Building Site Rent. Rent in Mining. Price of Land
If the basis of differential rent is a surplus profit over the average profit, made on marginal land, then the higher profits that can be made from the use of land for mining, industry or residential development create a basis for differential rent.
“This rent is distinguished, in the first place, by the preponderant influence exerted here by location upon differential rent (very significant, e.g., in vineyards and building sites in large cities); secondly, by the palpable and complete passiveness of the owner, whose sole activity consists (especially in mines) in exploiting the progress of social development, toward which he contributes nothing and for which he risks nothing, unlike the industrial capitalist; and finally by the prevalence of monopoly prices in many cases, particularly through the most shameless exploitation of poverty (for poverty is more lucrative for house-rent than the mines of Potosi ever were for Spain), and the monstrous power wielded by landed property, when united hand in hand with industrial capital, enables it to be used against labourers engaged in their wage struggle as a means of practically expelling them from the earth as a dwelling-place.” (p 773)
As social productivity rises, the potential for higher profits rises. But, in addition, this higher productivity results from and creates a greater accumulation of capital. The capitalist accumulates fixed capital, which makes this higher productivity possible, but as seen in relation to agriculture, at the end of a lease, this capital, incorporated in the land, is appropriated by the landlord, and forms the basis of the new higher rent.
The landlord has to do nothing here other than benefit from this social progress.
“Not only the population increase and with it the growing demand for shelter, but also the development of fixed capital, which is either incorporated in land, or takes root in it and is based upon it, such as all industrial buildings, railways, warehouses, factory buildings, docks, etc., necessarily increase the building rent.” (p 774)
In relation to house rent, it comprises two elements according to Marx. Firstly, it comprises actual rent for the land on which the house sits. In Marx's time, it was common for this land to remain in the hands of the landlord, and be rented by the capitalist builder/developer. This is separate from the interest on the money-capital advanced by the builder in the form of the house.
In other words, the builder provides the use value of the house to the tenant. The house for the builder is capital, which has a money value. As was seen earlier, when capital in the shape of commodities is loaned out, it is the same as if money-capital of the same value is loaned out. The rent then depends on this capital value, plus the current rate of interest.
In addition, the capitalist will seek to recover, in the house rent, the rent they have to pay for the land, plus an amount for wear and tear of the house. The same applies to factories, shops and offices.
The land here has two separate aspects. Firstly, it is used in agriculture, mining etc. as a means of production and reproduction. Secondly, in all uses, it is a fundamental requirement for all activity – we must have land to stand on, to live on, to put factories, shops and offices on. The landowner requires rent, whichever of these functions it serves for the tenant. Marx deals with this further in Theories of Surplus Value, Part II, in analysing the confusion in this regard by Ricardo.
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