in the realm of renting is to institute protocols of accounting and reference tools that make it much easier for those at the bottom to avoid getting into a bad rental deal and, if they do, far easier for them to get out of it quickly, at minimal expense, and into a better alternative.

That bears repeating. The best way to reduce the dichotomizing effect of renting is to institute protocols of accounting and reference tools that make it much easier for those at the bottom to avoid getting into a bad rental deal and, if they do, far easier for them to get out of it promptly, at minimal expense, and into a better alternative.

THE NUTS-AND-BOLTS OF THE REDUCTIVE METHOD:
In applying the Reductive method, the most expedient approach to assessing whether rent is reasonable or not, is to first develop a model rental scenario that conforms to the average earnings of those who earn too little to escape being renters (through home ownership), without violating the 30% FHA standard, and without causing the owner of that property to lose net worth. From that starting point, a rent-setting method can be constructed. Naturally, the model won’t describe every other rental of similar size and utility in a precise way, but it can be very useful as a base against which the rent on other dwellings of comparable class can be gauged for fairness and affordability.
I’m not implying in any way that we can lower the rent on every rental dwelling across the city of Seattle with the approach I’m suggesting. That scenario is neither possible nor desirable. The effect I believe we can create follows a far more sophisticated market principle whereby outlier deals that are outrageously good and very evident act on pricing psychology to create a much wider spread in prices more affected by underlying costs than by a collective rush by the supply side toward the top of the market.
The best examples I can give of price ranges being spread by outlier operators are Costco, Walmart and Target. These operations make money, lots of money. The deals they offer on any given item are not based on what the top of the market suggests they can get, but instead, upon what they have to pay wholesalers for each and every item and the relatively slim margin they add to that. What allows them to do that are very rigorous internal accounting systems. Their net effect on the retail market has been to create a significant spread in price and service offerings for any given type of item.
The first axiom attached to our rental model is the acknowledgement that, for the supply side of the market to be healthy, structures need to be entering the supply side in a constant stream, and designated for being rented out. A large majority of those structures will have mortgages attached. Payment of the interest on those mortgages delivers a range of benefits. A portion of those benefits is enjoyed by the occupant; the rest are entitlements of ownership exclusively. If one goes by the principle that you should pay for whatever part of a collective package of benefits you happen to receive, it follows then that the interest load of a mortgage on a rental property must be split between the owner and the renter (more on that later).
In the model being used, the dwelling is not substantially altered during the course of being rented out.
The first operative considerations begin with when the property was bought and how purchase of the property was financed.
For the property to serve as a reasonable model, the complete tenure period, from purchase to sale, had to be about average for a rental house. I opted for 15 years, with a 15-year mortgage to tie up loose ends.
Selecting a model in which purchase of the property involved taking out a loan with a 20% down and 15-year repayment process describes the most payment-intensive way of owning and managing a rental that I would consider to be within acceptable parameters. I opted for the shorter mortgage, as opposed to a 30-year mortgage, because it is the situation that most clearly obliges us to separate out the three major cost considerations that form the backbone of the Reductive analysis method. Using those cost considerations supplied by the model rental as a comparison tool, we can then rate the rent on any dwelling of similar size and utility for economy and decide whether the approach being used by an owner to purchase a given property shifts an equitable burden onto the renter, or an unfair one.

One of the core inclusions forming the model behind the Reductive method is an acceptance that the property is put up for sale at an auspicious point in time when the property market has swung high. After all, why would you sell at a low point, if optimizing your net worth meant anything to you? Granted, some are forced by misfortune to sell at a low point, but if I were to base my argument on that scenario, I would be shifting the burden of ensuring a good return on property speculation onto the backs of renters, which would be a socially regressive approach.
At the point of sale, we ask the following:

*What average amount would’ve been needed each month of completed ownership, for the owner to simply break even on the property being cashed out now, (assuming the owner had sufficient cash depth to cover all contingencies encountered) – the retrospective monthly Break-even Reconciliation Requirement?

*What's a reasonable monthly estimate of the Passive Investment Income that the amounts of capital fed into buying the property over time might have earned if placed in instruments of comparable risk and management load– the Diverted Passive Income Potential?

*What was the Peak Monthly Carrying Cost?

Without knowing the values described above, it is literally impossible to know how much net worth gain, or loss, the property is generating, or how well the asset stacks up against assets of comparable difficulty to manage, involving comparable levels of business risk. If you don’t know what percentage return on investment you’re clearing, or how your net gains stack up against what you could have earned in, say, the stock market, with the amount you put down, plus subsequent outlays, how can you be sure that what you’re charging your tenant is indeed fair, or how your investment is performing against other lines of business in the economy? In reflecting on this, you need to keep in mind that it’s the same economy your renter is obliged to work in to make money to pay the rent within a system of democracy that will almost certainly begin to break down when wealth and income disparities go too far.
Not too remarkably, most landlords don’t know the answers to the three questions listed above. That leads to uncertainty and uncertainty fuels an inclination to want to err on the side of safety by padding the rent.
As long as their tenants are equally ignorant about how much wealth is actually being added to the landlord’s long-term financial picture, the padding goes on unchallenged. That whole discussion changes, however, when a tenant can compare his/her rent against the socially reconciled rent on a model dwelling of comparable characteristics, where the amount derived was the product of a no-nonsense Reductive approach.

THE BREAK-EVEN RECONCILIATION REQUIREMENT:
The first task in getting an estimate of the retrospective monthly Break-even Reconciliation Requirement is to go back to the date of purchase and get the best estimates you can of the following:
*what the owner has shelled out to date to keep the property, appurtenances and grounds in the same condition as at time of purchase (no upgrades qualify), plus
*the amount of interest paid to date (excluding principle), plus
*the estimated overall property tax outlay to date, plus
*any other non-elective expenses to date, plus
*estimated property transfer costs for both buying and selling the property

The result obtained by adding all of the above together is then divided by the number of months the owner has held the property to get the estimated average monthly cash outlay on owning the property. That’s the monthly negative side of the calculation.
On the monthly positive side of the equation, we have whatever gain over the original purchase price that the owner could expect to realize at sale, if the property were put on the market at an auspicious time, divided by the total number of months of ownership.
When the two amounts above are reconciled, the estimated net monthly will result. The amount needed to reconcile that net to be zero is the Break-even Reconciliation Requirement.
In most areas of the country, the result of the above reconciliation should be a slight positive, the less desirable an area. In urban areas with advancing house prices, however, the reconciliation will almost certainly be a negative amount.
Let’s start with the more pessimistic scenario, a positive Break-even reconciliation.
If all a renter did was to cover that basic shortfall with his/her rent, owning the property would be a wash for the owner, a net zero.
In Seattle, one would be hard put to find a freestanding house, bought before 2000 and cashed out at this time whose gain did not completely offset the costs itemized above. In all but a tiny fraction of such cases, an owner would actually have had to have spent money on a resident caretaker to have scored a net zero. This one fact handily demolishes the claim that rent has to cover whatever the monthly load of loan repayment happens to be – an amount that can vary all over the map, if such payment even exists.
Obviously, the Break-even Reconciliation Requirement floats on the tides of time and the ups and downs of the real estate market, and some people clearly bought too close to the peak of 2007 and sold too close to the bottom in 2010, but that’s not what I consider to be a responsible use of capital, worthy of being included in a general assessment of what fair rent ought to be. If you make an investment mistake, speculating on property is yours to own. That’s the way the world works because, from every moral perspective, that’s the way it should be.
The longer you hold a property, the more information on maintenance you collect and the more evident it becomes as to what that monthly Break-even Reconciliation Requirement might actually be. In the case of very long tenure, well past the paid-off point, on a sound structure here in Seattle, the possibility of a net loss on a purchase-to-sale cycle, when adjusted for inflation, is almost completely dependent on the how much the market has risen during the tenure period. Exceptions to this rule include properties whose value has been degraded by neglect (landlords, take note!), properties that have been subjected to ill-considered changes, properties damaged by natural events and properties sold during a period of wholesale market deflation.
One very trenchant point to take note of here is how a strong real estate market actually sends the Break-even Reconciliation Requirement into deeper negative territory because the potential gain from resale is higher, greatly more than offsetting what needs to be chipped in by a renter to affect a net zero cash point. This fact runs counter to the popular view put out by Market Opportunity advocates who tend to equate upticks in real estate activity with an excuse to raise rents where, in point of fact, the rise in equity - combined with the ever-present mandate to improve the lot of other Americans elsewhere in society - provides ample reason not to do so.
If you are a landlord, getting a relatively accurate handle on the Break-even Reconciliation Requirement should be essential, especially if the rental is in one of those rare areas where sale of most properties renders a net loss. In such a case, a supplement would be needed to render a net zero on full tenure.
Say you’re renting to a person you’re especially close to who is barely getting by, your own child or your parents, for instance, and you want the rent to be as low as it can be without eroding your long-term net worth prospects. Knowing the Break-even Reconciliation Requirement gives you the best way to be comfortable with whatever rent you decide to charge.
Even if the situation doesn’t involve a family member, you may still care enough about the wellbeing of the person you’re renting to to want to give him/her a good deal. Landlords of that ilk are somewhat rare, but they do exist, and if growth in their number can be facilitated by government action, it should be.
From the perspective of local government, knowing what the Break-even Reconciliation Requirement on any given rented domicile happens to be is indispensable to knowing how fair the rent levied is. On a grander scale, it offers the potential to know how much wealth is being transferred to the landlord community from the renter population. One thing is for sure, thanks to tax reporting requirements, all of the amounts needed to calculate the Break-even Reconciliation Requirement on any given domicile are a matter of official record, so it might as well be calculated.


DIVERTED PASSIVE INVESTMENT POTENTIAL:
Estimated lifetime Diverted Passive Investment Potential is a general estimation of the average monthly gain you could reasonably expect to have accrued to date from having invested the money you originally sunk into buying the property, instead, in some form of capital-gains-producing portfolio that you never pulled the dividends out of - an investment instrument of comparably low risk to that of owning an income-producing property.
One thing that has to be accepted here is that low-risk investments traditionally offer a comparably low return. There is a little bit more work involved in staying on top of the responsibilities a conscientious landlord faces, but nothing that an agency won’t handle for you, so it’s safe to say that although hands-off ownership of a rental property may not be quite as stress free as owning low-risk stock, it doesn’t carry the same downside potential for loss that owning stocks does. All in all, they’re comparably desirable ways to invest one’s money. Indeed, REITs (real estate trusts) are where the two roles become virtually one and the same.
The instructive value of the Diverted Passive Investment Potential resides in the psychological competition it poses to the inclination to become, and remain, a landlord. It’s the thing you might otherwise do with the capital you have control over and, in the absence of any benevolent connection with the person you’re renting to, the lowest net return on lifetime tenure that most would be content with getting out of a rental property.

OWNER’S PEAK CARRYING COST:
The third cost consideration – the Owner’s Peak Carrying Cost - is the most cash needed to cover all contingencies in any given month during the course of owning the rental, including the mortgage payment (if, indeed, a mortgage obligation exists). If a mortgage is involved, keep in mind that a hefty chunk of that payment – the principal, plus gain - will ultimately be recovered as cash when the property is sold. Only dead people don’t get to cash out their real estate, and they’re in no state to regret not having done so before dying.
In the end, the Peak Carrying Cost will depend most on factors like what kind of loan was issued, whether the owner refinances the property, what happens to background interest rates, the monthly property tax impact, and what kind of monthly financing cost arises out of major upkeep and repair.
Basically, the Peak Carrying Cost is an assessment of the most cash you will need in hand at any given time to meet your responsibilities during the course of obtaining and owning a property in a fiscally astute manner.
It is important from a social equity perspective that a prospective owner have a relatively accurate idea of what the Peak Carrying Cost on a property is going to be and that he be able to meet the Peak Carrying Cost without the help of a renter. An owner with insufficient cash resources of his/her own to be able to comfortably cover the Peak Carrying Cost will inevitably be tempted to see if he/she can’t oblige the renter to carry it. Regardless of whether the renter knows this is happening, or not, it is not a situation that contributes anything positive to the underlying standards of manifest concern that bind us together as a society under a constitution dedicated to the preservation of equality and meaningful opportunity for the individual. It’s what folks call a free ride. When a significant proportion of the population becomes indentured in that fashion, a deleterious long-term impact on society will inevitably unfold over time.
Whether the owner possesses adequate cash capability to take care of all contingencies out of pocket, or by maintaining a credit account with sufficient ‘space’ in it, or simply with the secure backing of a trusted party with means, makes little difference.

In fact, the situation my wife and I now find ourselves in is precisely the situation decried above, where we are effectively carrying on our shoulders the combined weight of property responsibilities, superior lifestyle, long-term wealth prospects, insurance costs and tax load of a couple not currently employed in gainful endeavor of any other kind, who bought more real estate than they could comfortably pay for and manage and yet, are disinclined to downsize their spending habits.
How can anyone claim that that is a socially positive situation?
Now, if we were the only ones in that position, it probably wouldn’t be worth writing about, but we’re not. Within the city limits of Seattle, alone, there are tens of thousands of renters in a similar situation whose discretionary spending power, after housing expenses, has been greatly reduced by the rental agreements they’re stuck in. How else can one explain the enormous run-up in wealth at the top since 2010, even as neighborhood retail establishments continue to struggle?
It’s neighborhoods with low crime rates and high street activity that persuade renters that paying higher rent is worth it, but if rents go too high, such as on Capitol Hill, a tipping point is reached where renter spending drops off, business turnover rises and the streets begin to host a growing population of those whom society has spurned. The ensuing surge in police presence is only palliative; it is no substitute for the hubbub of friendly, cross-class commerce.
What delicious irony it is that those most dismissive of the idea that lowering rents would promote general commerce tend also to be among the staunchest supporters of the claim that lowering taxes on themselves has stimulated the economy. Go figure, as they say.

If the renter is paying the Peak Carrying Cost in rent, or more, government ought to be concerned about it. The situation amounts to a 100% plus subsidy of the owner’s financial responsibilities involved in speculating on a property. Unless the owner is in a much lower income class than the renter – rarely the case – it’s patently at odds with how a robust middle class can be both built and sustained.
No one – with the notable exceptions of the deeply wronged, the permanently handicapped, beloved heirs, lucky guests on TV shows and lottery winners - should be subsidized 100%, plus some, in the purchase of property, by anyone, let alone a beneficiary significantly better off than the benefactor. That’s just outright freeloading; and while anyone of us might dearly love to be in that position (being the pragmatic mortals we are) it simply isn’t very good for either party involved, spiritually speaking, and it ticks off the rest of us who must build our own wealth the old-fashioned way.
The only type of case where I would endorse renter-to-landlord 100% subsidization, would be where the rent payer loves, and wants to help, the recipient; for instance, where an adult child with a large income might elect to live in, and carry the mortgage on, the second home of a parent who has lost the ability to derive an income. That’s a completely different issue. In that scenario, there is the implicit preservation of self-interest as a family member, combined with the potential of being the beneficiary who stands to inherit that property. To be sure, we don’t feel that way about our landlords.

TESTING THE METHOD:
So let’s see how using those three important amounts – the Break-even Reconciliation Requirement, the Diverted Passive Income Potential and the Peak Carrying Cost – can be used to gauge just where the rent we’re currently paying sits on a scale of adjectives stretching from give-away to extortionary.
Because I’m in the convenient position of having so much hard information about the situation my wife and I are in, I’d like to use it to see what insights the Reductive approach might reveal, and then use those insights as back-up in proposing what I think would be a more socially benevolent model situation.

THE BREAK-EVEN RECONCILIATION REQUIREMENT ON THIS HOUSE:
From the assessor’s database, we obtained the basic tax information on the property. Anyone can do this. It’s public information.
In the case of the house we’re now renting, the owners paid $182,500 for it on September 24, 1997. Currently, in December 2013, it is very conservatively assessed at $350,000 by the city. The property tax load is 1% of that.
That’s not the market value, mind you. For the past year, the market value has stood around $450,000 (the house two doors down just sold for $550,000 and the one across from it just went on the market for $595,000 and those houses are similar in size and construction, though somewhat nicer in exterior appearance).
After researching everything I could find about the house, I added up the total known and estimated outlays, including property taxes, incurred by the owners subsequent to taking possession, right up to the present ($67,500), plus what I think they might have to spend to simply make the property saleable ($12,000). To that, I added my best estimation of what they would have spent on mortgage interest to this point had they not used the equity in the house for unrelated expenses ($74,000). Then I added the expectable sale costs ($13,500). All of that came to $167,000.
Next, I deducted the difference between what they paid for the property ($182,500) and what they could easily get for it at this time ($450,000) for a gross gain of $267, 500. If they didn’t roll that $267,500 over into another rental property elsewhere, and decided to just cash out of the game, they’d lose $40,125 in federal capital gains taxes, because this is not classified as an owner/occupied property. Even then, that would leave them with an after-tax gain of $227,375, virtually without having raised a finger in the past twelve years of our tenure as tenants.
Inevitably, there’d be other minor costs attached to the process, for which I deducted another $4000, just to be safe. That brought the net gain down to $223,375.
Finally, I deducted their combined accrued expenses of $167,000 from their potential net sale gain of $223,375 to get a walk-away-from-everything gain of $56,850 – not including any rent.

When I first worked this out, I thought I’d made some large mistake in my math or my method. Surely, our rent was needed to be able to get a positive potential ROI?
I checked my calculations again.
When I finally realized that I hadn’t made a mistake, it really hit me how skewed the perceptional landscape in Seattle was, with respect to renting, and why the owners of other houses that could have been in the supply side of housing - either for rent or for sale -were content to leave those houses sitting idle.
Through this process, I was able to determine that the Break- even Reconciliation Requirement for most rentals in Seattle was actually a negative! Far from having to get monthly revenue from us to break even, as they claimed so often, our landlords could have paid us $386.73 a month for caretaking, repairs and improvements, and still broken even on a cash-out, if they had not overtopped their cash-flow abilities elsewhere by trying to own six properties at the same time.
In addition, were our landlords to hold onto the property beyond their last mortgage payment, the mathematical impact of the interest load in the calculation would diminish against the rise in the value of the property, pushing the theoretic Break-Even Reconciliation Requirement into even deeper negative territory.
I can hear the naysayers already, “What if values were to go down, big-time?”
Are you kidding? When house prices start to decline in Seattle, you’ll know that living standards in China and India have surpassed those in Seattle. Until then, the chance that house prices might actually fall in Seattle, and never recover, is about as likely as space aliens landing on the White House lawn. When you think about the global elite gradually fleeing the results of global climate change over time, it’s hard to imagine how they’d overlook a place like this one.
No doubt about it, my landlords’ property here is as safe a financial nest egg as any, whether they opt to rent it out, or not. All they have to do is have the cash capability needed to underwrite the tenure cycle to its completion at an auspicious point in the market.

THE DIVERTED PASSIVE INVESTMENT POTENTIAL ON THIS HOUSE:
OK, so maybe there are a few owners (and entities) that actually do pay people to live on, and take care of, their properties and a few more who feel that renting to people on a just-break-even basis fulfills their desire to do good in life. I tip my hat to them. Nothing so effectively battles poverty as cheap housing, and government could do no better in combating inequity than by stepping in to provide a healthy slice of the rental housing needed, on a break-even basis. If a negative Break-even Reconciliation Requirement results from the ownership of those properties, it can be used to create jobs by paying residents to discharge a schedule of upkeep services.
Nevertheless, landlords of the aforementioned type are a tiny minority. I didn’t undertake this endeavor with them in mind. It’s with the greater majority that I feel positive change can be had.
That majority can be broken into two distinct categories: those whose properties are in a state of being rented out for a profit, and those whose properties could potentially be rented out if they could only feel more secure about doing that. Since having more competition between landlords on the supply side is a critical factor in deterring price gouging, people have to be given reasonable incentive to get into, and stay in, the business of renting out properties. Properties just sitting idle, whether they’re collecting gains, or losing wealth, isn’t just a neutral thing. It’s a bad thing. In Detroit, Buffalo, Philadelphia and Baltimore, idled properties contribute to urban decay.
Cities like New York, Boston and San Francisco, on the other hand, have a different type of supply side problem – too few landlords competing, because to own real estate in those cities, you have be very, very rich and the percentage of very, very rich people in the population is very small.
Rents tend to be far more reasonably pegged to what the average Joe makes when a reasonable percentage of the population – the somewhat better off – opt to be in on the supply side – like our landlords, for instance.
Now, we may be valued by our landlords as tenants, but we’re not loved in the way a family member might be; nor do they feel in any way obliged to help us through life, even though we are fellow Americans. For them to feel like they made the right decision when they diverted their capital away from other investments of comparably low risk, they need to make enough money to warrant having taken the initiative to rent the house out. The amount needs to be sufficient to dissuade them from quitting the renting business and just holding onto the property for its investment potential as an unoccupied dwelling, or, alternatively, just selling it and investing the utilizable net in something else of comparably low risk – say, bonds. The secondary positive effect of having had a satisfactory experience renting out an abode comes with being ready to attest to the fact to others who might be considering doing the same, further strengthening incentive on the supply side.
For millions of those who acquire sufficient resources to have to make a considered choice about where to put their wealth reserves, and who don’t care to go into some form of high-attention business, the final cut will come down to having to choose between risking their money on the stock market, renting their money out on the bond market, or investing in some kind of rental property. Comparing one option against the others will occasion no small amount of contemplation, because, in terms of overall attractiveness, the difference between one of the courses of action and the others boils down to a toss of the coin.
So I worked out, using the Reductive Approach, how much rent our landlords would have to have got from us for them to be able to beat the financial markets and realize an average return of 6% per annum on the average amount of money they had tied up in the property between 1997 and 2013.
Now, in case you’re not familiar with what kind of gain one can reasonably expect to realize on the markets, let me assure you, 6% is a pretty handsome return for an investment of low risk.
To the initial $182,500 they invested, I added the accrued amount of outgo at the halfway point in that period ($167,000 divided by 2, or $83,500). That gave me an average tied-up amount of $266,000. An average 6% annual return applied to the average tied-up amount of $266,000 comes to $15,960 per year. $15,960 is the average amount they would have to realize at sale, for each year they had owned the property, for them to realize a 6% ROI. That comes to $1,330 per month. That’s the amount in combined capital gains and rent they would have to realize for each month of ownership.
Now, in case you missed it above, they’re already realizing a capital gain on the property, after all expenses, of $386.73 per month of tenure, (or thereabouts), leaving $943.27/month (or thereabouts) needed in rent for that 6% annuity to be realized.
Based on all the arguments laid out in this writing, $943.27 (give or take $50) is the current rent that the Reductive Approach shows is sufficient to have left fair-minded people feeling satisfied with the overall ROI they were getting from their investment in this rental property – as long as they knew they were getting it. The important thing to realize here is that they’d have to know it to be able to be satisfied, and if they didn’t have a convenient way of calculating it, they probably wouldn’t know it. Part of my motivation in writing this is to encourage local government to require landlords opting to be on the city’s roster of accredited rentals to submit the information needed for a universal algorithm to calculate the projected annual ROI on
any given property on the roster. Nothing would more clearly inform the prospective renter whether the rental situation being offered was reasonable, or not.
How does $943.27 compare against the rent we are actually paying? Well, to begin with, it’s 33% less than the rent we were paying before being socked with that first $200/month increase. Now, with the current rent we are paying, it is 69.6% over that fair exchange amount - in short, too much for us to justify. Essentially, we’re paying for a slush fund that lets our landlords sleep well at night but keeps us awake. That overcharge has exacted an awful accrued toll on our future prospects. I calculated that with the original 33% overcharge alone, if I had been able to put that money into our self-managed retirement account, it would be close to $56,000. If we hadn’t been lucky enough to secure the financing from a relative to flee the city and set up elsewhere, we’d be on a crash course for financial disaster, given our ages and how tenuous our earning prospects on the employee market are becoming.
Had it turned out for the worst, there is no doubt in my mind that we would have been forced to seek public assistance just to survive. This fact demonstrates, in a very personal way, how overcharges in rent ultimately end up with failed renters falling into the lap of government, and why government has an inescapable responsibility to the public purse to seek out any ways it can find, within the constitutional limits of its powers, to avoid becoming the savior of millions of aging, tapped-out renters.
For those who still think 6% too paltry a dividend for a close-to passive investment, permit me to remind you of the thousands of owners of unoccupied houses in Seattle satisfied enough with their asset prospects to aver renting out altogether. Are we to conclude from that that the accountants of those owners are incompetent in assuring their clients that they’re not losing wealth by retaining those properties as inactive households? Not likely.
It’s hard to overstate how little difference there is between the work-time-intellect-risk load involved in owning a rented property, managed largely by someone else, and owning bonds, managed by some firm on the other side of the country. If aged, great- grandmothers can do it, how difficult must it be?
As someone currently involved in both activities myself, I’ve had the benefit of first-hand comparison.
On the one side, I’m managing our own tiny stock portfolio of 26 positions, trying to increase the cash value of the modest savings we have (about enough, after ten years of scrimping, to cover about nine months of rent on this house, or around half of what we will need to get the café back up and running).
On the other hand, for the past ten years, we have carefully managed the tightly controlled short-term renting out of two bedrooms we don’t use ourselves to a sustained progression of those in need of lodging. The research load on the former activity is less demanding psychologically but it burns up a lot of time and you can wipe out on a bad stock choice. Being a rental manager, on the other hand, requires more fortitude, but the upside of it is that your earnings never go backward.
All factors considered, when it comes to managing our own financial assets, neither role seems more desirable or more difficult to discharge well than the other.
What that means is this: if you come into a lot of money, it’s kind of a toss-up as to whether you deploy it in a managed rental situation or on the financial markets, and if it is a toss-up, what’s the justification for expecting renting out to be markedly more rewarding than investing on the markets and for placing the load of realizing that expectation on weaker financial shoulders than your own?
Let’s just face facts; though justifications do exist, they’re not morally or socially defensible ones, but rather, strictly opportunistic use of market and financial advantage, conferred by assumptions that have long been allowed to persist unchallenged.
The Reductive Approach takes up that challenge by attaching real numbers to ontological concepts and forcing the business of renting to acknowledge that it doesn’t live in a bubble of self-referencing reality, but rather, in a surrounding world of facts, figures and fraternity to which it must account, on pain of being considered a parasitic entity sucking on the vigor of the general economy. Leaving government and charitable organizations to deal with the social damage left in its wake, is simply not good enough.
With respect to the question of how large a return on investment might be appropriate for rent to be considered fair, the Reductive Approach takes the view that the role of renting out property cannot claim some sort of special investor status by refusing to be pegged to the more exigent realities of the greater world of general investing. It directly challenges Market Opportunity adherents to show why two forms of comparably discomfort-burdened enterprise should yield significantly different returns on the dollar. Indeed, in the future, with respect to levying rent, the Reductive Approach is likely to become more the norm than the exception in parts of the country where private equity firms and REITS have bought up large numbers of foreclosed-on homes in the wake of the financial correction in 2008, with the express purpose of renting them out. These entities know the competitive value of sailing close to the break-even point and they’re very good at it. To them, the prospect of a dependable 3% to 5% margin per annum is as wide as a four-lane highway and more than enough incentive to get into the game of renting.
Mom-and-pop landlord operations are in for a rude awakening when the likes of JP Morgan and Blackstone begin to move into their territory. Though Seattle isn’t one of those markets, as yet, the practice of truly competitive rent pricing, based on reductive principles, is likely to spread as governments, needing to see more money circulating through their retail sectors, add their weight to the movement to reduce the drag of high rent on economic activity.
The obvious danger here is that once they have muscled their way into the market and driven out the mom-and-pops, the big players, having crushed the competition, will raise rents again, implement gentrification of properties, and use their clout to stymie local governments from acting to improve competitiveness and accessibility in the market.
The only way that I can see of preventing the above from happening is for government to immediately engage in an aggressive program of creating decent break-even housing for the most financially challenged in society and energetically expedite the operations of non-profit housing groups with deep pockets who will use reductive accounting, excellent management, and the background tilt of rising property values to maintain rental housing at the minimum needed to stay in the black.
My wife and I, thank heavens, are no longer among the most financially challenged in society. We are a notch or two above that. We could survive for around five or six months without an income before becoming insolvent. Getting anything on someone else’s tab doesn’t sit well with us, at all. If we’re getting something we need from someone, they need to be getting something they need from us. It’s just basic reciprocity, the fundamental psychological fuel that drives the engine of the whole world’s economy. Ideally, as long as this exchange of needs conforms to basic tenets of respect, the process will preserve the dignity of those who participate in it, regardless of differences in net worth between participants – a seminal goal of our American Constitution. This is not to say that differences in net worth are not material to the quality of life in society - nothing could be further from the truth – but rather, that no one paying, or being paid by, another should be made to feel socially subordinated in the process. Indeed, a very good argument can be made that it is through failing to respect the need for the preservation of human dignity, when money is exchanged for value, that we have encouraged insupportable differences in net worth to manifest in society, not just here in America, but wherever the tenets of raw Market Opportunity have been allowed to take root unchallenged by government.
Inevitably, every tenant must arrive at the question, “Is my landlord respecting my person in the monthly exchange that is occurring between us?” And similarly, every landlord is going to ask the same question. If the tenant has been holding up his/her end of the deal faithfully and, all of a sudden, is unilaterally socked with a large increase, with no numerically justified explanation as why the increase is necessary, save that market conditions permit said extraction, you may be sure that the bond of mutual respect has been violated, if not irrevocably broken.
Certainly, that is the case with our situation. Under the current circumstance that exists between our landlords and us, we think of them as nice enough people; but they’re also freeloading ingrates, happily pillaging our hard-earned reserves while we carry their baggage for them. After twelve years, we’ve seen enough to know that their only affection for this property resides in what overall extraction in dollars they can realize from it and those it shelters.
So what kind of rent extraction from our hides do I think would have met the standard of fairness that I’m used to getting from other people from whom we purchase services each month, like the telephone company, the city utilities authority, or the online investment house that safeguards and tracks our stocks?
Well, based on the condition of the structure we got from them, and given the degree to which we had to improve it at our own expense to make it livable, long-term, I think that a 6% annual return on the average amount of capital tied up in this property is a pretty rich return for our landlords. I’d feel fully respected if the average return we’re giving them could be reconciled against the average return my own efforts on the market have netted us. I know how many hours go into carefully scrutinizing each company I invest in. There is simply no comparison between what I have to do to realize the net worth return I get and what our landlords have to do. I don’t accept that I should have to work harder and be more astute for each unit of percentage I earn. By rights, if we’re putting in as much as they’re putting in, on balance, we should be getting about the same return out of it. That’s what equity is all about; equal pay for equal work.
I’d feel the exchange between us were socially reconcilable if their return were more on par with what I, and millions of other market investors, realize – around 5% per annum, on average.
OK, so I know that all investments don’t pan out equal and that there’s a whole lot of guesswork involved in doing well.
Every investor loves to beat the market; I have no problem with that, as long as it’s a win/win situation. Society celebrates that as good business. But when it’s a win/lose situation, where some are using superior market advantage to extract unreasonable amounts out of those who are unable to do anything other than co-operate, say like loan-sharking, society deplores it and sometimes even prosecutes those involved in perpetrating it. So there is a line that can be crossed on this issue, somewhat fuzzy perhaps, but still a line.
As mentioned above, my best estimate of the average amount of capital they’ve had tied up in this property each of the past 16 years is $266,000, all expenses included. A 5% annual return on that is $13,300. That is the same as $1108.33 per month. As already shown, the portion of that return attributable to asset appreciation minus cost of holding is $386.73, so the balance that would need to come from rent for them to realize a 5% return on an all but passive investment with a low risk potential would be $721.60, or 45% of the rent we’re paying now and, interestingly, the kind of rent people are paying for a house of this size in the county in Oregon that we’re moving to, where property tax rates are actually slightly higher than in Seattle.

The above is not fuzzy math. It’s a very real baseline truth that goes beyond mere cash flow to drive right to the heart of why net worth is accumulating so quickly at the top and being lost so rapidly at the bottom. The only thing that really is fuzzy is how much extra profit gets loaded onto that basic figure of Socially Reconcilable Rent in most rental situations in Seattle.
Now, in case you think that $721.60 (or thereabouts) in rent for a two-bedroom house in Seattle is an absurd idea, let me remind you of all those who currently consider zero dollars in rent an acceptable amount to get each month on the empty houses they own in Seattle. You can wiggle and squiggle any way you like, but you’re never going to get away from that baseline fact. Now add to that consideration having tenants who maintain the property squeaky clean and in good shape, and also pay to keep it heated and protected from all other assaults (including flooding of the basement, you’ll remember) and, suddenly, $721.60 each month, plus all those services, doesn’t look so bad, does it?
In fact, it’s only when the typical landlord begins to look at the egregious rents being perpetrated on so many in the renting population in Seattle by other landlords that notions of lost extraction potential begin to raise their ugly heads.
For those who would argue for lower rents in Seattle, it is most important to get a solid grip on what the term “Socially Reconcilable Rent” means in real mathematical terms. It is the supplement needed each month to increase the annual gain in net worth tied up in the property being rented by a percentage that more or less equals the percentage gain in net worth that could be expected from an equal amount invested under the same condition of risk elsewhere.
As experience shows all too well, stray too far from that definition, and social disintegration begins to manifest. Too far above it, and you get a populist reaction. Too far below it, and people invest their money elsewhere, shrinking the supply of active rentals below what is needed for people to be housed, even as the inventory of abandoned structures balloons (think Detroit, Philadelphia, Baltimore in the 1990’s).

What the Reductive rent assessment process shows, therefore, is that the Socially Reconcilable Rent is also the competitively reconciled rent.
So is a rent of $721.60 per month on this two-bedroom house an amount that will leave both parties equally content?
From our point of view, it would be a fair price, equal to about one third of what we’re able to earn and, therefore, congruent with the maximum percentage of income recommended by the FHA. We could live as a normal couple of our age might be expected to live, namely on their own. We wouldn’t feel cramped in our own home. We’d be able to entertain our friends in a spontaneous way. We might even be able to travel every few years. In short, we’d feel normal.
It may be hard for anyone earning a comfortable high five-figure income to credit this but, feeling like we have the money to live normally is a luxury we’ve never experienced. Among the things that one or other of us has never done in the past 21 years, because they were too expensive, are the following: eating out at anything other than a fast-food restaurant, staying at a hotel, motel or B&B, going to a concert or full-price movie, buying health insurance, seeing a dentist, getting a health check up, buying new clothes or shoes, living without housemates (other than one of the years we’ve been together), having children, going on holiday out of the country, flying on a plane. The list goes on, and what it describes is not a normal life by most people’s standards.
For our landlords, getting only $721.60 would mean a significant haircut, the real impact of which would be mostly psychological. Even so, they’d still be living a lot higher on the hog than we were.
But who’s happy, and who isn’t, is not the most important consideration, is it? The only opinion that really matters, in the end, is that of the one entity that counts above all others – society. Through the judicious use of its agents of action - the three branches of government - society has the power to implement programs that would work synergistically toward making real-world rents look more like the socially and competitively reconciled rents they ought to be. Government will also be the entity that stands to be held accountable for ameliorating homelessness and personal destitution. If government knows what’s good for it, it will not shy away from giving people the tools, the needed information and the incentive to know what truly Socially Reconcilable rent looks like on any given property.
Sure, there are those who will say that the private market doesn’t need government’s help to work right. Of course, that is simply not true. How well our economy does is a matter of careful integration of the raw muscle of the private sector and the long-term oversight provided by the public sector.
Lest $721.60 appear too little for our landlords to receive each month for this house, permit me to point, once again, to the thousands of owners of empty houses in Seattle who believe that no rent at all is OK. Why the moment you have someone on the property, taking care of it, is it not a blessing to get $721.60, month after month, aside from those other maturing dividends inherent in just owning the property? Why is it so compelling to get every dollar that circumstances allow you to wring out of those with less financial power?
Further, we have to take seriously the fact that, because of the higher costs of both education and car insurance, and now mandatory health insurance, and the shortage of paid employment, the age class between 20 years old and 40 – the second quintile - has less disposable income to put toward rent today than it did in the 1980’s. During the 1980’s you could rent a house of this size and condition (before the investments we made) for somewhere between four and five hundred bucks. The net income of this age group is being consumed from all sides, leaving them with far less of it to keep for elective spending than their parents had when they were that age.
Those who claim to have intellectual authority, as demographers, need to view our current economic struggles against the larger historical backdrop of a once fast-growing society in which reasonable rents prevailed across the nation.
While a widespread diminution of rents might be a very effective way of helping the economy rebuild the ranks of the middle class, I’m not suggesting that it’s a solution that can stand alone. Rather, it should be contemplated as but one fix, in a panoply of potential fixes, that could be applied to that effort.
Social change, when it happens, invariably does not confine itself to one narrow area of concern. A citywide roll-back in rents on houses would induce all kinds of associated change in a grand rebalancing of the affairs of local society, and if that were shown to work here in Seattle, and be reported on nationally, it would create pressure for similar roll-backs in other inflated rental markets. Whatever rollback those on the upper end of the wealth dichotomy might suffer would be more than offset by quality of life improvements for a far greater number at the other end of the income spectrum.
Certainly, while our landlords might be less enriched by getting $721.60 in rent instead of the $1,600 we pay now, the quotient of combined utility and security that we would gain from being able to retain an extra $878.40 each month would enrich our lives to a far greater degree than foregoing that amount would stunt theirs; and if that change were part of a much larger citywide trend, there’d be the upside for them of an uptick in general prosperity that a citywide roll-back in rents would produce. No doubt, they would not bemoan being relieved of the social stigma of being considered greedy-by-nature by many in society. Certainly, their granddaughter would not bemoan such an uptick in prosperity when the time came for her to go out into the world and find a job. In the meantime, hundreds of thousands more people in Seattle would be financially liberated to explore life’s potentials in a dramatically expanded way. Government would find its reserves rising and its social assistance burdens cut to a fraction of what they are today.
What’s not to like about that scenario? And if it’s so desirable, why aren’t we working harder to see it come about?

THE PEAK CARRYING COST ON THIS HOUSE:
The last of the three big considerations used in the Reductive Approach isn’t as mathematically relevant as the Break-even point or the Diverted Passive Income Potential, but that doesn’t mean it’s not important to know. It’s the estimated Peak Carrying Cost at any given point in the life cycle of being invested in a rental property.

A decent respect for responsibility demands that any owner in debt to a bank be fully capable of meeting the Peak Carrying Cost reliably from the get-go, come what may, without help from rent.
Why is that? For two good reasons, the first being financial. The contract of trust between the owner/borrower and the bank/lender depends on reliable repayment of the loan for the bank’s interests to be secure. Renters come and renters go, and vacancies between renters can be quite long. If the borrower cannot pay for all contingencies without being subsidized by the rent, periods between renters will almost certainly be problematic. Banks don’t like lending to anyone whose repayment performance could prove spotty.
I’ve rented from more landlords than I care to remember, and not one of them has been able to keep their property fully rented without a break.
The second reason is a moral one: society, at large, declines when richer people use the earnings of poorer people to speculate on the property market.
What keeps rents low – and society vital - is landlords who are financially strong enough to consider the rent they receive as no more than icing on the cake of life; landlords who use what they have to contribute to the community they’re members of, and toward which they feel a definite sense of responsibility.
You can’t be that if you’re depending on having a renter to carry you through the rough spots in your tenure. Inevitably, you’ll be tempted to raise the rent, thereby undermining larger interests than yours alone.
If you can’t be totally confident of your financial grip on responsible ownership of a property, irrespective of rent, it is better for all that you leave it for someone else who can rise to that level of financial capability.
Some people will say that such a high degree of financial conservatism would decrease the availability of housing. They ignore the fact that every house not bid on contributes to the supply side, making houses more affordable for those who wish to buy one and live in it, and that every renter who transitions into the more empowered situation of owned housing leaves the demand side of rental housing.
When our landlords bought this house, they did so initially as a private residence for their daughter (doubtless, so she could escape the clutches of other landlords). Renting it out was not part of the picture then. The bank would not have lent to them if they hadn't shown the comfortable ability to cover the mortgage.
My best estimate of the Peak Carrying Cost on this house, which includes consideration for taxes, maintenance, insurance and mortgage payments on the original contract, was around $1,400/ month.
In view of the wealth-building arguments outlined above, we feel in no way socially obliged to meet that ongoing monthly cost for them. It’s the price they pay for wanting to be in this line of speculation, and the numbers show it’s worked out far better for them than being renters has worked out for us. From our point of view, all we conscionably owe them is a rental amount that is socially reconcilable. That met, our slate would be clear and their bread adequately buttered, with no damage, either way, to the spirit of social equity.
As things stand, we’re way over that measure of a fair exchange – meaning, we’re more than buying the house for them, even as we struggle to save enough to build one for ourselves 400 miles from here in that tiny mountain town.
And let’s not forget the additional contributions of ongoing property management and maintenance and the many hundreds of hours (yes, we recorded them) of work in repairs and upgrades we supplied at our own expense over the past eleven years just to make living here a civilized exercise.
A ballpark measure of the monetary value of the average 20 hours of maintenance on the property each month in cleaning, tending, pruning and repairs is around 240 dollars’ worth. Plus, we pay to keep the structure heated. Add half of that to our current rent, and our real transfer to them each month in cash and cash value from services rendered is more like $1,900.
Remember, as explained above, that only gives us around half of the total explicit and inherent benefits conferred.
Just how much of a poorer family’s hide do you need to feel like you’re keeping up with the Joneses?


THE HIGH COST OF DOING NOTHING, AND WHY GOVERNMENT ACTION IS NEEDED:
Keeping up with the Joneses: nothing describes more aptly how the rent on this house was set. So eager were the landlords to get more money out of us that they could not resist asking us, of all people, if we knew what the neighbors were paying, as if we were dumb enough to participate in our own financial ruination. How bald-faced can you get?
We made it a point never to ask the neighbors.
It is a staggering thing to contemplate how many of Seattle’s other 270,000, or so, rent payers might be similarly overcharged, and how the gross amount of that overcharge might be affecting the main-street economy and local society. Let’s just say, for the sake of argument, that the average per capita portion of rent that works against the goal of establishing social equity in Seattle is, very conservatively, around $300 per month. That translates into $3,600 per capita per year. My calculator tells me that the citywide total per year is, therefore, in the area of 972 million dollars. It’s probably more like a billion. OK, so that’s just Seattle. How about all the other cities in America where the ratio of rents to earnings is similarly high, or even higher?
Why is it no one in the halls of power seems to be worried about what this diversion of liquidity away from the retail sector and into the pockets of landlords may be doing, not just to American prosperity and American security, but Americans themselves? How many live diminished lives as a result? How many die prematurely from the accumulated effects of living on their financial knees? How many forego starting a family? Is anyone counting? Why is trying to draw attention to this like pulling teeth?
I suspect it has much to do with the tendency we have of deferring more to thought forms around which the established power structures of our time have constructed themselves than to the abstract products of commonsense observation, even to the point of selling out our own interests.
Looking back on the last 20 years, we can trace a pattern of self-destructive decision-making at the highest levels in which commonsense logic was set aside to allow established power structures free rein – overriding judicial discretion, with mandatory sentences for minor drug offenders that has resulted in the disastrous over-crowding of for-profit prisons; welfare reform that, when it crashed head-on into the worst employment conditions since the Great Depression of the 1930’s, caused the ranks of the poor and near-poor to balloon; the repeal of restrictions on how banks could co-mingle bank functions and speculation in securities that laid the groundwork for the financial collapse of late 2007; the imprudent actions of giant investment firms that created two massive losses of value in 2000 and 2008, first in the run-up of dot com securities and then in mortgage securities; the invasion and occupation of Iraq – a mistake so disastrous and so damaging to all concerned that it would take pages just to summarize; the roll-back in government spending across the nation that seems almost calculated to thwart any chance that our fragile domestic economy might recover in the wake of the Great Recession; the significant truncation under law of women’s rights to reproductive autonomy in states around the country, despite documented proof around the world of such rights leading to a drop in unintended pregnancies, unwanted children, child poverty, child labor, youth prostitution, employment exploitation and the government expense needed to counter such ills; the continued confounding of efforts to transition from carbon-based fuels to alternatives (including nuclear), despite reams of data clearly showing the growing scope and cost of rising CO2 levels in the planetary atmosphere; the inability to create a single-payer healthcare system similar to those used by most other developed nations, supplanting it instead with that profit-driven compromise the legislature cobbled together under guidance from private insurance, large pharma and healthcare conglomerates. And that’s just a shortlist off the top of my head.
In hindsight, it’s easy to see that these decisions were inferior. Nevertheless, at the time they were made, they enjoyed majority support from the bodies that made them.
In the story “The Emperor’s New Clothes”, it takes the naïve blurting of a little boy to embolden people enough to acknowledge that what they are supposed not to know is, in fact, so. The story deftly points out three important truths, the first being the tendency of the presence of power to suppress fact if fiction happens to be more convenient and how that can lead to an absurdity becoming a social norm. The second point made concerns the tendency of people to pay lip service to what they think everyone else believes rather than state what they believe personally, when speaking truth to power can bring retribution down upon your head. The third point made is how quickly change can come when you have a single clear voice, not complicit in the promulgation of orthodoxy, cutting through the muck with a single observation no one can refute that renders old perceptions intellectually obsolete.
That story is an apt analogy for what has become “the rental industry” we know today. It also portends what might yet become of “the rental industry” should one clear voice ring out with a trenchant challenge to standard practice.
In light of current reality, it cannot be repeated too often; for anyone who cares about social equity, mute acceptance of rents rising against average income is simply out of the question. It’s a destructive trend that is bad for the majority in a very personal sense and bad for society in an economic sense. What it demonstrates is a misdirection of funds away from where real jobs and real lives are created and sustained toward the economic aspirations of the rentier class.
Rentiers, in case you’re unfamiliar with the term, are people who use capital to buy stakes in very large material assets and paper instruments, which are then managed, preferably by others, in such a way as to let contract advantage work for them.
For a demonstrable majority of full-time rentiers, real jobs and real lives are a dispensable abstraction. Living, breathing functionaries have to be paid, and paying them eats up profits. Lower profits mean smaller dividends, so human presence in the place of production is more of a liability to be minimized than an asset to be fostered. The replacement of humans with robots is therefore seen as a good thing.
It’s nice being a rentier. In that we have a modest stock portfolio that is currently doing very well, my wife and I are part-time rentiers, ourselves. I’m not ideologically opposed to the basic idea of being a passive investor in the American economy, nor of making a living that way. Indeed, when I am too old to be otherwise useful, I fully intend to help provide for our needs through a collection of astute investments (plus a few risky ones to keep things interesting).
The nicest part about being a rentier is the moral insulation it gives you. The money just pops up like magic in some account in ‘the cloud’. The source of it is no fault of your own, if there be fault in how that occurred. That’s nice, you have to admit. Your investments can steal bread from the mouths of starving babies and you won’t even know about it. The Market forgives you for you know not what they do. Weep they may, but you sleep well at night. You eat well too, and you have time to exercise, so you look good. Thus relieved of the grittier realities of life, you have time to concentrate on what’s really important like wearing the right pants, spoiling the grandkids, checking your stocks and just generally being an all around nice person in a superficial way, the kind people in the 1950’s used to call ‘swell’. When you’re a rentier, being seen as ‘nice’ is very important. It’s your ticket to parties where you can meet other nice people with big houses and yachts and stuff. Most of them are CE-somethings. Some have tons of cash. That can be useful if you get up one morning with a good idea. Others give you tips for investing a few sentences short of what would qualify as insider trading. On Tuesdays, you all meet at a brew pub and get fashionably drunk. Saturday mornings are reserved for brunch somewhere upscale. You tip well. Sunday afternoons in summer, you keep on top of your tennis game. Apparently, it forestalls the onset of dementia. Real work is done on Wednesdays, over nine holes on the golf course where you take care never to win too big. It’s the one time you get to talk about your latest trip somewhere – Africa, Vanuatu, Mongolia, the South Pole, whatever – and the various charitable enterprises you support. Should anyone get too nosy about where your money comes from, you can always point to where it’s going. Your conscience is clear and, besides, when people ask you what you do, you don’t have to engage in some kind of lengthy explanation. It’s easy; you just say philanthropist and they think you must be an exemplary citizen. All in all, it’s a nice lifestyle being a rentier and quite conducive to self-actualization. Who wouldn’t say yes to it, if they had half the chance? I know I would. What can I say? I’m human.
Clearly, as long as people walk on two legs, they will enjoy getting more for doing less and, even better, a pile for doing nothing. It’s the essence of efficiency in the hunting and gathering life our species pursued for about 110,000 years, prior to the advent of agriculture and animal husbandry.
The evil part comes when you try to avoid owning up to getting something for nothing with some exculpatory rationale that anyone with an ounce of grey matter between their ears can tell is tendentious, in an attempt to justify taking more from others than the preservation of common goodwill can bear.
That’s why we have government; to make sure that rentiers here and there don’t take getting something for nothing too far, and end up like Marie Antoinette and Louis XVI (who, by all accounts, were very nice people too).
Good ground rules and levelness on the field of play aren’t just for the benefit of the losers in the rough-and-tumble game of life; they’re there to protect all of society from the consequences that can erupt when the winning is taken too far, or achieved unfairly.
The cliffs of social consequence are like those of Dover, England – improbably abrupt. Soft green grass leads right to the very edge. One moment you’re riding high, having a nice stroll along a path you think you know well, taking things for granted. The next, you’re gone – a hapless victim of the cliff’s ever-changing face and your own complacency. All that would’ve been needed to keep you safe was a few poles and a length of yellow caution ribbon. That’s how good ground rules work. They’re ephemeral structures, but they keep people from becoming the victims of their own success taken to excess.
Some say the basic ground rules with respect to renting are sufficient. Obviously, they haven’t had the educating experience of suffering the consequences of a significant deficiency in those rules, or taken an accurate tally of their relative accumulated loss in wealth accrued one month after the other, for decade upon decade, and figured what this portends for them as they advance into the years beyond their employment prime; or perhaps, not wanting to be bummed out about it, they just don’t want to know.
The growing consensus among financial consultants is that, when it comes to the subject of how people are being housed, ignorance is not bliss; nor is indolence. This piece of advice holds true just as much for government as it does for the individual, maybe more so, given the cumulative impact slowly developing.
It is my earnest opinion that no exegesis on government policy regarding rent is worth a damn unless it begins with an upfront commitment to standing behind the assertion by the Federal Housing Authority that when more than 30% of full-time, take-home pay is devoted to housing, society experiences deleterious knock-on effects.
What, exactly, are the core reasons behind the FHA issuing this well known guideline to a nation suckled on Market principles? Because conservation of discretionary income has to be built into the system we live under, if the activities essential to expression of middle class existence that form the backbone of demand propping up the economy, are to continue at levels sufficient to providing jobs to all who need them. A shortlist of the most obvious of those activities includes: housing, nutrition, transportation needs, clothing, footwear, healthcare, communicational access, energy consumption, furniture, educational materials, water, recreational activities, entertainment activities, cultural events, wellness preservation, general taxes, insurance, in-home entertaining, family connections and events, hobbies, entrepreneurial incubation, volunteerism, animal and pet care, property improvement, yard and garden care, general child-related responsibilities. That may seem like a boringly long list, but it covers only a fraction of the full scope of spending upon which the full vitality of our economy depends.
As we are now finding out so painfully, in the wake of quantitative easing by the Federal Reserve, you can have a large increase in the volume of cash bled out into society and still fall short of creating sufficient public liquidity to attend the needs of society, if those infusions fail to circulate through a sufficient number of hands to both sustain the income needed to keep people in the middle class, and generate enough in taxes from such transactions to keep the public sector working as it should. If a significant portion of those infusions is quickly diverted to fuel what the rentier class does to make income from passive investing, the intended benefit of quantitative easing is undercut, and the sudden presence of fresh money may even end up causing an exacerbation of the wealth dichotomy. Herein lies the Federal Reserve’s quandary; it funnels cash through the government out into the economy by buying government bonds but a lot of that infusion quickly disappears via rents into the seemingly endless ocean of investment accounts held by the rich, so the priming effect is quite inefficient.
Opportunistically expensive rents are a chief culprit in this regard, right up there with mortgages on sky-high house prices.
If you don’t believe what I’m saying, consider what the Swiss think about the link between income and rents:
In Geneva, you can’t rent out any dwelling for more than one third of the applying party’s income (single, couple or group). It changes the dynamic of the exchange in a subtle way; rather than it being a process whereby the applicant, alone, has to be flexible in how much he or she will accept paying, it becomes one in which the landlord must also consider lowering the asking price to snag a tenant who seems to be a good fit.
There are only so many eligible takers for the higher priced rentals; when they’ve been snagged, the only way you’re going to get your place rented is to either continue losing rent while you wait to find somebody eligible, or drop your price.
Statutory provisions exist to accommodate those with large reserves of cash, in lieu of income.
A secondary result of this requirement is that the salary market is hard-wired to the rental market and, guess what, it works. Salaries can’t drop too low, relative to rents and rents can’t go too high, relative to salaries. In the meantime, the Genevans get to build their reserves, while enjoying the highest standard of living in the world, with no one going homeless.
The secret to why this approach works is because the rule is universal (I’m not saying that I think that this is the only way to go; just that it’s one way to go if we in America wish to prevent too much ambient liquidity from being sucked up by rents).
Oops. Perhaps I shouldn’t have included that. Nothing so completely marshals the intellectual capacities of American legislators in defense of the national status quo as proof that other approaches are working better elsewhere in the world.

INFLATED RENT: IT'S NOT JUST BUSINESS; IT'S PERSONAL
As to how the FHA’s recommendation might pertain to my wife and me, in particular; well, I should start by saying that our combined average income for last year and the year before was $24,742. That’s $2,061 per month.

As I’ve explained, we rent out the lower bedroom I made (and, occasionally, the upper bedroom that few seem to want) to people in need of short-term housing. Averaged out, we can usually find enough takers to cut the combined overall rent-plus-utilities load on us to around $800 per month, or around 40% of what we make, but it’s a constant struggle, a strange kind of life, and a whole separate job to keep that up, year-in, year-out.
If we weren’t sharing our space, to clear the $1,600 our landlords want each month and still fit within the FHA's recommendation, we’d have to be pulling down an income of $5,333.33 each month, or $64,000/year. The only way we could get that kind of money, at 49 years old and 65 years old, is to get a whole lot luckier and smarter than we’ve managed to be thus far. Make no mistake about it; we haven’t exactly been slackers in life.
Relative to the full scope of employment positions people hold down, only a small fraction lets you earn $64,000, whatever skills you may have, and of those, there are few that don’t come with some sort of question mark attached, like being on call 24/7, or holding down the earnings of other people somewhere in the web of employment that supports the position you hold, or contributing in some way to an deleterious impact on some part of the natural world, or taking advantage of customers who have little option but to pay you whatever you demand.
Knocking on the doors of the few jobs that are beneficent to both self and other self are some of the brightest and most motivated young people on the planet. That’s the competition. Well, neither of us is bright enough, motivated enough and also young enough to stand a chance of doing justice to a job like that, so the chances of ever seeing anything like $60,000/year are slim to nothing.
However, if we were paying only the amount that the Reductive rent-setting approach suggests would be socially reconciled – namely $721.60/month (or thereabouts) – our yearly income would have to be $28,864. That’s something we could, in fact, do without being constantly obliged to share the sanctity of our home with others, at an age (for me), when many of my richer contemporaries are already retired (and some already dead).
We’d be able to close the distance a little if my wife, a server with over 20 years of experience, could make more money. But she can’t because her hours are regularly cut. Why are they cut? Because fewer diners from the younger set can afford to patronize the restaurant where she works than used to be the case, in no small measure because rent is consuming an ever-rising fraction of what most in that age group can earn.
As it now stands, when we can’t find a temporary housemate to defray the cost, paying the rent claims over 75% of our take-home money and around 100 hours of work per month, on average, from the part-time jobs we have secured.
At 65, I'm pretty much confined to being the multitasking support person in the household. At 65, it's damn difficult to find anyone who will actually pay you to do anything for them. As a result, the burden of the extra workload involved in just staying afloat here now falls squarely (and unfairly) on the delicate shoulders of my wife who, at 49, is not quite yet considered redundant.
Lest you think that her job is easy, reflect on the following: unlike most restaurants, in the one she works at, the dining area is divided between two floors. The more popular dining area is on the second floor, overlooking the kitchen. A ten-foot stairwell connects the two floors. In the summer, guests can sit outside on a patio that surrounds two sides of the building. There is no dumbwaiter between the kitchen and the second floor. Every little thing has to be toted up the stairwell by the servers. It’s a high attention restaurant, with a strong emphasis on superior table service. That means constantly having to go up and down between floors during a seven-hour shift, with no breaks. At the end of a busy night, she’ll be so stripped of vital energy that she can’t recover before the next shift begins the following day. The toll the work takes on her is cumulative. She would like to drop a day to more fully recover but she feels she can’t because the rent on our home takes so much of what she earns.
I add that bit of information to illustrate that greed on the part of landlords isn’t just an academic issue; it results in a very real price people pay with their flesh and blood, their health, their happiness and their life prospects.
It is very likely that the FHA’s recommendation that a limit of 30% of take-home pay be consumed by housing expenses isn’t solely an economic consideration. It’s also a reflection of humanitarian concern for the disproportionate impacts levied on Americans who are less well paid for what they have to put out to hold onto the employment they’re deathly afraid of losing.


WHERE WE’RE AT NOW:
So, if we made so little over the years, how did we not just make the rent, but build some savings, as well? That bears some explaining. Well, right from the outset, we calculated that if we leased a house with extra bedrooms and then sub-rented out two of them on a temporary basis to roommates at the lowest rates we could afford to offer, it would come out better for us than if we had a one-bedroom house all to ourselves. It would be more work and a lot less comfortable, but if we were diligent, we could save more of what we earned.
In time our approach evolved into renting those rooms on a short-term contract basis. That way, we could keep the rooms in tip-top condition and not have to risk being stuck for an unbearably long time with some roommate who made us feel uncomfortable. Our system took a lot of work to set up and a lot of discipline to manage. Granted, it certainly beat being broke, but it wasn’t anywhere close to being the comfortable lifestyle people who have their homes all to themselves enjoy. 195 short-termers passed through our home during that time.
In the end though, by doing it that way, we managed to save enough to buy that raw land in the middle of what most people consider to be nowhere. After we’d paid that off, we covered the question of what we would do there to make money by buying the old café that had gone defunct. There’s still the small question of having to build a house on the land – a prospect I do not relish – but it beats having to watch my wife age as she slowly works herself to death keeping the landlords sustained in a manner we dare not even dream of enjoying.
In light of my 36-year association with Seattle society, I have little patience with shills who rattle off that old saw about hard work being the basis of class mobility.
For those I know who do not struggle with a constant shortage of funds, our landlords included, the opposite tactic – an aversion to hard work, in favor of the astute use of influence and capital - seems to have worked far better. 
 To many of the financial upper class, using contract advantage to siphon off the life energy from poorer to wealthier is entirely normal in the new American era. It’s considered what one should attempt to perfect, the holy grail of a modern professional life and a seminal precept of instruction in business schools across the country.
Apparently, we’ve forgotten that the practice was also endemic to the pre-revolution era, in the middle of the eighteenth century, and a principal complaint by native-born Americans against their British overlords. We know how that all worked out.

I wouldn’t be writing about this if the current situation were our first experience of being downwardly manipulated by people further up the wealth and power scale, not just as renters, but also in my former role as the owner of a custom wood window and door shop. It takes time to figure out how the game is being played, and a few decades of first-hand experience bumping into obstacles at the bottom of the economic pile for a person to get as focused on issues of social equity as I have become.
Looking back over the past thirty-five years, I recall the list of wealthy people I worked for whose fortunes I helped to advance, doing difficult, dirty and often dangerous work, while my own circumstances grew slowly worse. Of special note were the self-serving caprices of a notable few who rewarded my efforts with unreasonable, ego-driven time demands and the odd short and late payment, among other indignities. Mostly, I took it in stride, because I had no other alternative, but the internal toll it took on my confidence accrued steadily with each humiliation I suffered.
Ultimately, I just stopped inventing reasons to keep fighting with circumstance, laid everybody off, and put all the machines in storage. The plan was to resume once my spirit had healed. I couldn’t foresee how long it would take to feel good enough about life again to resume. That was twenty years ago and though I use the machines now and then, I’d rather scrape by on a pittance, wearing other people’s throwaways and contenting myself with day-old bread and restaurant leftovers, than go back to aggravating the wealth dichotomy by making doors and windows for upscale people in a dusty, noise-ridden shit-hole, seven days a week, often ‘til one or two in the morning, just to meet some fatuous deadline.
To a man, every independent contractor I know still working, gives me the same dark assessment of the trade. It’s where the rubber meets the road, where the sweat, worries and accumulated expertise of workers are combined with the largest outlays in capital most clients will ever make to derive one of the largest imbalances in net worth outcomes obtainable through any exchange in the modern economy. One easy way to get one’s head around this phenomenon is to take in the view of the city from Harbor Avenue on Alki, realize that what you’re looking at has trebled in size in little over twenty years, and reflect on the degree to which the net worth of those who own those buildings was advanced by that growth, relative to the net worth of those who actually built them.
Frontal resistance against this trend is futile. It’s just math made manifest. But net worth isn’t the sole determiner of whether people lead fulfilling lives, or not. We can also use math and public authority to countervail social disparity by claiming society’s dividend on the back end of the process. We can then use those funds to build strong, commonly held institutions that obviate the need for personal wealth in obtaining an adequacy of individual providence. We can also institute laws that hold any and all persons and entities to account for unduly compromising the personhood of another. Granted, it’s clear that some in government understand these truths. It’s equally that many don’t. To the extent that any American of high or low degree suffers unnecessarily in this century, with all the wealth we’ve accumulated in society, we are reminded of how the public sector has failed to fulfill the aforementioned charter.
Once you realize how inevitable it is that the use of capital and influence leads to a widening of net worth outcomes, you also realize how foolish it is to continue procrastinating on the only form of action that can make differences in personal wealth immaterial to whether a man or woman enjoys life and the fruits of equality under the American constitution.
I know I’ve strayed a little from the subject of this heading. Allow me to return to the mundane perspective of our personal life and move from focusing on my past to my wife’s experiences struggling to make ends meet and build some equity.
She’s put in a solid twenty-five, juggling several part-time jobs simultaneously, as a waitress, bookkeeper, a field-to-table berry seller, and art model - whatever she could find – and, boy, is she in need of the month-long holiday she has never enjoyed in all those years.
That's a combined sixty years of contributing to making the lives of people in a better position than ourselves more comfortable, profitable and enjoyable, as we slowly clawed our way up from having nothing, and finding good enough work to offset rising costs got progressively harder for us.
In the twenty years we’ve lived together in this town, we’ve never been to a concert together, ridden to the top of the Space Needle or been to any kind of sporting event and only very rarely eaten at a restaurant of any kind; you tend not to think about such things if they seem expensive to you and, in time, the prospect of experiencing them fades from your mind. We also gave up on the idea of being able afford having children of our own in the time allotted by nature.
With respect to rent, we've really paid our dues, 274,000 dollars’ worth down the drain, with zero recoverable equity to show for it. Precious years of critical opportunity slid by while we twisted ourselves in knots trying to get to the other side of the housing equation in Seattle, to no avail.
As for giving up on Seattle, the love died decades ago. We’ve made our peace with our failure to make an abiding home for ourselves here. When we leave, we will not look back; nor will we ever return unless absolutely obliged to. The last thing we need is to be reminded of how one or other of us lived on the street in a car, on occasion, and how the deck of life was stacked against us by a system so many are content to accept, even embrace.
The real city you live in is the one you can reasonably expect to enjoy, not the glittering citadel you see from afar, and there is little that we have access to here in Seattle that some small town in the mountains with fewer inherent stresses cannot match.
I don’t ruminate much over how being able to retain an extra $900, or so, per month, might have changed our current prospects, but it’s reasonable to conclude that it would have made quite a difference in how much we enjoyed being here.
Maybe you’re thinking that I wish I’d had it easier. I don’t. As long as you’re not broken in the process, harsh experience is a better educator than pleasing experience. I am grateful for what I learned, and I am grateful not to have been broken psychologically. There are feelings deeper and more useful to human existence than pleasure, feelings of authority regarding some aspect of being that are simply never discovered easily, feelings that give you the inner fire required to temper the steel of your convictions. Only by sensing that well tempered steel within you do others take what you say seriously. Those with the God-given ability to fight against institutionally protected impediments to the inherent rights of individuals must go through significant and sustained adversity before they will be taken as credible witnesses for the disadvantaged.
Isn’t it a delicious irony that there isn’t a university on the face of the planet that can give you precise instruction on the subject of hardship, yet there’s no shortage of people with advanced degrees in it? Perhaps that’s the hidden reason behind why students are given so many impossible study projects to complete. Regrettably, that amounts to double dues for those who come from hard backgrounds to begin with.

WHAT CAN BE DONE TO IMPROVE THE SITUATION:
Back when I was a young man in South Africa, I would sometimes argue with my parents about the system we lived under. In those days, apartheid was entrenched in the psyches of South Africans of all races, just as standard rental practice in America is entrenched in the psyches of Americans today.
One of the biggest reasons apartheid managed to stay that way was geographic isolation. Maybe it’s the same reason that America manages to hang on so doggedly to retrograde aspects of itself, transcended elsewhere, but still unaddressed here.
My stepmother would cut me off in mid argument by saying, "Peter, this is the way things are and the way they’re going to stay for the rest our lives. Get used to it.”
When I addressed the issue of the Cold War and the danger of a nuclear holocaust, the response would be the same. My father’s appetite for discussing potential evolution in public policy wasn’t any greater – very likely a product of having been a participant in combat in North Africa and Italy. I was outnumbered at the dinner table and I didn’t like being put down so I learned to keep my views to myself.
Now, many years after both apartheid and the Cold War have faded from the news, I can see that what my parents were exhibiting was not so much considered opinion, but rather, a fear of change, even change toward the better. Having come through that dreadful period in history, what they wanted, above all else, was stability. Under the influence of that yearning, they clung to anything that seemed immutable, convinced that nothing, much less the soft force of public opinion, could change it. Sadder still, they would become resolute advocates for its preservation.
This form of fatalism among those on the more comfortable side of some kind of questionable social status quo is not exclusive to South Africans of the apartheid era. We’ve seen it exhibited in the past by people in at least two of the most currently dynamic and fastest evolving societies on the planet – China and Russia. The accumulated cost of those periods of arrested development, to not just those nations, but the whole world, is well known to us.
There is a deeper lesson to be learned from that past, a lesson that every nation would do well to take note of. We should not presume that society’s inherent need to evolve can be stuffed into a bag and indefinitely postponed without creating unpleasant consequences. Nor should we underestimate the power of public opinion to exact a penalty on those who drag their feet when things are obviously out of whack.
As things stand, the need for America to evolve into a society that goes beyond lip service to actively work to promote, sustain and protect social equity is greatly overdue. The higher potential of millions of lives is being lost with every month of inaction that passes.
In the years after World War II, during which prosperity was considered to be rising, conservative Americans were quick to compare their living standard with those of the major European nations, as a way of showing how high-tax systems worked against economic vigor. These arguments failed to take into account either the fact that Europeans would require generations to recover from the trauma they had been subjected to, or that the U.S. was riding the momentum of enormous economic growth as a result of its factories and farms having been beyond the theater of war.
We failed to acknowledge the necessity by European nations to exact higher taxes to repay public loans taken out to rebuild infrastructure and institutions destroyed during the war. While Americans rested on their laurels, Europeans undertook the difficult task of convincing their electorates that central contribution would serve individual needs, if given time to work out the bugs.
Today, sixty years later, the only Europeans immigrating to Seattle are those who feel comfortable letting go of the many publicly-funded programs they now enjoy, mainly cheap and simple access to healthcare services, free access to cultural events and housing that claims less of a person’s paycheck. And just who might those transplants be? Answer: those who feel they don’t need those publicly accessible benefits because they have an excellent chance of being, and staying, on the winning side of the growing state of inequity between rich and poor. After all, if being one of the top 1% in the world is what moves you, above all else, and you can swing the moving costs involved with financial help from the corporation that has offered you that big time position, the USA is only a first class plane ride away. Here, I’m reminded of those from Europe and America who moved to South Africa during the apartheid years, precisely because it was so inequitable.
Social evolution invariably begins with griping about unfairness, but unless the griping translates into substantive modifications being made for the better, there is a real danger of cynicism setting in. There is nothing that so deeply undermines a democracy’s ability to function as intended as public cynicism. Public cynicism damages the fundamental architecture of democracy the way gribbles attack wooden piers – the outer form remains, but the inner fundament becomes riddled with voids, weakening the whole.

SO WHAT NEXT?
Griping about the situation, alone, isn’t enough. It simply prepares the ground for the presentation of an alternative vision. If I were to stop short of putting forward some better alternative, I’d just be helping to create fatalism within the ranks of those who suffer under the load of crippling rent.
What follows, then, is a list of strategies government can pursue to bring rents in line with the recommended limits put out by HUD.


POTENTIAL PATHS TOWARD RENT RELIEF -
AT THE NATIONAL LEVEL:
Why start at the national level? Briefly, because the diversion of liquidity from the hands of lower earning Americans into the hands of upper earners via the quotient of rent that is excessive has a deleterious effect on society and the entire national economy. The scale of the imbalance will become ever more acute as the needs of a still growing population needing meaningful employment begin to overtop the limits of key capacities in the natural world to sustain and cradle the activities of the national economy. Under that condition, the only thing that will be found to help sustain America’s middle classes will be through reapportionment of the gross earnings of the economy. As that point approaches, people will inevitably become far more cost conscious; a penny saved is a penny earned, as they say. Across the board, people will demand proper justification for what they’re paying for essentials. They will turn to government to hold sellers of essentials to a much higher level of scrutiny and justification. There’s no good reason to suppose that rent should enjoy immunity from that growing call for cost accountability.

Since this eventuality is all but inevitable, it would behoove government at the national level to come up to speed on the realities of the renting life, beginning with a decent examination of those basic aspects of the national rental industry that might justifiably be subject to federal oversight.
Let me suggest a few: First, there’s the simple truth that there are few parts of the country where even a fully grown adult in prime physical condition could survive the most extreme weather conditions encountered during the yearly cycle; you either freeze to death or are cooked alive. In light of that, let me pose a question to illustrate a principle regarding responsibility, and then, having demonstrated the principle, follow it with a more pointed question regarding the subject of housing and the federal government.
How would you regard a general who casually ordered his troops to attack, without guarantees of logistical support, like ammunition, fighting machines, victuals, shelter and transportation, knowing full well that, without that support, they would suffer terrible losses in that action?
Not very highly, right?
Now, along similar lines, I ask you, what would you think of an immensely powerful national government that casually sends its tax-paying population out into a potentially deadly landscape to take on the challenges of establishing and maintaining civil society and a national economy without a solemn pledge that none requiring housing should go without it, regardless of status, knowing full well that, in the absence of that guarantee, they would suffer terrible losses in life, liberty and happiness?
I leave it to you to provide an answer that satisfies you.
Second, speaking of personal liberty, I’d like to hear one cogent argument explaining why the national rental industry should be granted an implicit exemption from the responsibility of honoring and protecting it. We all know that people are becoming increasingly trapped in the situation of having to rent without chance of escape to ownership, precisely because their rent is so high in employment regions where there is little to no chance of finding cheaper rent, or better-paying work; and we all know that ever growing numbers of them consider themselves permanently indentured servants of those to whom their rent goes each month.
This lamentable condition constitutes the owning by one man of so much of another man’s earning capacity that he is no longer capable of the kind of discretionary action required to be a fully engaged member of American society. He is equal only in theory; not in practice. Indeed, he hovers somewhere between the status of a free man and that of a slave, moving, with each month that passes, further from the former state and closer to the latter, from felicity to bondage. You might think that painful precedent had shown us what grave harm can come to a nation when the issue of liberty is long left unaddressed in a morally responsible fashion.
The reluctance by Congress to be duly vigilant regarding issues of personal liberty - instead, allowing states to drift far into self-serving moral territory all their own - has proven disastrous in the past, not just in the case of the Civil War of 1860, but in many lesser domestic upheavals since. If Congress continues to ignore the modern-day economic bondage caused by the current nationwide rush to exploit the need for housing among those too poor to buy their own homes, there will be consequences to bear. They will come in the form of yet one more round of populist blow-back that will begin online, spread to the printed media, manifest on the streets of major cities and ultimately blow like a house-cleaning wind though the halls of government.

Third, there’s the small issue of what might have been intended for our times by the nation’s founders. I’m sure, beyond a shadow of a doubt, that the last thing they intended to abet when they crafted the national constitution was a monetary meritocracy in which it would become ever more difficult for individual character to take root, grow and serve.
In our debates on what role the law should play in America, we tend to focus too much on the honorific significance of individual rights under the national constitution and too little on the practical aspects of those rights and what we need to do to make them meaningful. In specific, I’m referring to the responsibility that our government has to stand behind those rights and deliver. As a result, our support for those rights lacks the quality of intellectual substance. The words, “individual rights,” themselves, are all too often little more than lip candy, calculated to persuade without a decent regard for intelligent substantiation.
What meaning would the rights of children have without being inextricably bound to the responsibilities of parents? In a very similar way, what meaning do the rights of citizens have if their government fails in its responsibility to stand behind those rights and deliver?
The right that particularly concerns me here is not the right to simply exist, as some might like it to be interpreted for others, but to live fully in a manner reflective of a citizen of the most powerful and richest nation on Earth, free of traditional impediments whose former reasons for being no longer apply to our modern age!
Economic bondage, and all its attendant ills, is a social scourge – a scourge like polio and smallpox once were. But like polio and smallpox, it is eradicable, provided we muster the required steadfastness of moral will to make it so. The impediments to achieving that end are not unscalable walls of existential reality; they are overwhelmingly political in nature and, as such, little more than obfuscatory baggage we would do well to discard.
Though recognition of the right to live as fully as society’s realities permit is laid out in the national constitution, the federal government’s support for that notion up to now has lacked real backbone. Whatever support that body has shown, of late, it has all too often been an undisguised attempt to accommodate powerful - and sometimes retrograde - elements of self-interest, intent on gaining easier access to the spoils of our economy.
A clear statement on the part of the federal government that it intends to raise the ante on the issue of the right of American citizens to be free of the fear of economic blackmail, occasioned by the need to be housed, and that there are certain standards that all states need to meet with respect to how Americans are housed because the fate of the American government is inextricably tied to the lot of the People, would go a long way toward eradication of the most pervasive fear fully half of all Americans carry within over the full course of their lives.
States and cities can do a lot within their own jurisdictions, but they cannot, by themselves, create the kind of legislative containment around themselves that a universal legal standard provides. Such protections as local law may afford are routinely undercut by entities elsewhere, at cost to the welfare of the people. Everywhere, good law is undercut by bad law beyond the border. With some things, that can be accepted as part of the notion that subordinate jurisdictions are incubators and testing grounds for more universal law yet to come. But when it comes to the critical need for adequate housing at an affordable price, universal minimal standards are absolutely appropriate and long overdue.

Here then, are some things those at the federal level might do:

STEP 1
For an initiative to exist, you have first to give it a name. A name is a quick and easy way to refer to what you are putting forward for people to consider or debate. It also gives those you’ve talked to an easy way of referring to the proposal when they discuss it with others. I suggest the name, the EQUITABLY ADJUSTED RENTS NOW!, or EARN!, because it has eponymous connotations. Once you have a name, you can do a press release explaining the core purpose of your work on the issue at hand. A good way to do that is to focus on how you intend to fix something that has long been acknowledged to be a big problem. When it comes to rental housing and its implications for fueling differences in personal wealth and how such differences affect the chances of the individual in life, much has already been said. Somewhat more compelling, I believe, is the idea that you’re going to fix the inherent bias against renters of the mortgage interest deduction enjoyed by homeowners by offering similar deductions to landlords whose net growth in held wealth from owning and managing rental housing, scrutinized by state-of-the-art accounting, pencils out to be less than one and three quarters the rate of inflation from the date those properties were deployed.

STEP 2
Form a commission of learned people, strong on constitutional intent, whose number includes equal parts of renters, former renters turned owners, and landlords. The job of this commission would be to see what actions could be taken at the federal level, both legislative and executive, that would bring the business of renting in line with the national effort to end homelessness in America and promote a more robust expression of interpersonal equity in social behavior throughout the country.
More than that, the commission would re-examine how the average renter’s income might ultimately end up being divided during the process of its being spent, with a particular focus on the impacts to federal tax revenue streams. When landlords take too big of a bite, they rob the demand side of cash, which ends up starving the supply side, which adapts by cutting employment, which shrinks the number and size of incomes, which throttles tax revenue, which cuts the input of government spending on public works, which further shrinks income, which diminishes demand further. The only give in the system that prevents this negative feed-back loop from spiraling ever downward is the absorption of consequences borne by those with the least ability to pass those costs onto the next level down – those at the end of the chain, the poorest and weakest who then have no option but to solicit help to survive.
The cruelty of this equation is abominable. It cannot be simply ignored. Were we to ignore it, we’d be less than fully human. Intercession must be made, but where is it found? Friends, family and charitable organizations can only do so much.
In the end, the bulk of the buffering is done by government, at enormous expense to the public purse. An ounce of prevention, in this case, is worth a pound of cure. In that sense, prevention is the low bidder and cure is the high bidder. The only reason we aren’t soliciting the low bid from prevention, when it comes to the federal government’s connection to the impacts of the renting world, is because we’ve given insufficient attention to how the public cause might be suffering as a result of said inattention. Half the job of the commission would be to put some hard numbers up so we can see what that cost amounts to.

STEP 3
Once the commission’s report has been delivered, Congress can begin to craft a bill in which the resolution to protect society’s highest interests within the rental-housing sector is encompassed by the following sequential logic and the declarations that follow after it, and in a form that I envision to be much like the following:

ACKNOWLEDGMENT OF FACT:
“Insofar as it is the obligation of the government of all the People of the United States of America under the national constitution to pay due respect to the phrase “with equality for all” and to act in furthering the dignity and well-being of all persons in the many demographic groups of which the nation is comprised, wherever possible and practicable, and to work to limit grievous disparities in circumstance between classes of the People, in the protection and enhancement of national harmony, in any circumstance where the benefits to be gained clearly exceed the negatives involved; and inasmuch as we are compelled to acknowledge that the following statements are truths of fundamental consequence:

*that all Americans are entitled under their national constitution to a meaningful per capita quotient of life and liberty to seek the happiness they aspire to enjoying;
*that there is no meaningful understanding of the words “Life” and “Liberty” in post-2000 America that does not infer the realistic ability to do more with one’s money than just survive;
*that, in America, having “Life” includes being adequately protected from natural elements, exposure to which can result in suffering, sickness, injury or physical death;
*that any useful interpretation of the phrase “adequately protected” in America means living in a built structure conforming to certain minimal standards, with respect to soundness and performance;
*that, in order to have access to such housing, close to half the American population cannot buy such housing and, therefore, have no option other than to seek out housing they can afford to rent;
*that, rented housing cannot be a perpetual solution for one and all, because the spinoffs of home ownership are vital to the demand side of the economy, to the accrual and preservation of private equity and to the cultural expression of many forms of the typical American family, necessitating an ongoing transition of Americans from renting to owning their own homes;
*that such transition to home ownership cannot be made without the average would-be buyer saving a considerable amount in cash for a down payment;
*that even as would-be buyers save to make a down–payment, they must also meet the costs of participating in the normal modalities of life upon which the national economy depends;
*that as one ages, the failure to transition from renting to free-and-clear ownership of one’s own domicile occasions an ever-growing risk of becoming homeless, as the ability to retain employment diminishes;
*that, the chances of a citizen never needing state assistance to survive depend utterly on getting to keep some portion of earnings as savings, quite beyond having paid for housing and other essential expenses related to preserving psychological and spiritual health;
*that the better Americans do in applying what they are left with, after having paid for housing, to enjoyment and the building of personal wealth, the more robust their participation will be in the demand side of the economy;
*that the better the demand side of the economy functions, the better people do, and the better government will do in collecting the revenues required to address matters of the public good;
*that the imposition of excessive rent has resulted in tens of millions of Americans being able to afford little more than having a roof over their heads at night and a paucity of victuals needed to forestall malnourishment, obliging them to reconcile themselves to a state of currently active, or imminent, dependence on government assistance in order to survive;
*that rents that are higher than they need to be to ensure a reasonable overall return on investment shift money from where the demand side is service-dependent and employment-rich, per dollar spent, to where it is less so per dollar spent, to a degree that the few who receive that money cannot make up for in their personal spending habits in that area of the economy, leading, in turn, to a net reduction in employment and general felicity while simultaneously depressing excise tax revenues;
*that the loss of elective spending ability suffered by the many subjected to rents higher than they need to be to assure a reasonable overall return on investment denies a statistically significant percentage of the population the kind of purchasing power, after housing expenses, that would otherwise have afforded them the many securities and felicities of the middle class;
*that, insofar as the excessive portion of rent does not represent what is absolutely needed to make reasonable recompense for costs incurred, or what might be needed to sustain the willingness of the landlord to continue renting out, said excessive portion must be seen for what it really is; namely, a narrow use of market advantage to wrest as much as can be got out of populations concentrated together by forces beyond their control, mainly economic, educational, cultural, age-related and political (among other factors);
*that such exploitation of the need for housing, as described above, is conducted by a significant proportion of property owners and their agents in a manner coldly calculated to extract as much out of renters as market conditions permit, regardless of the social impact that such conduct levies on those so affected, resulting in an institutionally tolerated, and legally protected, form of market-based extortion;
*that landlords routinely reference the rents charged by other landlords as the sole justification for raising the rent on their own tenants, thereby creating an upwardly spiraling feedback loop between landlords of raises and justifications for such raises, knowing full well that tenants constitute a partially captive market, dissuaded from exercising their ostensible right to relocate to more affordable accommodations by the numerous difficulties, high costs, geographic realities and many uncertainties inherent in taking such action;
*that it is routine for city authorities across America to invest in trying to attract people to move into them, to the extent of simultaneously creating both a shortage of rentable housing, driving up rents, and a glut of people needing employment, driving down personal earnings, particularly among those who must rent;
*that even a conservative reductive estimate of the gross transfer of funds from poorer to richer represented by the excessive portion of rent in communities across America demonstrates the existence of a considerable drag on efforts to improve levels of social equity in the nation and a diminution of the nation’s collective human potential;
*that higher levels of social inequity and social distress in America lead to higher levels of social disaffection in America, undermining the nation’s strength in unity;
*that the likelihood of the embodied potential within individual renters actually coming to fruition is inversely proportional to the percentage of their income lost to rent, because unnecessarily high rents lay a disproportionate claim on the discretionary income needed by individuals to secure the externalized components of social opportunity – a decent level of education, adequate demand-driven employment, adequate personal transportation, good nutrition, good health habits, access to a sufficiency of cultural engagement, access to healthcare, the ability to have children, the inviolable right to remain in one’s home, etc;
*that, as a result of the point outlined directly above, unnecessarily high rents undermine the gross strength of America that arises from the overall sum of individually expressed attributes and talents;
*that rents on housing that lay claim to more than one third of an individual’s after-tax income are considered by the federal Housing and Urban Development Authority (and other authorities around the world) to be deleterious to the broader and greater interests of society;
*that any gratuitous premium on rent, beyond what is reasonable, as defined herein, competes directly with what the renter is obliged by law to spend on buying health and car insurance, thereby creating a moral hazard for any government content to levy a mandate to buy those things, without bothering to concern itself with the obvious impediment that high rent imposes on the ability of the individual to comply with such mandates;
*that studies by impartial academic authorities have shown that while life satisfaction does improve with the having of more money when one is poor, the effect tapers off the higher you go until a point is reached somewhere around one and one third times the median income, beyond which net contentment begins to decline, suggesting that the pain borne by those who carry the burden of excessive rent does not translate into an inversely comparable quotient of pleasure for those receiving said rent and eliminating any rationale for Congress to endorse the taking of anything beyond that which consummates a socially reconcilable exchange;
*that buying, holding and selling property alone, even without ever occupying or renting it out, is regarded as a perfectly viable form of building wealth through speculation in most cities where rents are high, relegating any rental relationship that rides upon said speculation to an essentially separate business activity and that, while it is reasonable to expect a tenant to pay for whatever occupancy and upkeep benefits the landlord provides, it does not follow that a tenant should be required to contribute money to the owner’s speculative interests associated with the actual purchase of the real estate being rented;
*that, it is common business practice to utilize the renting of property (often through proxies) as a cash-conserving way of holding such property until the most propitious time to sell arrives, thereby greatly enhancing the odds for landlords, over owners who do not rent, that good money will be made from owning said property, in the form of capital gains alone, and diminishing the importance of the renter’s contribution to the task of ensuring a respectable return on investment;
*that inasmuch as society now strains at the very limits of what can be got sustainably from the planetary envelope in order to underwrite the incomes currently in existence, and inasmuch as people are driven to make more money the higher their rent goes, any widespread practice of imposing gratuitous surcharges in rent beyond what is necessary to derive a reasonable return on investment inevitably contributes to a gratuitous increase in resource extraction and carbon loading of the atmosphere, making said practice a gratuitous burden upon the planetary envelope itself in a time of grave uncertainty;
*that it is fundamentally absurd to think that rents can continue to rise faster than income year after year, as they have been, on average, for the past two decades in America, without damage to the condition of society or the general economy;
*and finally, that it is the duty of Congress to serve all citizens equally, regardless of what may differentiate them, one from another, and when the interests of one significant group in the population appear to be suffering so that the interests of a far smaller group may be inordinately advanced, resulting in a net loss of benefit to the whole, Congress must use its powers in search of a way to provide relief, and if such a way can be found, enact law to put such relief in action on behalf of the People…..

DECLARATION OF FINDING:
We find, therefore, that the practice of extracting any rent money over and above what constitutes a socially reconcilable exchange of cash for value out of a tenant, quite irrespective of local law, creates less benefit for society, as a whole, than does the retention of that overage in the hands of the renting public. For that reason, we find said excessive portion to be demonstrably malign to the better interests of the public, throughout the nation at large, and clearly at odds with the national government’s abiding intent to derive higher levels of social equity among the People.
Furthermore, when title to private property holdings, amassed at the expense of the life potential of others, passes through inheritance from one generation to the next, into perpetuity, with only the chance of the completely unforeseen to disperse it back among the People from whence it came, the identity of a democracy begins to incline toward that of an entrenched financial class with the potential to skew the business of the nation toward its own interests. Inasmuch as this body cannot abide the conversion of our democracy into any form of plutocracy, however mild, we are compelled to act to mitigate wealth accumulation fed by that upper portion of rent that is neither necessary nor congruent with the broader fight to preserve our democracy as a socially equitable entity.
As for what is meant by the words “socially reconcilable exchange” in the preceding paragraph, a definition follows below. First, however, it is necessary to define what we deem to be the kind of rental situation this statement of intent covers.
All residential structures and parts thereof, that have a door to the exterior environment, the right of entry to which is contracted out to a tenant by a landlord in return for money paid on a set period basis, shall be deemed to be the kind of income-generating business entities this declaration covers. (Specifically excluded are rental situations where the renter and the occupant with the ultimate right of domain - the owner or prime tenant - share the same living unit.)
While these rented abodes are subject to locally established regulations regarding habitability, healthfulness, soundness, safety, sightliness, energy conservation, access and zoning, the much broader, over-arching mandate upon federal authority transcends those concerns. That mandate of duty upon Congress is to ensure that use of these abodes in making money on the rental market does not drift into any modality that conflicts with the broader philosophical ambitions implied in the nation’s Constitution to such an extent as to perpetually undermine, indefinitely frustrate, or make meaningless the right to life, liberty and happiness for the many millions obliged to rent the homes they occupy – a group presently constituting greater than half the population of the nation. When it becomes clear that such a conflict has indeed arisen, and that it is so entrenched and so widespread as to contribute in a substantial way to a growing schism between the few with more wealth than is needed to be happy and secure and the many with too little to none, we are challenged by the Constitution to do all in our power to reverse the imbalance, lest resulting widespread disaffection breed discord within the nation.
To that end, since it is by means of net worth, rather than income, that the nation’s most grievous inequities become entrenched and grow, it is upon the ultimate differences in net worth between renter and landlord that arise out of the practice of renting out residential property that we must focus, and, in so doing, derive means to help close the gap between those two starkly divergent realities.
Toward that end, we consider the Socially Reconcilable Rent on a property, in principle, to be an exchange that splits the benefits of the relationship between landlord and tenant equitably, so that all the conditions that follow below are met and neither party gets more satisfaction out of the exchange than the other.
Conditions to be met:
1.) That tenants, as a class, may progress, without undue difficulty, and without unreasonable sacrifice of quality of life, in growing net worth out of the earnings of regular, everyday employment, even as they rent.
2.) That such accrual may be sufficient as to allow a clear majority of said tenants to move in a realistic way toward owning their own homes before the age when the opportunity to have a family fades away.
3.) That such accrual may be sufficient, in theory, to allow almost all of those wishing to escape being renters to do so, and further, to do so before the age when finding employment of the kind that it is possible for them to hold down becomes demonstrably unlikely.
4.) That landlords take only as much as is sufficient as to guarantee a percentage of growth in net worth, at final accounting, not greater than that achievable by the tenant, nor significantly different from percentage returns yielded by other forms of investment of comparable difficulty to manage – specifically, not less than one and a half times the rate of inflation and not more than twice the rate of inflation.

Any portion of rent that lies upward of what comports with the definition outlined above shall not be considered to be within the bounds of a socially benign exchange, regardless of how willing prospective renters may be to pay it, since such acquiescence inevitably contributes to growth in the nationwide wealth dichotomy we are charged with containing.
Let it be clear, we do not consider the mere willingness to pay as any arbiter of whether the exchange in question is good for society, or not. Rather, it is in the long-term consequences that arise out of consummation of such exchange that we must decide whether the exchange is good or bad for society.
We are aware that there are many who believe that it is the mechanics of supply and demand that should decide what is acceptable and legal, and that government should in no way concern itself with exchanges that occur within what is broadly referred to as “the market” – a legislative approach generally referred to as laissez faire – as if all Congress had to do to make things better throughout the nation were to recuse itself from any and all actions of regulation with respect to said market.
We emphatically reject that notion as an opinion put forward overwhelmingly more by those who seek a freer rein to exercise advantage over others for personal gain than by those of good heart and pure intention who seek only the greatest good and who accept that they themselves might lose by it.
As duly elected protectors of the good of the nation, charged with crafting the over-arching legal structure to which subsequent law made at all lower levels must conform, we are obliged, above all, to serve the spirit of unity within the nation – a task that cannot be fulfilled if we do not actively work to maintain a strong sense of fair play and inclusiveness in our daily life together. To that end, when it becomes necessary to temper how much the strong can gain, and how much the weak can lose, in select areas of “the market”, especially with respect to how Americans are housed, we will act with all due diligence to the full extent of our rightful powers to make such tempering an instrument of over-arching national law.
To add substance to our intent, we will act, using all means available, to help make smooth the road for both landlords and tenants who wish to be part of a nationwide initiative devoted to establishing a much more transparent and socially constructive relationship between all parties in the business of rented housing.”

Such a broadside would be an excellent prod to the rear of states across the country to get on board with a major facet of the single most important fiscal challenge facing the nation, namely, slowing, and perhaps even reversing, the relentless growth in demand across the country for government assistance to the needy.

STEP 4
Congress must then put its money where its mouth is by laying out a general strategy to empower the executive branch to, on the one hand, grow a nationwide system of collaborators, right down the chain to the individual landlord, to build a robust inventory of socially reconcilable residential rental properties and, on the other, enforce a nationwide list of basic requirements and protections that every rental agreement must contain to make level the psychological and logistical playing field between renter and landlord, so that individual states and cities may then have the legal backstopping they need to actually draft the language of the laws needed to meet those mandates.

How do you build a network of enthusiastic collaborators? It isn’t easy and it doesn’t happen fast but, fortunately, it’s been done before and, today, part of the initial outreach can be made online. The implementation of the Affordable Care Act by the legislative and executive branches of the federal government was an extremely complicated process, but it was achieved by engaging the active support of many different agencies, organizations, media outlets, state governments, private companies and individuals acting as point people and interlocutors.
Wait a minute, you might say; you’re not trying to compare this proposal with a heavyweight like the Affordable Care Act, are you? Indeed, I am. When you compare the social gains to be had against the gains proposed by the Affordable Care Act, they’re every bit as significant, if not more so. I firmly believe in the worth of alleviating the fear that people face when they get sick, but I’m no less passionate about the social rewards to be gained by giving the young and the poor a better shot at making the best of their lives by letting them keep more of their hard-earned money each month.

STEP 5
Nothing can be achieved before Congress settles on a solid definition as to what exactly the term “socially reconcilable rent” means, with regard to the physical nature of any given rented structure, and the financial realities governing its ownership. That is the beginning point of action, the factual cornerstone from which all ensuing action devolves.
The basic financial reality facing all Americans – no less Americans who rent - is simple: for society to be healthy in this country, the net worth of an overwhelming majority of citizens must grow as they age so that, at a propitious point in their later years, when well paid employment is either hard to find or impossible to discharge well, the net worth that each has accumulated can be drawn on to help them traverse their final years in dignity and without undue distress. There is no way around this fact.
Fortunately, thanks to the foresight of wiser generations than ours, part of that fundamental requirement has been collectively met by establishment of the Social Security Trust Fund. Nevertheless, the balance still falls upon the shoulders of the individual to complete.
It cannot be overstated how important it is that every effort be made to preserve the viability of that two-pronged approach. I’m sure most who have been around long enough to see how things really work in America would agree. So how is it most of us simply shrug our shoulders while climbing rents claim ever more of what individuals will need to fulfill their role in that arrangement? This moral lethargy must end, post haste. Growing numbers have little to nothing left, after paying rent, to put toward growing their personal net worth, even as the net worth of the great majority of those to whom they pay rent, most especially in large cities with many attractions, rises by leaps and bounds. By so impeding the growth in the means needed to transition from rented housing to owned housing, the industry has created a destructive feedback loop of a need for rental housing that is the direct result of high rents, leading, in turn, to an artificial swelling in the ranks of those on the demand side that encourages landlords and their proxies to keep raising rents, further compounding the problem.
Congress has done all it can to help people manage the leap to home ownership, but the leap has become unmanageably large for all too many, especially while the nightmare of the 2008 meltdown of the mortgage market remains fresh in people’s minds. At the same time, it has done nothing at all to help renters save more and become more self-empowered to make the leap from renting to owning their own homes. The long-term result is clear: these people, as a class, will be more dependent on help from the federal government than they would have been had the federal government been more active in helping them keep their rent payments at a level where their long-term wealth interests were as well served as those of their landlords.
Some have called for higher wages at the bottom as a way of addressing this problem, as if the impact on business were sustainable, which it might not be. But, even if that could be done without undue economic harm, what good would be achieved if landlords, under the influence of their accountants, simply responded to the existence of such raises by raising rents, which they inevitably would?
Clearly, the only economically efficient way to tackle the problem of insufficient growth in individual net worth at the low end of society is to rein in the drain posed by that top-end portion of rent that is clearly inconsistent with long-term social equity.
To do that, we must stoutly refute the fallacy that any level of return on net investment (ROI) in rental housing is socially acceptable and sustainable, regardless of what it does to the ability of others of lesser means to grow their own net worth. We need an accounting tool that lets everyone know when the rent being charged on a particular domicile passes from being socially sustainable to being unsustainable. More than that, we must create tools to let countervailing actions kick in by default whenever that limit is passed. These actions do not need to be harsh to be effective, but they must be relentless: if the rent being charged produces an ROI that is in excess of what is socially sustainable, countervailing measures need to be applied - the more in excess, the more dissuasive those countervailing measures need to be.
In view of the negative consequences that are bound to arise if we do not act, Congress is obliged by duty to mandate a universal standard. Clear guidelines must be laid down in how ROI must be assessed, what hard numbers define the term “socially reconcilable return on investment” (ROI), what possible countervailing measures are constitutionally sound, what direct federal action must be taken and what actions more properly devolve to states and cities to take.
To avoid muddling the picture, passive growth in the market value of structures has to be assessed separately from the service aspects of maintaining the structure in a legally compliant state, as a rental. A rental that requires a high degree of maintenance to keep it in the state initially encountered by the renter, deserves a higher overall ROI than one in which the owner does little to nothing.

In calculating the ROI that could be deemed socially reconcilable to the experience of having acquired, managed and sold a rental structure, the first step is to find the Break-even Reconciliation Requirement for the structure (or relevant portion thereof), given the current market value of the property concerned. That’s the amount the renter would need to contribute to derive a net balance between income and outgo in the lifetime account on the property of zero. Of course, in any case where this calculation is relevant, the property won't yet have been sold, so a best estimate of what that process would cost, and how much money it would derive on the current market, is required. This is the sort guesswork owners and assessors do all the time.
Technically speaking, we don’t need the Break-even Reconciliation Requirement to calculate the Socially Reconcilable ROI any more than a ship needs a waterline to be able to float. It is, however, a useful comparison tool when the issue of net loss or profit in a business enterprise is being contemplated or discussed.
To make sure that all subordinate authorities working with the system use the same methodology and metrics in determining the Break-even Reconciliation Requirement for any given rented domicile, items in the accounting must be clearly differentiated.
This is not arcane stuff. Every financially organized business owner keeps an orderly account of assets, liabilities, income and outgo.
Assets generally include things of a durable form from which direct, or indirect, financial benefit can be obtained, without their being used up in the process. As such, assets can generally be described in contract language and then sold, if the option to do so is exercised.
Liabilities generally include things for which you will, or may, be required to pay to settle accounts with other parties or authorities.
The first class of expenses – asset acquisitions - covers the initial purchase of the property, plus the purchase of any additional material components of long lasting, to permanent, value. These expenses are partially or wholly recoverable when the property is sold. In the case of real estate, in most cases of long-term ownership, a capital gain will be realized. Examples of additions to the initial equity package of the property might include concrete walkways, new plumbing, an electrical upgrade, insulation, a more efficient heating system, new windows, new roofing and gutters, retaining walls, drainage, solar power equipment, large appliances and so on. Since they are considered to be investment increments deposited in an entity of enduring equity, they are not deductible against income from rental, though wear and tear on such aspects might justifiably be claimed as a depletion of asset value. Such progressive depletion must be tracked on a depreciation schedule for that attritional expense to be claimed as deductible.
The second class of expenses – direct maintenance expenses – would cover anything wholly depleted during the course of operations, and maintenance services, without which the operation of the enterprise would be compromised or impossible. Depending on the nature of the rental contract, they might also include utility expenses paid by the landlord. This class of expenses is legally deductible against gross income from rents.
The third class of expenses falls broadly under the term Owner Withdrawals. When the owner uses a company’s cash account to pay for anything not covered by the two categories described above, it is generally regarded as the company having contributed that amount to the owner’s gross income and is subject to income tax. In the case of a sole proprietorship, the company cash account and the owner’s bank account are the same thing.
This general model is just as appropriate for an entity that generates business income from renting out occupancy privileges as it is for any other business entity.
In calculating the Break-even Reconciliation Requirement on a rental property, care must be taken that inappropriately designated expenses do not skew the result. For example, expenses that pertain to anything the owner intends to remove from the premises and keep after selling the property to the next owner, cannot be included in the calculation. Other types of expense that should not be allowed to qualify as deductible are extravagant, excessively frequent, or lavish expenditures on upkeep, clearly less related to keeping the structure in compliance with code and contract than satisfying the owner’s private whims. Inasmuch as such expenses provide no added occupancy value for the tenant, they are more properly classified as private indulgences and, therefore, as owner’s withdrawals.
This might seem like an abstruse concern, but rental properties upon which such money has been lavished, clearly beyond providing any tangible benefit to the renter, just so the Break Even Reconciliation Requirement calculation can be tweaked upward to justify higher rent, do nothing to help the financial prospects of the renting public.
The big advantage to landlords who opt to adopt the more rigorous standards of reporting required for membership in the EARN! system is that they can see plainly what the actual Break-even Reconciliation Requirement on their properties happens to be. They will then be in a better position to decide whether applying for inclusion in a nationwide register of socially accountable rentals is something they’d like to do, or not.
Considerable advantages would have to be gained by being on a national register of socially accountable rentals for EARN! to gain traction among a worthwhile slice of the nationwide inventory of rented homes.
A BIG SWEETENER is required, some sort of magic bullet.
So how about this? Craft law to allow the mortgage interest on participating rental properties to be deductible against the incomes of both landlord and renter, half thereof going to the renter and the other half to the landlord. As it is, landlords don’t get to deduct mortgage interest on houses they can’t classify as first or second homes. In one simple move, this change would attract renters and landlords into the system, while reconciling the aggravating inequity surrounding the deductibility of mortgage interest for homeowners, versus no deductibility on rent for tenants.
The prospect of getting something back on one’s rent would encourage renters to try to find rentals within the system, where their accrued rental payments could then be tracked. That tracking would allow them to earn credits toward exclusive access to submarket interest on any money they would need to borrow when buying a home of their own. After decades of helping other people build equity, it is only right that a renter should get some help from society in building equity of his/her own.
In addition, since the track record of the rental would be researchable, prospective new tenants could draw security from the fact that any unresolved problems that the most recently vacating tenants had encountered with respect to the property and the owners (or their proxies), would be viewable online. Once resolved, the record of any such problems, though archived by the register, would no longer be visible on the public property record, allowing landlords a clean slate.
For participating landlords, the advantages would be obvious – deductibility of half the mortgage interest, preferred access to an inventory of accredited renters on the database of the system, and the professional status attached to membership among those landed people whose financial dealings with the renting public are not just above board, but consistent with the broader quest to rebuild social equity in America.
Here I add: it would be a strategic blunder to offer this carrot as anything but an “incentiviser” for people to join the far more comprehensive EARN! system. All by itself, it would do little good. It should be proffered to the public the same way parents promise ice cream for dessert if the children consume decent portions of the far more nutritious vegetables prepared for the main course.
Another excellent purpose served by requiring landlords to keep disciplined books if they participate in the program under EARN!, would be in their gaining a more precise awareness of the prevailing value contained under the general umbrella of the property, which can be most useful in the management of one’s financial affairs, applying for a loan or when it comes to selling the property.

In calculating the estimated closed-book return and the Socially Reconcilable ROI that devolves from it, the following financial items, and dates thereof, are needed:

RECORDS
a.) what the owner had to pay the previous owner to buy that portion of the property being occupied by the tenant, leaving out whatever interest might have been paid on a mortgage, if money was borrowed to buy the house (more on that, below),
b.) the amounts and dates of periodic outlays on asset increments pertinent to the portion of the property occupied by the tenant, added to that portion over the course of ownership of the property, and clearly intended to enhance either the occupancy value or the divestment value of the property itself, minus any depreciation taken on such increments,
c.) the full record of outlays on services, materials and depreciation allowances used up in maintaining the contract provisions and code requirements pertaining to the share of the structure occupied by the tenant,
d.) the total accrual of property tax payments, to date,
e.) the transfer costs and commission payments to brokers attached to the initial purchase of the property,
f.) a reasonable estimate of the potential sales costs that would be incurred if the property were to be sold forthwith,
g.) bills yet to be paid, relating to ownership of the property,
h.) all income derived from owning the property plus any accounts receivable.

The serious social analyst can’t make an accurate assessment of a socially reconcilable ROI on a rental from the raw material above until hee/she examines each outlay and separates what part of it serves the landlord’s ongoing responsibilities toward the tenant from what serves the property owner’s purposes exclusively. Tax law considers the former to be a business cost deductible against rent received. The latter type of expense - that serving the owner’s interests alone - is either an act of investment adding equity to, or maintaining equity in, a piece of privately owned real estate being held, be it by intention or by default, in a de facto action of property speculation, or a personal expense. If the personal expense was met by taking cash out of the company account, it is considered an owner’s withdrawal, subject to income tax.
Through a process of allotted depreciation, portions of what is spent in investment can be converted into deductible expenses.
To find the socially reconcilable ROI, we have to separate what was spent honoring the service requirements owed the tenant from what was spent securing and enhancing the equity related interests of the owner. Winnowing out one form of expense from the other can’t just be left to landlords to decide on, as they wish. Some sort of standardization is required. Drawing on my decades’ worth of experience in this area, I suggest the following allotment limits:

PORTIONS OF EXPENSE ATTRIBUTABLE TO SERVICING THE TENANT’S INTERESTS:
1.) Normal Maintenance Outlays:
a.) No more than 30% of the permitted depreciation taken on outlays incurred maintaining that portion of the dwelling occupied by the tenant, where the presence of the tenant did not cause such maintenance or repair work to have to be done, i.e., work occasioned by having to countervail the attritional effects of prevailing environmental factors over the course of time.
b.) 100% of all outlays required to address the average ongoing rate of normal wear-and-tear as a demonstrable consequence of the tenant’s use of, and presence on, the property; to include all surfaces, appliances, appurtenances, tools, et al (but not any property left behind by previous tenants and not removed by the landlord), in short, anything that is in the care of the tenant as part of the overall rental package, as long as the rental relationship endures.

The amounts listed above must be able to be corroborated by electronic or paper records to be included in an EARN! certified calculation of socially reconcilable rent. These expenses cannot be comingled with depreciation claims on aspects of the structure that are purely theoretic. To qualify, depreciation cannot simply be considered as inherent to the material nature of the structure; it must lend itself to a process of either repair or replacement, or both.

The amounts listed above specifically do not include repair costs for which the landlord is directly reimbursed by a tenant on a per occasion basis, either by assent, or out of the tenant’s damage deposit, or by demand, or in a court of law.

2.) Groundskeeping Outlays:
a.) 0% of outlays if the landlord retains full claim on the use of the grounds around the rented structure, along with unconstrained access to it, at will.
b.) 60% of outlays if the landlord retains the exclusive right to merely tend (or have tended) the grounds, on a rotating schedule or by appointment, and assumes the responsibility of seeing to it that needed work gets done, but cedes the residential right of presence on such grounds to the tenant, short the right to do any work upon it.

3.) Utility Outlays, if included in the rent:
a.) Water: 100% of outlays by the landlord for water and sewer charges, plus 5% for billing responsibilities, less whatever the tenant has a right to claim as an offset for water used in serving purposes in which the landlord has a vested interest, and over which the landlord has the last say, such as irrigation of grounds controlled by the owner, or pressure washing the exterior of the dwelling, or any other purpose controlled by the owner.
b.) Gas: i) 100% of outlays on charges for combustible gas used to heat water or cook, plus 5% for bill management, separate from gas needed to heat the building in winter,
ii) two thirds of outlays on heating the building, as separated out either by metering or by seasonal comparison taken from prior usage records.
c.) Garbage and recycling: 100% of outlays on charges for provision of service, plus 5% for bill management.
d.) Electricity: 100% of outlays on charges for electricity,
plus 5% for bill management, less any use of electricity under the control of the landlord.
e.) Yard waste: i) if the landlord controls what can and what cannot be done with the grounds, and the tenant has no access, 0%.
ii) if the landlord controls what can and cannot be done with the grounds, but the residential right of access is controlled by the tenant, 60%.
iii) if the tenant controls both what can and what cannot be done with the grounds, (understood as benign to the owner’s equity interests in said grounds), 90%.
f.) Communicational Services: 100% of outlays on monthly charges for such services, plus 5% for bill management.
g.) Miscellaneous Facility Maintenance Charges: 100% of average monthly outlay for charges incurred, plus 5% for bill management.

4.) Outlays on Property Taxes:
50% of outlays on Property taxes.

5.) Outlays on Interest:
0%. Why zero percent? First, there’s the simple reason that many owners routinely refinance rental properties they own to fund a huge variety of things that are purely lifestyle indulgences, having absolutely nothing to do with either the rental contract or the value of the property itself, making a fair calculation impossible. Second, for society to be a healthy collaborative entity, the process of becoming wealthy must be funded out of the monetary excess that individuals have managed to set aside as savings, not through extracting that money out of the hides of others through willful exploitation of their need to live somewhere other than out in the open. This cautionary rule pertains most particularly to the paying of interest on borrowed funds. For the preceding reasons, the consideration of interest cannot be rolled into any meaningful calculation of socially reconcilable rent. If people could just borrow money to make a certain net return by investing that money in some instrument or other, and get someone else to pay the interest and fees, one third of us would be millionaires, neither having to work or save, and the other two thirds would be perennially broke and desperate – precisely the reason something close to this is seen in many countries around the world, even those that are resource rich.

6.) Outlays on Home Insurance:
0% on insurance outlays, because the thing being insured is the owner’s equity, and the sole party protected is the owner alone.

7.) Reimbursement to the tenant for Leasehold Improvements appropriated by Landlord when the tenant leaves:
0% on leasehold improvement reimbursement outlays because this form of expense is considered an investment in durable equity.

Again, these are not hard assessments to make. They involve the simplest of accounting principles. A decent bookkeeper can do this sort of separating into categories in his/her sleep (and that’s no joke: they literally do dream about doing this kind of stuff).

Caveat: The inclusion of financial information used in this calculation has to be connectable to the rental contract, itself, for which a socially reconcilable ROI is being sought. The initial understandings in a rental contract prevail – a fixed monthly amount expected for as long as the contract endures, in return for a fixed quotient of accommodation appurtenances.
As a consequence, outlays made on any kind of durable upgrade to the rented domicile, executed within the time frame of the prevailing rental contract, cannot be used to justify any form of rent increase until after the contract expires. If we are to be serious about improving levels of social equity in America, we can’t simply shrug it off when an individual from a generally poorer class is being unwillingly obliged to help pay for an equity upgrade on the property he rents so that a person in a generally richer class can advance his wealth advantage.
Also, expenses on upgrades to parts of the property discrete from the portion occupied by the tenant cannot be included in the calculation of Socially Reconcilable ROI until the understandings under the prevailing contract expire.
Does this mean that upgrades to rental properties, beyond maintenance, should never occur while tenants are in the domicile concerned? As far as I see, if the tenant is content with the dwelling just as it is, it should not be done. Such work should be relegated to the interregnum between rental contracts. The execution of such work claws back the very value the tenant has paid for in his rent, and the temptation to raise the rent to offset the cost of work done – even to the point of pushing out the tenant who cannot afford such increase – is more than many landlords can bear.
Nevertheless, if the tenant is on board with an upgrade and is willing to lose occupancy value while the work is being done because it will make living there a nicer experience in the future, no harm is done as long as such outlays devoted to that upgrade are not factored into the prevailing assessment of a socially reconcilable ROI after the prevailing lease agreement expires, and then, only as a depreciation allowance.
With the components of expense pertaining to delivery of service segregated from the overall outlay, and the balance of expenditures divided into what went into protecting and enhancing equity value, on the one hand, and the owner’s personal expenses, on the other, the basic data needed for assessing the Socially Reconcilable ROI on the rental is in hand.

CALCULATING THE SOCIALLY RECONCILABLE ROI:
The phrase, “adequate return on investment” on a rental property, over the full tenure of its ownership, should be construed to be a net profit from both renting and the ultimate divestiture of the property over the sum of all outlays in money, time and attention, that comes close to equaling a basket of the following discreet types of financial reward:

1.) An average annual return not to exceed twice the average annual rate of inflation over the course of ownership, on each major outlay invested in constituent components of the overall durable equity of the property, from the date each was made to the present, beginning with the initial full purchase cost of the property.
2.) A management reward not greater than 1/6 of the sum cost of all materials, labor charges and service contracts incurred serving the renter/occupant’s interests in the course of owning and maintaining the rental property in a stable, code-compliant condition, distinct from those portions of costs deemed to have served the owner’s interests, exclusively, as laid out in the above itemized guidelines on maintenance and utility outlays.
3.) The sum of dividends on the average invested each year on that share of costs pertaining to preserving the owner’s interests, exclusively, computed at a rate no greater than twice the average annual rate of inflation over the course of ownership (not to include any mortgage interest).
4.) Either 12% on outside accounting services engaged to maintain financial records, prepare required reports and pay taxes pertaining to the rental property, OR a flat reimbursement of eight times the federal minimum wage per year of ownership, if such work is done by the owner him- or herself, but not both.
5.) An allowance of 25 times the federal minimum wage for each time a new tenant had to be found and signed on.
6.) An annual due diligence and business relations reward, in dollars, of eight times federal minimum wage, plus two hour’s worth of federal minimum wage for each of the following:
a.) .0003 of the sum of all floor areas and roof areas in square feet,
b.) .001 of the square footage of yard space over which the renter has the rented right of exclusive use.
This calculation provides a ceiling figure that reconciles wealth accrual from a rental with what the rest of society must go through to be able to survive.
Why go into such detail? Because, for social sustainability to be durable and provable, transparency and justifiability in business dealings is of paramount importance. The very essence of interpersonal trust in business is open books, justifiable numbers and truthful entries. The enduring presence of nefarious self-interest in society will forever look for advantage that suits its purposes in the murky realms of factual obfuscation.
If you’re getting a monthly stream of revenue in the form of rent from a property or two, and you’d like your property to be on the ERA roster, using the services of a reputable accountant to do the necessary calculations should not be too much of a burden.
Of course, the expense information submitted to the registrar would have to be vetted for accuracy and veracity and, if found not to be compliant with reporting guidelines, adjusted. It’s the same kind of challenge that government examiners face every day when tasked to review claims for reimbursement by contractors. They have to ensure that any payment made reflects a wise, fair and frugal use of the public’s money in the establishment of infrastructure and the provision of services.
As I have pointed out, when it comes to protecting the overall long-term wellbeing of individuals who, together, constitute what we broadly refer to as the American public, we have to go beyond husbanding government-held funds: an even greater share of the public’s money exists in private holding. It is that share that this initiative seeks to protect against profligate claims by landlords, so that, in the decades ahead, government will have to shell out less in social support to the elderly and the needy who were trapped all their lives in renting, and slowly bled white. It is just as important to the long-term interests of society to invest public funds in protecting the public’s privately held money as it is to invest in protecting the public’s publicly held money. Both types of money need to be used in a wise, fair and frugal manner, and that demands exigent, computer-assisted oversight to ensure that information submitted to the system is accurate.
Fortunately, there’s no shortage of actuarial expertise in America. We live, breath and eat money. We dream about money. We concoct countless ways to exploit even the smallest margins of profit to build the biggest private fortunes ever seen. We’re so obsessed with money that many people seem to have bank notes for brain cells. Within the bounds of our nation, where the money goes is something paid sleuths track with indefatigable zeal. There’s no shortage of hawkeyed bean counters for whom a loaded claims submission is as plain as the smell of coffee in the morning.

Once the owner’s SRROI has been calculated, the expense history can then be applied against the expectable net capital gain to find out how much rent would have to be added to the pie for the owner to achieve the SRROI and divided into average monthly increments. Even then, the process is not finished. That’s only a default figure for Socially Reconcilable Rent (SRR). If the rental arrangement includes the renter having to provide ongoing maintenance and management services, an adjusted reckoning is needed.
Having been a tenant long in that position, I feel qualified to make the following suggestions:

OFFSETS TO THE DEFAULT SOCIALLY RECONCILABLE RENT
1.) Offsets for Grounds Maintenance:
If the landlord cedes both access and the ongoing grounds duties to the tenant’s authority, but reserves the right to decide what the layout and condition of the grounds and plantings upon said grounds shall be, the tenant and landlord must, for the purposes of this section, be considered to be conjoined, by default, in a joint custodial contract to accomplish the planning, oversight and ongoing discharge of such work, though not in the same manner, or to the same degree.
The landlord’s less frequent need to be engaged in a planning and oversight capacity, relative to the recurring engagement of the tenant, shall be considered to be 10% of the total dedication of focused attention devoted to the discerning oversight required in the maintaining of said grounds. The tenant’s portion shall be considered to be 90%, owing to the fact that the tenant is nearly always at the property whereas the landlord is rarely there.
The benefits to be gained from the maintenance of grounds shall be considered to be 50% the tenant’s, in the form of experiential rewards gained through living on the property, and 50% the landlord’s in the form of intrinsic, long-term wealth benefits, to be realized at the time of divestiture.
In terms of gross output of concentration, exertion and self-discipline, the differential between oversight and the actual execution of the carefully directed physical work that arises out of such oversight shall be construed to be 5% as compared to 95%, taken as a moving average, over time.
In terms of time, energy and oversight, the tenant’s total investment share under this arrangement is, therefore, 90% of 5% plus 100% of 95%. The landlord’s share is 10% of 5%, with 0% of the actual execution. This renders an input differential of 99.75% by the tenant and .25% by the landlord – a ratio of 399:1.
Since both parties are considered to be deriving an equal measure of value from the work done under this arrangement, albeit in different forms, and since both are presumed to be equal in the eyes of the law, the landlord is therefore indebted to the tenant for the work delivered in the amount of 49.75% of the total cost of such work, the amount of which shall be calculated either as compensation for actual hours of work done by the tenant, at a rate no less than 1.5 times the prevailing minimum wage or, alternatively, subject to the following default process:
First, in the case of a free-standing house, the term “grounds” shall be limited to cover no more than 10,890 square feet, or a quarter of an acre (equal to a square 104 feet 4 inches on side) beyond the footprint of whatever built structure sits on the property, including outbuildings. Caring for anything beyond that area stretches what is understood by the term “resident” and cannot reasonably be subsumed into a residential rental contract with attached groundskeeping responsibilities. The care for such outlying grounds is more properly dealt with in a separate contract, subject to whatever work regulations prevail in the jurisdiction in which the property is situated.
Second, the term “groundskeeping” in this section shall not be construed to include anything beyond the safe reach of a person standing on the fourth step of a stepladder, generally understood as anything over 10 feet above the ground.
Third, such groundskeeping work is understood to be limited to the maintenance of existing, or annually recurring, elements; specifically not included is form of work that establishes any element that is new, or any element that replaces, upgrades, substantially repairs or enlarges, any existing element, inanimate or living.
Fourth, the work covered in this section is restricted to recurring functions of maintenance that can be scheduled in advance. The establishment of a rental agreement that obliges a tenant to perform such work does not absolve the landlord from an obligation to compensate the tenant for remedial action taken by the tenant in response to unforeseen events or conditions for which the tenant cannot be held responsible (such as a fallen tree, or flooding). No contingency for dealing with such case-by-case circumstances is included in this section of estimating of what an “adequate return on investment” should include. Rather, it is presumed that the final profit margin added to the sum of all itemized outlays, combined with protection of normal insurance, will be sufficient to cover the overall financial impact of such unforeseeable outlays.
Fifth, a fair rate to pay the tenant for the discharge of the aforementioned services is considered to be no less than 1.5 times the minimum wage enforced in the jurisdiction where the dwelling is situated.
Sixth, the work involved on a quarter of an acre of tended grounds is presumed to be able to be accomplished with an input of around 10 hours per week – or about 40 hours per month for every 1,000 square feet of yard. The preceding understandings translate into a default monthly rebate owed any tenant required to perform ongoing maintenance of grounds under the aegis of the landlord that is equal to 6 times the minimum wage for every 1000 square feet of yard, if the tenant is not paid for actual hours of work performed, as described seven paragraphs back, beginning with the phrase “Since both parties”.

2.) Offsets for Compromised Occupancy:
Inasmuch as the word “home” implies a dwelling on premises from which the master/mistress and lawful occupants have the right to exclude the potential presence, and/or material possessions, of any and all who are not expressly authorized to be on said premises, and inasmuch as that right prevails in the eyes of the law over the right of an owner to enter said dwelling, at will, for any reason other than having to respond to a situation of compelling gravity or urgency that transcends such right of exclusion, the following is fact: any rental situation that includes permission for the landlord to penetrate, at will, the boundary of the property being rented, or to impinge in any particular way upon said tenancy, not considered both legal and routine, must be considered inferior to a contract not similarly encumbered.
Accordingly, any rental arrangement where this form of inferior tenancy exists must be seen to be of lesser value than if the premises were rented out free of such accommodation to the landlord by the tenant.
Further, if that circumstance exists, offset provisions calculated in the following manner must apply against the default Socially Reconcilable Rent:

Step One: the extent of the premises being rented must be separated into discreet areas of use, as follows:
*within the main structure: primary living space, secondary varied-use space and tertiary work/storage/garage space;
*within ancillary structures: primary living space (with complete bathroom facilities), secondary varied-use space (with toilet), tertiary work/storage/garage space in a separate ancillary structure;
*yard space.

Step Two: the relative utility value/per square foot for each type of area shall be applied to the square footage of each area concerned to derive the relative value between spaces comprising the property being rented.
If the unit value per square foot of primary living space within the main structure is x, the unit value of other areas of use shall be as follows:
*areas within the main structure: secondary varied-use space shall be worth 60% of x, and tertiary work/storage/garage space shall be worth 20% of x;
*areas within ancillary structures: primary living space shall be worth 80% of x, secondary office/studio/recreation space shall be worth 50% of x, and tertiary work/storage/garage space shall be worth 15% of x.

Step Three: when the relative utility value of each type of space within the property is multiplied by its square footage, the overall price ratio between spaces will result. This will permit the calculation of the exact dollar amount being paid in rent for each type of space (from the point of view put forward here).
Combining the results of the three steps above: whatever portion of any given type of space the landlord has reserved for his/her use shall apply against the full cost of that space for rebate.
In addition, whatever space the landlord needs to pass through to gain access to the space reserved for his/her exclusive use shall also be eligible for a 20% rebate, in accordance with the degree to which the potential at-will presence of the landlord compromises the tenant’s sense of rented possession of such space.

Once any offsets that pertain have been applied against the sum of outlays enumerated and defined above, the net outlay on any given property will result. Final determination of a “reasonable return on investment” rests with what class of rental service the landlord provides to the tenant.

Structure Maintenance and resulting Service Classification:
With regard to those functions required to preserve the good appearance and working condition of structural aspects of the dwelling, ancillary structures, pathways, drainage systems, street frontages, et al, if the landlord depends upon the continuing vigilance over, and/or discharge of, such work by the tenant to any degree, the landlord shall be considered to be the recipient of an ongoing service by tenant, for which an offset is forthcoming. Such services shall include, though not be limited to, the following:
Exterior:
1.) the proper gathering and disposal of leaf-fall,
2.) cleaning of roof gutters,
3.) sweeping of pathways and exterior hallways,
4.) maintenance of driveways and parking,
5.) exterior window surface cleaning,
6.) deck maintenance,
7.) street frontage cleaning,
8.) security system and exterior lighting maintenance,
9.) exterior surface cleaning and/or repair,
10.) roof leak repair,
11.) gate locking, hardware and structural maintenance.

Interior:
1.) heating system duct cleaning, air filter exchange and furnace motor lubrication,
2.) plumbing, toilet and wastewater system maintenance (faucet washers, toilet seals, shower heads, aerators, etc),
3.) door and window hardware and locking maintenance and/or repair,
4.) lighting maintenance and repair,
5.) maintenance of landlord’s cooking appliances (stove elements, reflector plates, lighting etc),
6.) maintenance and repair of landlord’s washer and dryer,
7.) groundwater intrusion and flooding response,
8.) mould abatement,
9.) painted surface maintenance,
10.) periodic carpet cleaning,
11.) invasive animal control.

The EARN! system would recognize that rental contracts range from those in which the landlord discharges all of the above to those in which the tenant discharges all of the above. Accordingly, it would be necessary to arrange rentals into service classes. Thus, if a rental agreement enjoins the services of the tenant in all, or the greater part, of the functions listed above, it would be considered to be a rental of the third class. If said agreement enjoins the services of the tenant in the lesser part of the functions listed above, it would be considered a rental of the second class. If the landlord takes care of the overwhelming majority, to all, of the functions listed above, it would be considered a rental of the first class.
Furthermore, with respect to such classification, if a tenant disputes a landlord’s claim to first or second class rental service in a court of law, it would be past experience that determined what class the contract rental really belonged to, and if the class accorded by the court were lower than that originally sold to the tenant, or originally advertised, the tenant would be entitled to claim fair compensation from the landlord for failure to perform, subject to approval of, and enforcement by, the ERA board of review.
For the purposes of determining a “reasonable return on investment”, we must recognize that the higher the level of service a tenant receives from a landlord, the more the tenant’s time and energies are freed up for him/her to make the most of life’s opportunities for personal benefit. Since being thusly liberated is of no small consequence to the individual seeking upward mobility in life, it is necessary to accommodate for this by allowing a surcharge to be added to the default SSROI, depending on how much the landlord’s level of service frees up the tenant’s time and attention.
Thus, a “reasonable return on investment” consistent with broader public initiatives to derive social equity for a first class, full-service rental property, could be up to 100% over the default SRROI. For a second class, partial-service rental, the limit could be up to 40% over default. For a third class, hands-off-the-wheel rental, no surcharge would be allowed.


STEP 6
Since the financial futures of so many younger adults, degreed or not, is currently a matter of great national urgency, Congress should require states to make annual reports for submission to HUD that show the ratio between the average per capita income of state residents who rent and the average rent they pay, along with the ratio between their after-rent disposable income and the income tax they have to pay, versus the ratio between the after-taxes-and-interest income of home owners and the income taxes they have to pay. These are important figures that need to be reflected on, because they have a bearing on the general vigor of the demand side of the economy.

STEP 7
Pass a law that makes it illegal for states to have constitutional bans, prohibiting states and cities from responding to rent gouging by instituting rent control (currently the situation in Washington state, for one).

For now, that concludes what I think the nation’s congress can do; there’s more, no doubt, but we have a move in the works and time is short.
After 44 years of renting, I'm convinced that there is no known way to escape financial brutalization by meekly surrendering to conventional renting practices in this real estate climate. We, the financial underclass, have to mount some constructive push-back if we don’t want to be economically exploited. What other form of consumer paying that much every month is not encouraged to expect respect? At $20,000/year, I feel that my wife and I should be treated like top-flight customers.
Across the nation, but particularly in this city - Seattle - the time has come for prevailing conventions around rent to be discarded so that more progressive ideas can come to the fore and be implemented. To do nothing is to continue contributing to the perverse idea that it is fitting for the poor to live on their knees so that those with greater access to capital and legal influence might live ever better, floating on air.
If this is not slow-moving class strangulation on a half-shell, then what, for God's sake, is it? The only reason the moral challenge it deserves from society has been so tepid is because the outmoded assumptions it thrives on still enjoy widespread acceptance from both winner and loser alike.

If there is change up ahead, however, it will not come soon enough for us. Our boxes are being packed and our affairs settled.
There are many others in this city who face the same life challenge. My advice to them is this: don’t wait too long. If insufficient progress is made on lowering rents, relative to income, vote with your feet and get out, while you can. America is full of opportunity where the cost of housing is far more affordable, relative to income, and personal wealth can be built with the passage of time. You just have to think outside the box of established memes and preconceived ideas and be prepared to act, like a modern-day Argonaut escaping the entrancing, but dangerous, call of the Sirens.

Let's not wait for inertia to decide for us. Equitably Adjusted Rents Now!