Rental Market

First counsellor of the government Mike Mathias explains us, on the pages of RTL, that there is little more to be done by the government in order to “tame” the rental market in Luxembourg. And he does so by using the traditional neoliberal dogmatic approach.

“The rent ceiling is not something that is imposed on the owner and the tenant. The bail is first of all something that is freely negotiated between the owner and the tenant and a signature is put under it if they have agreed on a certain price. And the price is of course dependent on supply and demand on the rental market. If afterwards the tenant finds that the rent is definitely too high, he can go to the commission des loyers.” (machine translated)

There are three main arguments here: both parties in a rent agreement are free to negotiate, the rent is a production of the markets, and tenants are free to appeal to the commission de loyers to get their rent revised.

The full fallacy rests on two assumptions: that there is freedom (to negotiate and appeal), and that there is a free-willing entity named “the market”. Plus, the argument itself contains the impossible to resolve contradiction of claiming that the tenant first freely negotiates and then considers he is paying too much – would the tenant be free to negotiate, and they would, at least, consider to have paid the fair price.

If we pick up the concept proposed by Isaiah Berlin, himself a liberal who advised both UK and USA neoliberal governments, we have it that he divides freedom (or liberty) into two “variants”: negative (or freedom from) and positive (or freedom to) freedoms. As an example, I enjoy of negative freedom when no law prevents from buying a Ferrari per month, but I lack the positive freedom of being able to do it. Needless to point out that negative freedom is associated to neoliberalism and positive freedom to scientific socialism.

So, when the honourable public servant claims that both wannabe tenant and owner freely negotiate the contract, he is proposing the negative variant of freedom. Nothing, objectively, prevents them from negotiating which ever contract they want, none the less, and being that negotiating requires the capability to withdraw from negotiations, the tenant is bound by their unsurpassable need to provide for a roof over their head.

It is true that the owner is also constrained by the need of searching for income to cover for his investment. But those two needs lay in very different levels: if the need for a roof is inherent to the human condition conducting and investment is a choice. Placing both needs at one same level is denying the tissue of society itself – something neoliberalism has no difficulties in doing, one must say.

But the public servant goes on to claim that once the tenant has freely negotiated and signed the rental contract, he is always free to go and appeal to the commission de loyers. Once again, the two freedoms collide and the system whilst providing the negative does not ensure the positive. Once and if the tenant manages to force a reduction in rent the owner will, as recent events have clearly shown, hand over the notice for rental termination.

So, the freedom we are “sold” is an artificial one with near to no real application.

But let us look onto the second assumption, the one that tells us about that magical, or even divine, entity that defines prices: The Market. It so happens that the market does not define any price. It is not like if those working with/under a specific market wake up in the morning to discover the price some neoliberal fairy ascribed to any given product. No, not at all.

What happens is that humans set those prices. And how do they set them? Given the speculative nature of neoliberal capitalism those selling on a market will try to get as much money for a good, or stock of goods, as they possibly can. With this as main goal they will scout buyers trying to discover up to what point prices can be risen. There is no automatic mythological equilibrium point around the value of usage of a good. There is a speculative desire to increase price as much as possible, not letting it drop beneath the value of production to ensure a profit, completely detaching the price of the good from either is production costs or usage value.

John Rawls explains us that only under the veil of ignorance we can make a truthful equalitarian decision. Only when we don’t know how reality elsewhere develops, we can engage into negotiating the price of a good that will know only tow boundaries: value of production, for the owner, and value of usage, for the tenant. This is not, obviously, the case on a market that has been commodified into looking at the abstraction of how many square meters, balcony or not, garage or not. To this we add the countless number of indexes and indicators: increase of work posts, amount of construction credits approved, new homes built, increase of salaries, etc, etc…

The way in which rental prices have increased in Luxembourg from 2010 to 2020, in some cases nearly 10 times as much as inflation, are a clear example that speculation is the only rule guiding in the rental market.

What in fact Mr Mike Mathias is telling us is: we know there are issues, but we cannot but protect the owners as they have capital and tenants don’t. One euro, one vote…