Using one example, discuss to what extent the opening and the closing of rent gaps is a social, political, and market process.
Q10: Blackstone’s programme of post-financial-crisis housing development, epitomised as ‘buy it, fix it, sell it’, represents an approach that constitutes a rent-gap strategy. Using one example, discuss to what extent the opening and the closing of rent gaps is a social, political, and market process.
-reference to rent gap graph and land value taxes
- -production (opening and closing) of a rent gap: Cyclical process (since land values are not fixed; process of disinvestment and reinvestment)
- Immediately after construction, capitalized ground rent is usually high
- Property price (made up of ground rent and built asset value)
- Property may depreciate in value over time (so u cant capitalise as much as the ground rent) and so (actual) ground rent which can be capitalized upon decreases accordingly
- Investment in repair and maintenance becomes financially unsound (since actual ground rent too low)
- Higher income tenants move away (disinvested area), replaced by lower income tenants. Displacement.
- Landlords undermaintain properties, collecting as much rent as possible while investing as little as they can – ‘milking’ properties (Slater, 2017)
-Investment when there is a big enough gap b/n the Current ground rent which can be capitalized upon (in the land’s present use) vs. potential ground rent (land put to a higher use)
Once the gap b/n capitalised g rent and potential ground rent is big enough, the rent gap can be closed since investment has been de-risked to the extent it is worth investing
Present use vs. ‘Higher use’
Use value vs. Exchange value. If the exchange value of a better use is higher, it opens up the rent gap and gentrification (in this case it is investment in individual properties) can occur.
After development, the capitalised ground rent line goes back up to meet the potential ground rent line
-MUST refer to social, political and market processes
MAX: 1500 WORDS
DO NOT USE PLAGIARISM CHECKER
Full references not needed, can just put author name and year in brackets next to each referenced bit.
