Raise the Rents
Originally published January 2022.
One of my greatest recurring nightmares and fears in involving myself into single-family real estate often comes down to one question: what happens when I have to evict someone from my property?
Of course I try and imagine a nasty tenant who has no regard for the property and is refusing to give me money while wasting it on ridiculous frivolity. But that’s often not the case — there’s too many mothers with children out there unable to pay the rent for a plethora of reasons. So, for now, I steer clear.
Dave Ramsey, on the other hand, has quite a few real estate holdings and tenants. And based on inflation he’s determined to raise the rents (his legal right to do so), and in so doing is pushing out his existing tenants for tenants that can pay the new prices.
The internet, of course, is going nuts.
Many have responded with shock and horror at Dave’s comments (and for the record, his comments without the full context). Let’s take a look at what Dave said and think through the ethics of his actions. First, here is the FULL video:
“If I raise my rent to market rate, that does not make me a bad Christian.”
Does it make you a bad Christian to raise rent, or in most business owner’s world, raise your prices? I think it depends. At the heart of this is why you are raising the prices. A good business owner realizes that his organization must cover expenses and a healthy organization has cash flow and profit that allow for growth of the organization, increased wealth for the owner (who in turn is likely to invest and give as a steward of what God has provided them), and investment back into the organization or properties that they have.
However, someone who has their sole goal of maximizing profit with little to no regard of their customers or clients enters into a grey zone. I think Jesus often looks at the heart to measure what his “good” or “bad.” See his words in Matthew 12:
33 “Either make the tree good and its fruit good, or make the tree bad and its fruit bad, for the tree is known by its fruit. 34 You brood of vipers! How can you speak good, when you are evil? For out of the abundance of the heart the mouth speaks. 35 The good person out of his good treasure brings forth good, and the evil person out of his evil treasure brings forth evil. 36 I tell you, on the day of judgment people will give account for every careless word they speak, 37 for by your words you will be justified, and by your words you will be condemned.”
When it comes to “raising prices,” I think this is a much easier sell when it comes to a business owner. If the quality of the product is strong and the service is excellent then people tend to be more concerned with the perceived value of what they are purchasing or putting their money into. [1]
The idea however that we must keep prices under-value in order to be a blessing to everyone is never going to work. I realize this may be the absolute crux of the matter, but I don’t see a better system where moral people are able to use their gifts of running profitable businesses to provide goods and services that benefits society as a whole.
There seems to be a growing desire and call for “fairness” as people decry the big, bad business owner. This is often done through an attempt at legislating equal outcomes. From curriculum out of C12:
Government’s efforts to legislate ‘equal outcomes or possessions’ isn’t what the Lord had (or has) in mind, nor does it represent responsible stewardship. Jesus said, “the poor you will always have with you” (Jn 12:8). His Word makes it clear that we each have differing gifts, opportunities and rewards before the Lord (see the parables of the Talents [Mt 25] and Minas [Lk 19] and 2Cor 10:5).
We’re also to give generously to Kingdom purposes, whatever our material blessings (contrast the Rich Fool [Lk 12] with the Poor Widow [Lk 21]). Along the way, we’re to share our Lord’s concern for ministering to the poor while remembering that it’s God who gives us the opportunity and ability to produce wealth for His purposes (Dt 8:18, Eph 2:10).
The eighth commandment, “Thou shall not steal,” presumes ownership, personal initiative, and accountability. We steward God’s resources and emulate Him as we work, tend to possessions, and serve others through business. The beneficial impact of voluntary commercial transactions between free people, where both parties benefit, is what sets moral free enterprise apart from ‘subsistence-oriented’ economic systems. Done with integrity, before God, such transactions promote each participant’s welfare and healthy interdependence. So, why are we so squeamish about requesting and justifying a fair price for our efforts? We’re taking the time for this ‘pep talk’ regarding creative freedom in pricing because we need to embrace pricing management as the vital and valuable leadership and management responsibility that it really is. Unless we sweep away subconscious hindrances, we’ll simply justify procrastination on this crucial topic!
When pricing and marketing, we need to “be as shrewd as snakes and as innocent as doves” (Mt 10:16). One without the other is unlikely to produce a sustainable business. We need to be shrewd and innocent and unashamed to communicate our value proposition. As Paul told Timothy, “Do not muzzle the ox while it is treading out the grain” (1Tim 5:18 and Dt 25:4). It costs time, money and investment to provide a service. If our service meets a need, we should price it according to its value. It takes creativity to clearly define, explain and price our offering for each customer segment instead of dumbing-down a one-size-fits- all approach that connects with very few. We fuel our ministry with the proceeds of sound commercial activity. Avoid letting bad pricing habits develop due to confusion among well- meaning employees. If, for example, you choose to deeply discount for widows and orphans, be sure to budget this subsidy separately so that overall pricing discipline isn’t compromised. [2]
“I did not displace that person out of that house, so that they can no longer afford it. The marketplace did. The economy did. The ratio of the income that they earn to their housing expense displaced them. I didn’t cause any of that. So you are not displacing them, you are taking too much credit for what’s going on. ”
This is where the supposed “mental gymnastics” begins to unravel itself, and where I think the clear biblical case for “price increases” doesn’t quite match with Dave’s premise here. Just own it, Dave. You made the decision to raise the rents, therefore you are the one that causes “displacement” of the tenant out of the home.
From a strict business sense, Dave is running a risk in raising prices in rents — will he have someone to replace his current tenant? That’s uncertain especially if there is a lack of individuals who are receiving increased income based on inflation.
On the moral side I would return again to the arguments above: a faithful business owner should raise the prices if the value is there in their property. However, I would have liked to hear Dave speak about situations where perhaps he has budgeted to help someone (widow, poor, etc.) and work through the process with care.
Often Dave comes across as a heartless “business only” individual. Either you are about business or you’re about charity. I don’t think one has to choose one or the other, but can embrace the complexities of these situations and realize that you can simultaneously raise rents on your properties while also seeking to take care of your tenants in a faithful way.
“If they need to move to a cheaper house because they can’t afford it, they are going to move to a lesser house. Because if they move they are going to pay market rent.”
Now, unsurprisingly the FULL context of the video includes more from Dave, and frankly, a much more balanced viewpoint besides “raise the rents and kick the tenants out.” In fact, he is very clear that in handling these situations we need to “treat other people like you’d want to be treated.” His issue is that for many — and it seems clear he’s actually right based on the Twitter reactions — there is an insidious belief that if you are a Christian landlord you should never raise the rents on your property. That makes absolutely no sense in the context of stewardship. The way Dave phrases it is this:
“This idea that you have to equate Christian and kindness with not having good marketplace experience is not true.”
And frankly, he’s right. Being a poor manager of money, assets, and resources is not the way a Christian should be. This is why in order to fulfill your mission, you must have margin.
“I’ve had situations (because I manage the properties with a heart and a head)…that someone is sick. I remember a long time ago a lady had cancer. Am I going to evict someone in the middle of chemo? No! I’m not! I’m going to work with them, I’m going to be kind. I’m going to have clear conversations, and I want to know what’s really going on — I don’t want to be duped by the situation — but on the other hand I want to treat other people like I want to be treated. That’s a biblical mandate.”
I’d encourage you to watch the video in full, but I think the co-hosts suggestion is wise. Landlords have an opportunity here to not respond with coldness and matter-of-factness, but with kindness and care, working to understand the situation and provide the necessary resources. If someone is holding on hope that their rent will never go up because their landlord is a Christian — they are sorely mistaken. But if there is a need, a challenge, or an opportunity to help — this is where a landlord can step in and work out solutions that a mutually beneficial and help promote human flourishing.
— Footnotes
[1] C12 Curriculum, May 2010, “Pricing on Purpose”
[2] C12 Curriculum, May 2010, “Pricing on Purpose”