Eh?

There is another, even more fundamental, reason why the present rental system is untenable. There is no justification in charging tenants to pay off historic debt when they have no financial interest in the value of the asset in the first place. They are tenants, they do not own the property. The historic debt should therefore lie with the owners of the housing assets, namely the government.

I\’m sorry, but I simply do not understand that argument.

Is he seriously saying that the rental of an item should not cover the capital cost of that item?

That if I rent a car that the car rental company should not be charging me some portion of the original cost of the car?

Seriously?

5 comments on “Eh?

  1. Is he seriously saying that the rental of an item should not cover the capital cost of that item?

    Of course it shouldn’t – it should be the market value of the services provided by that item. If you pay £50,000 list for a Lexus, and Avis pays £35,000 discounted, that doesn’t have any impact on the price I pay to rent it for a weekend.

    Yes, you’re stupid if you purchase a capital asset for a high enough price that its rental value doesn’t cover debt repayments on the money you borrowed to pay for it – but that has no bearing at all on the rental value itself.

  2. Of course it shouldn’t – it should be the market value of the services provided by that item.

    To a point: but if you don’t know what the rental market value is of something (e.g. renting a compressor in Eastern Russia), you start by fixing the price so it pays for itself in the maximum time acceptable to you. An awful lot of hire kit is priced on the time it takes to pay for itself, not the market rate. I am guessing that one is closely related to the other insofar as equipment is concerned.

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