Economic rent is not the same as the rent an apartment tenant pays their landlord every month. The amount of economic rent a specific land site generates is determined by environmental factors such as location, natural features, and surrounding infrastructure, compared with sites that are barely worth living on or working on.
Crucially, this means that total economic rent can be much higher than a landlord’s rent. A landlord of a site seeks to make enough profit to satisfy their needs, but that amount is not always as high as the site’s true rental value. This means the site in question is not being put to its best use, with so much potential economic rent going to waste.
“A major difference between rent paid to landlord and economic rent is that the latter is the potential rent available if the site is put to its best use.
this is determined by the objective conditions operating at the site concerned and at the marginal site.”
How our Economy Really Works by Brian Hodgkinson, p. 40)
