Rack-rent
Encyclopedia
Rack-rent denotes two different concepts:
  1. an excessive or extortionate rent
    Renting
    Renting is an agreement where a payment is made for the temporary use of a good, service or property owned by another. A gross lease is when the tenant pays a flat rental amount and the landlord pays for all property charges regularly incurred by the ownership from landowners...

    , or
  2. the full rent of a property
    Property
    Property is any physical or intangible entity that is owned by a person or jointly by a group of people or a legal entity like a corporation...

    , including both land and improvements if it were subject to an immediate open-market rental review


The second definition is equivalent to the economic rent
Economic rent
Economic rent is typically defined by economists as payment for goods and services beyond the amount needed to bring the required factors of production into a production process and sustain supply. A recipient of economic rent is a rentier....

 of the land plus interest
Interest
Interest is a fee paid by a borrower of assets to the owner as a form of compensation for the use of the assets. It is most commonly the price paid for the use of borrowed money, or money earned by deposited funds....

 on capital
Capital (economics)
In economics, capital, capital goods, or real capital refers to already-produced durable goods used in production of goods or services. The capital goods are not significantly consumed, though they may depreciate in the production process...

 improvements plus depreciation
Depreciation
Depreciation refers to two very different but related concepts:# the decrease in value of assets , and# the allocation of the cost of assets to periods in which the assets are used ....

 and maintenance
Maintenance, Repair and Operations
Maintenance, repair, and operations or maintenance, repair, and overhaul involves fixing any sort of mechanical or electrical device should it become out of order or broken...

 -- the normal market rent of a property—and is not inherently excessive or extortionate. Also, this may be different from the rent actually being received.

Historically, however, rack-rent has often been a term of protest used to denote an unjustly excessive rent (the word "rack" evoking the medieval torture device), usually one paid by a tenant farmer
Tenant farmer
A tenant farmer is one who resides on and farms land owned by a landlord. Tenant farming is an agricultural production system in which landowners contribute their land and often a measure of operating capital and management; while tenant farmers contribute their labor along with at times varying...

. The two conceptions of rack-rent both apply when excessive, extortionate rent is obtained by threat of eviction resulting in uncompensated dispossession of improvements the tenant himself has made. I.e., by charging rack-rent, the landowner unjustly uses his power over the land to effectively confiscate wages, in addition to merely charging the tenant interest and depreciation on the capital improvements which the landlord himself has made to the land.

When there is no accessible rent-free land, any improvements in the condition of society, be they in the form of civilizational progress or local improvement, are recaptured in the form of higher land values, and the leftover wages after rent is paid will tend towards subsistence, as described by David Ricardo
David Ricardo
David Ricardo was an English political economist, often credited with systematising economics, and was one of the most influential of the classical economists, along with Thomas Malthus, Adam Smith, and John Stuart Mill. He was also a member of Parliament, businessman, financier and speculator,...

's Law of Rent
Law of Rent
The law of rent was formulated by David Ricardo around 1809, and this is the origin of the term Ricardian rent. Ricardo's formulation of the law was the first clear exposition of the source and magnitude of land rents, and is among the most important and firmly established principles of economics. ...

. Such rents can be described as rack-rent, and this sense of the term is economically meaningful, and distinct from other forms of rent.

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