'Dogfight' looms as landlords start suing restaurants over unpaid rent

It's hard to know who is profiting more, but it's a side question.

Normally - the restaurants would declare bankruptcy, the landlords would follow suit, and due to the pervasive nature of this pandemic ... so would the banks who can't absorb that much loss. The dominos would come down and take the entire economy with it.

BUT

'Real Estate' is not a productive game!

This is one of the weirdest things about our economy - so much is based on rent-extraction, not productive investment.

This is why the central bank can take all the 'worthless investments' off of the bank's balance sheets and give them cash at face value and 'poof' the economy can move on.

2008 was not an implosion of productive assets - it's was a major accounting realignment ... which caused productive parts of the economy to suffer as a result of calamity. But at its core, just a big rebalancing of the balancesheet.

Put another way - what if all real-estate were socialized: it's all free, you just have use it, and everyone is 'allocated' some kind of limit or whatever by whatever rules. Those rules may not be perfectly fair but it could be done.

Then nobody has to pay rent. Then, when restaurants 'pause' operations, they don't go out of business.

Because we are not an agrarian society wherein any specific bit of land is really about its industrial value ... this could actually work. We do it in a fancy way today by having people speculate with huge mortgages, only to sell them later.

I'm only making a rhetorical point here, but if we are going to 'socialize the risky parts of the real-estate economy via central banks' because they need to be unfairly bailed out every 10 years, then there is no 'free market' in such things anyhow. The 'unfair socialization' is happening at the central bank.

In Canada, the average home price increased last year more than the average annual wage (before taxes!). This is insane and untenable. It means the real #1 driver of inequality is simply homeownership: the more you can leverage, the more you are leveraging over others. A $200K income becomes a means to buy a $2M home that increases in value as much as your income. While the flat owners and renters are left with no capital gains there.

This aspect of our economy might essentially be the most truly fragile because.

It is absolutely not a landlord's job to assume the business risks of their tenants. Definitely not.

If the restaurants declare bankruptcy, yes, then there is limited ability for them to get their rent, but otherwise, the restaurants 'owe'. It may be a good idea for renters to renegotiate and for smart landlords to take heed.

But in general - contracts need to be obligated. It doesn't matter that you view the 'landlord' as 'doing nothing'. Also, in most cases, remember that land has been commoditized, it's not like the 'King' owns everything - the land was purchased for some amount, has a value, it's being 'managed' like any other asset, and if there's competition in this industry (there is a lot), the surpluses are going to be thin, just as thin as any other industry.

While there are existential issues about the 'productivity' of real estate, they don't really matter at the most local level, because the most local 'landowner' is just playing in a competitive layer of business like anyone else.

So for now - it's best to honor contracts, re-negotiate, and follow the laws.

The government may want to intervene in a 'really really smart way' but I don't see how this is perfectly possible.