Landlords 'must cut rents'

[costargh]

Landlords 'must cut rents'

Landlords are morally bound to reduce rents for struggling tenants after yesterday's drop in interest rates, according to tenants advocacy groups.

The Tenants Union of Victoria said landlords have used interest rate rises to justify rent increases for years and now had no excuse for not lowering them after yesterday's big cut.

"All landlord's with a mortgage who have received a reduction in their mortgage should pass that on immediately to their tenants," policy worker Toby Archer said. "They do have a moral obligation to pass it on if their costs have been reduced."

Mr Archer said landlords were already receiving historically high rents, while tenants were suffering through the worst rental squeeze since the post-war period.

"People are really struggling out there and landlords need to cut their tenants a break," he said. "If a landlord's received a break of $100 a month then they should be passing that on to their tenants. Unfortunately I think there will be a lot that don't."

The union's call echoed the Queensland Council of Social Service (QCOSS) comments today that tenants badly needed some relief from high rents that were making life impossible for some.

"Many pay up to 50 per cent or more of their take-home income on rent," QCOSS president Karyn Walsh said. "Reducing their rents will put more food on the table for disadvantaged families in Queensland.

"It will also help pay for other essentials such as medical, clothing, transport, education and life's necessities."

She said many owners of investment properties with average loans would see their repayments reduced by $200 or more each month.

http://www.theage.com.au/national/landlords-must-cut-rents-20081008-4wjw.html

I find this whole article LOL worthy. I thought I'd put it in here but also hope that it serves for discussion. Should landlords be "moral bound" to reduce rents?

I personally think it's the biggest load of garbage I've ever read. The return on investment for landlords is ridiculously low as it is (around 4%) compared to other investments (term deposit 6.5%ish?), shares in excess of 12% (until recently).
I don't see why landlords are morally bound to provide housing to consumers at discounted rates just because they have a moral obligation to. Landlords invest in property in an attempt to make a return on their investment. If demand is high for rental properties  and supply is low (as is the case as the moment) then the equilibrium price for rental properties should be pushed up until demand meets supply.
There is no moral obligation to reduce your own profit in an attempt to subsidise the living of others. If people are not happy with the rent they are paying, they will try to find alternative accommodation which better suits their financial needs (although their chances are slim in the current market) or they will go with a substitute product (purchasing a house).

Just because the cost of borrowing has decreased for businesses doesn't mean that they are morally obligated to reduce their prices. This article is total rubbish.

[Collin Li]

There's no such thing as a free house. Trying to get it, through public-private partnerships that guaranteed the risky loans that the mortgage companies were giving out, actually contributed to the mess of subprime mortgages in the first place.

I think it's important to ask: if the cost of borrowing (is a cost for the poor and the rich, whether it be a "true" cost or an opportunity cost), doesn't outweigh the benefits of a rent, then why should such a transaction be incentivised? Who else will benefit? I certainly don't benefit. The market process figures out this cost-benefit principle the best.

[cobby]

This article is simply based on sympathy,
Although it emphasises the line " the rich only get richer"
But for discussion sake,

"Many pay up to 50 per cent or more of their take-home income on rent," QCOSS president Karyn Walsh said. "Reducing their rents will put more food on the table for disadvantaged families in Queensland."

Thats means those households are living in poverty?
Isnt  it that you are classified as living in poverty when you pay more than 1/3 your income to paying off a debt? (or was it 2/3???)
Confused right about now.......

[costargh]

I know that there are three types of poverty; personal, absolute and comparative poverty.

I haven't heard of the 1/2 or 2/3 of income rule.

[cobby]

I know that there are three types of poverty; personal, absolute and comparative poverty.

I haven't heard of the 1/2 or 2/3 of income rule.

I only know of it because the lecturer from tsfx told us that, just forgot the amount

Also, i was watching the news earlier and it said that despite the economic dilemma in amercia, Indonesia seems pretty secure, as opposed to India and Japan, despite foreign investors withdrawing their money from the Indonesian economy, how does that work out?

[costargh]

unreliant on foriegn markets?
low exposure to foreign trading partners who are toughing it out?