Property as Rent

As fear of financial market turbulence reaches its most severe level since the lead up to the Great Recession in 2007, this article revisits the topic of real estate securitization while broaching a broader concern with the inadequacy of how property theory has reckoned with major changes in the post-war economy since the 1970s. To do so the article highlights a new form of securitization— of rental payments from single-family homes — that has been emerging in the United States since 2013. It discusses the new class of securities that such single family rental (SFR) payments support as one example of the economy’s ever shifting overreliance on debt-based forms of financial asset property more generally. The article situates real estate securitization in specific and financial asset property in general in relation to our reinvigorated debate in law about property as an in rem right to exclude versus a versus a bundle of social relations making democratic community possible. Arguing that neither side in the debate has been well equipped to account for financial asset property, the article makes a normative case against the renewed resort to securitization in the real estate market. Using SFR-backed securities as an example, it argues that we can better understand debt-based property derived from real estate value according to a long-standing conception in law and economics of property as a means of extracting economic rent from land. Neglected by recent theorists on all sides, this conception of property-as-rent dates to the origins of classical economic thought and remained highly influential for early institutional economists and their legal realist inheritors in the United States. Its distinguishing feature was an underlying idea of rent that concentrated attention on land control as a means of garnishing unearned revenue from production so as to inhibit rather than promote economic well being. As renewed debate in property theory has instead focused on other concerns, we have missed the key role that financial ownership claims on land’s scarcity value have continued to play in our actual economy, steadily re-directing income and investment from productive to speculative use since the 1970s. In pressing the case for the conception of property-as-rent, the article closes by drawing on a novel data set to disaggregate the relative share of land versus built structure values in the long-term composition of housing prices in the United States. By doing so, the article shows how contingent securitization is on extracting — and transforming into bondholder interest — rentierist scarcity premiums from land, which the data demonstrate to comprise much/most of the increasing value of residential real estate in the last half-century.