Modern-Day Feudal System in the Making

EghtesadOnline: Uncontrolled instabilities in the economy, particularly in the rental housing market, are accelerating Iran’s descent into a new form of feudalism, Nasser Zakeri, an economic analyst, says in a write-up for the Persian daily Shargh. A translation of the text follows:

News ID: ۷۸۷۶۶۶

22 January 2022

Official statistics show 26.6% of Iranian households lived in rented homes in the fiscal 2011-12. The figure increased to 30.7% in the fiscal 2016-17 and those in charge recently put the percentage of those living in rented places at 40%.

These figures do not indicate the financial status of households or the rate of homeownership because despite having their own residential property, a small number of people prefer to rent a place in another neighborhood for economic or social reasons. The method of calculating the percentage of renters and its accuracy, announced by former deputy minister of roads and urban development, is questionable. However, these figures reveal the extent of the housing problem: A large number of households are deprived of having a suitable house and this group is getting bigger by the day; the growth rate in the number of tenants is also increasing.

Nothing good has happened over the past few decades to make it easier for families to have a secure housing; in fact, all developments have made it increasingly difficult for people to get access to housing.

Expert studies will give us the actual number of households without long-term accommodation, which figures will be more alarming than those pertaining to the fiscal 2016-17. The absence of accurate and reliable information on the number of renters indicates the insignificance of this issue for policymakers.

The Right to Living

Comparing the share of rent in Iran with other countries, especially developed ones, cannot be informative since members of each society have different perspectives toward housing.

For example, in an economically stable country, some citizens may not be keen on purchasing a home, as they prefer to spend their money on other things.

But in Iran, housing is considered the top fundamental need; even if a person does not need housing, they would invest savings in real-estate.

Here, owning a residential property is like having the right to living and having an identity. Therefore, housing cannot be considered a choice.

With such a perspective, a large number of people who don’t own a place gradually come to believe that the existing social and economic order does not provide them with the right to life.

Social Inequality

Given the present state of the economy and the reign of double-digit inflation, social inequality is increasing by the day. Inflation makes the low-income individuals and the middle class poorer.

The government is inadvertently fanning the flames of poverty by increasing the money supply and taxing the middle class.

Social inequality manifests itself best when it comes to homeownership. The Iranian society is now divided into two groups: the group owning the place they live in and the group that either has no property at all or if they do, it does not meet their needs.

Regrettably, economic and social developments of the past few decades have led to a worrying enlargement of the second group. There is no hope that the future direction of the economy would improve the situation of the second group.

A New Version of Feudal System

In other words, if the government fails to intervene, the situation will get worse and we’ll see a new feudal system.

Seventy years ago, landlords owned agricultural lands and farmers had to give them a significant portion of their annual income to secure the permission to work and provide for their families.

The new feudal system is based on the ownership of urban lands. The renters have to give a significant part of their income to the new masters to secure the right to live in residential units.

The increase in the number of tenants should raise the alarm for the economy, but the state officials seem reluctant to pay attention.

Short-term strategies employed by governments can only slow the pace of austerity; even this perception is questionable because theoretical studies show many of these policies can backfire and worsen the situation.

A telling example of such counter-productive policies is the former government’s failure to regulate the market by setting a ceiling on rent increases.

To save the country from falling into a modern feudal system and pervasive underdevelopment, the government needs to avoid employing tools such as raising the ceiling on home loans or launching mass housing projects in the suburbs. Rather, it needs to reevaluate the state of real-estate market.

As long as trade of urban residential properties is regarded as ‘investment’, wealthy people will be attracted to the real-estate market instead of the stock exchange market or manufacturing sector.

Secondly, the pits of poverty will grow deeper with the gradual increase in the prices of urban properties; the rise in rents does not allow people to save even to buy cheap homes built by the government.