The profit demands of landlords in the Icelandic rental market is approximately ten times higher than among those who invest in the general stock market. Such a profit demand arises despite the fact that returns on the housing market are considerably higher than on the stock market. In recent years, the profits from rental housing in the form of rent payments has been between 6-7% of the value of housing, while the profits of investments in shares has been around 0.4 – 0.7% of their value. The risk of investing in residential real estate is not only much lower than investing in stocks, the value of real estate has also increased much more than stocks over the past 15 years.
Profit demands towards value-driven large corporations
There seems to be a general agreement among stock market investors that they do not demand more than 0.4 – 0.7% annual dividends from companies or investemnt funds. At least there has been no demand to increase the dividend amounts tenfold, despite the fact that the capital or finacial strength behind the value and dividends of shares are big corporations and the biggest finacial forces in the country. Corporations and investment funds that receive the investors’ funds put them directly into value creation, where they are required to attract more wealth. That wealth is then to draw from large production and service industries on a global scale, where again a large and powerful financial system is drawn upon or share within economies and markets is expanded.
Although the ability of such capital to pay dividends is many times greater than that of families on the rental market, no one thinks of increasing it in such a way. It can be argued that such increase in demands of annual divident would reduce the ability and health of the corporations to operate in the long term. It is therefore a completely legitimate point of view that a tenfold increase in dividend payments would lead to great losses for the companies and investment funds that would have to support such a demand. Although the vast majority of corporations and funds that receive investor’s funds use a large part of them to pay their managers higher salaries, which are often ten times higher than the wages of workers in the rental market. Yes, the salaries of managers of corporations and funds that receive capital from investors on the stock market are ten times higher than those of tenants who have to pay ten times higher dividends to the owners. Amazing business!
An immoral demand on families in the rental market
How can it be that investors in residential property for rent on the Icelandic rental market can put forward such unethical profit demands and yield requirements that are many times higher than among other investments, which at the same time contain much higher risk? There is probably a very simple answer to that. It is because they can and the lack of morality prevents any kind of empathy or reflection on their act. Perhaps, however, some are willing to argue for and justify such moral decline by reference to economic models or the law of the jungle.
But let’s keep in mind that in the rental market there are families, children, young people, displaced people, low-income people, immigrants, the disabled, the elderly, parents in despair, patients and refugees who have to support ten times higher return of those who invest in housing and that on wages ten times lower than those who receive investments in the stock market. It is simply a completely immoral act, which seems to have been given a toxic normalization by those who manage housing issues here.
But what about maintenance and capital costs?
It is common to hear landlords moaning about maintenance and finance costs when trying to find some justification for unethical behavior. Maintenance costs are primarily related to building costs and not market value, but in addition, the increase in value of residential property ensures funds to support increased maintenance, such as the renewal of plumbing, roofs and windows. Such maintenance may be carried out once or twice every 100 years. Similarly, maintenance related to the renewal of interiors, doors and flooring only takes place every few decades and only costs a fraction of the added valuepf the property during that time.
A landlord’s finance cost is a part of their personal finances, creditworthiness, property status and financial literacy. It is absolutely absurd that the most important interests of tenants should be subject to such factors. Apart from the fact that tenants are in no way involved in the landlord’s financial obligations, the landlord acquires constant asset increase and increase in value of the property. He should therefore see his merit in not unfairly demanding that his tenant meet the obligations he assumed during the investment.
Investors who take out loans to buy shares on the market hardly think of slamming the doors at the corporation directors and demanding that they pay off their loans? Hardly, since such a visit would be regarded as madness and absurd, which also applies to the same demands of landlords towards their tenants.
Culture of madness
This impudence, disdain and aggression of landlords in the Icelandic rental market is one of the most immoral things that Icelandic society has seen in recent times. Abuse of power, selfishness and arrogance unfortunately characterize many souls who see an opportunity to prey on families stuck in the rental market. Unfortunately, the Icelandic rental market brings out the worst in human behavior, and many good people lose their foothold and disappear into the culture of madness that prevails there. Unfortunately, they have the support and encouragement of various „reasonable“ individuals, both within the government and financial interest groups, who calm any doubts landlords might find about their own morality or justification for the abuse of power they show frequently.
There is absolutely no justification for rent to be based on market value of housing, let alone thinking that it should support a ten times higher return than an investment in shares and bonds. There is also no justification for the tenants to take on the landlord’s personal financial obligations or to pay for normal regular maintenance, which increases the value of the property and increases the landlord’s return. All talk of such things testifies to madness and absurdity.
Tenants should repel these imprudent attacks
We have been completely bcarried away. The disdain of arrogant speculators has become something of a universal standard and main tune in the Icelandic rental market. It would perhaps be fine if their subjects were stockfish or gravel mining and not displaced families in search of shelter and homes.
I would like to encourage all tenants to join the Tenants’ Association, over forty thousand homes are on the rental market and together we repel these plain and brazen attacks on our home sanctity.
Guðmundur Hrafn Arngrímsson
Chair of the Icelandic Tenants Union
