Friday, April 12, 2013

# 5 Rent based on Mortgages

If a building has been paid for, the tenets of that building should not be charged for a non existent mortgage. For example all building over thirty years old have had the mortgage paid off. The Building owner is taking all the extra income from that building and 1) living off it or 2) using it to as a down-payment to purchase more buildings.

What is bad about this is most of the time it's the least able to pay increased rents that suffer. In many cases Rental prices exceed the price of monthly mortgage payment if only the renter qualified for a loan. To add gasoline to the fire, banks don't lend to people unless they have a 'good' credit rating. Mostly based if you pay your bills on time each month.

This creates a third kind of inflation. Credit inflation. Where banks in essence get to print there own money in the form of the amount of credit they lend out. Taken together, this economic system lead to a amplitude cycle that demands booms and busts. With the wave length of time being determined by how productive we are as a society.

Let it be noted that conversely any building that does have a mortgage will have higher monthly rates. As it should being a modern building.

Note I'm not saying that true maintenance and upgrade costs can not be included in the monthly rent, only that mortgages that have been paid off, should automatically have the rent reduced by that amount.

Which is also the solution.

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