Why Neofeudalism is Your Problem Too: An Essay On Housing Costs, Serfdom, And The Looming Crisis

The pitchforks haven’t come out quite yet, but support for populists will continue to rise and take ever more extreme forms until and unless this problem is solved. The basis of rising support for populists isn’t primarily concerns about immigrants, or foreign policy, or woke culture wars, though these do make convenient red flags for populists to wave in front of the raging bull of public opinion. No, the real issue driving voter behaviour is, quite literally, closer to home. It’s rent. It’s mortgages. It’s the absurdly high cost of just having a place to sleep and keep your stuff, as a percentage of your pre- and post-tax income.

The downstream consequences of unaffordable housing go well beyond improving the election prospects of outré nationalist demagogues. Why are we witnessing a breakdown in family formation, declining birth rates, and a middle class turning sour on mainstream politics? A key part of the answer lies in the cold, hard numbers of the monthly rent burden.

The Societal Consequences Of Long-Term Asset Price Inflation

Decades of asset price inflation in real estate have created a chasmic divide. On one side, there’s the shrinking minority of mortgage-free homeowners and asset-owning rentiers—our modern-day feudal lords, living the high life on passive income. On the other, everyone else. The renters, the over-leveraged mortgage holders, the paycheck-to-paycheck strugglers who pour more than half their take-home pay into a landlord’s pocket. These people are a large and growing majority of the population, and they’re increasingly angry and unhappy—legitimately so.

This isn’t just bad luck or bad policy—it’s systemic. It isn’t a transient phenomenon that will self-correct through normal market mechanisms; it’s a consequence of structural factors driven by rising wealth concentration, exacerbated by flawed monetary policies—notably the particular form that quantitative easing, QE, has taken since its widespread application post-2008. Trillions of dollars, euros, and pounds worth of QE have led directly to massive asset price inflation, one-sidedly benefitting those who were already asset owners, while creating uncrossable asset-price moats for the majority.

In many Western economies, housing prices have skyrocketed while wages have stagnated. Fifty years ago, a family could afford a decent house on a single income, with mortgage payments eating up about 15 per cent of gross income. Today, that figure is more like 30–40 per cent of the combined household income of two people who work full-time—if you don’t live near a major conurbation. In places like Ashburn, Virginia, which is close to Washington DC, rent on a modest three-bedroom house is around $3,800 monthly; rent consumes around 70 per cent of the median household’s post-tax income.

For aspiring first-time homebuyers, prices are so astronomical that ‘buying’ a house means mortgaging your future for the rest of your life. The cumulative nominal value of your mortgage payments will quite possibly exceed the sum of your plausible lifetime earnings as a median wage earner. This means you will never really own ‘your’ home. You’ll either be renting a house or apartment from a landlord, if you don’t qualify for a mortgage, or renting it from a bank, subjected to the relentless stress of crushingly high monthly mortgage payments for the entirety of the rest of your life. Interest-heavy amortization schedules ensure you’re mostly bankrolling the owners of shares in financial institutions, not building equity. You’re basically a landless serf, not an owner. This is today’s reality as more and more people experience it, and there’s a suitable term for it: Neofeudalism.

Welcome To Neofeudalism: Serfdom In Disguise

Imagine you’re a skilled tradesperson in the US, earning $40 an hour, more than double the median wage of $18. After deductions at source for income tax and social security contributions, $40 shrinks to about $29. You work on average 168 hours a month. At prevailing tax rates, 37 of those hours are devoted to contributing to public services provision—your membership fees in society. And if you’re paying a fairly typical $2,500 a month for a one-bedroom apartment, you’re effectively working 63 hours a month for your landlord.

Let that sink in. Imagine you are that tradesperson. Incredibly, you spend 1.7x more time every month labouring to line your landlord’s pockets than you do contributing to your country’s public services and social safety net via taxes. You’re unable to save any money to speak of from your wage income; your personal finances are permanently precarious.

It’s time for the asset owning class to ask why the system we have is producing economic serfdom, rather than economic freedom, for the hard-working middle and working classes. It wasn’t like this in the 1970s, so why is it like this now? What are the structural financial dynamics that have led to this situation?

This essay is too brief to present an analysis of those dynamics—it is meant as an encouragement for IFC readers to study the relevant technical literature, in particular, to get familiar with empirically grounded stock-flow-consistent (SFC) accounting models of the macroeconomic algorithms at work. This will lead to an understanding that the mechanisms involved will inevitably continue to intensify housing unaffordability and extreme asset-ownership disparities until and unless major countervailing policy shifts are introduced. I encourage you to look at the work of scholars like Antoine Godin, Gennaro Zezza, Marc Lavoie, Wynne Godley, Duncan K. Foley, Lance Taylor, Eugenio Caversazi, Peter Flaschel, Maria Nikolaidi, and Steve Keen, among others. I know you’re very busy (we all are!); a very time-efficient way to get familiar with the key ideas of SFC economic models is to ask ChatGPT 4o or another cutting-edge large language model (LLM) to briefly summarise the key ideas of these researchers for you.

I also urge you to look at the work of Thomas Piketty, Emmanual Saez, Gabriel Zucman, Anthony Atkinson, and Facundo Alvaredo, who primarily use longitudinal empirical data and tax records to study income and wealth distribution trends over many decades, and what drives these trends. Their research highlights how returns on capital outpace economic growth (as per Piketty's formula r>g, where r is the rate of return on capital and g is the rate of economic growth). Their work has been crucial in understanding structural drivers of wealth inequality. 

The Decline Of The Middle Class

This relentless increase in asset prices and asset ownership concentration isn’t just a personal tragedy for non-owners; it is a growing social and economic disaster. High housing costs gut disposable income, strangling consumer spending. When families are barely covering rent, they aren’t buying cars, dining out, investing in education, or generating the next generation of consumers (ie having children), because it’s all just too expensive. Aggregate demand suffers. Entrepreneurship dwindles, too—few can find startup capital when 37 per cent of American households can’t even save $400 for emergencies, and 85 per cent are so poor that the rising price of groceries is a serious concern for them. It's no surprise that the industrialised world is chock-a-block with disillusioned young people, frustrated middle-class workers, and an increasingly polarised electorate ripe for populist exploitation.

Why does this crisis persist and intensify? Because the system is designed to perpetuate it. When returns on capital outpace wage growth, wealth concentrates at the top. Taxes on capital gains are lower than taxes on labour; taxes on wealth barely exist, and where they do, they are generally fairly easy to avoid. The result? A self-reinforcing cycle of increasing asset-ownership inequality, with the rich getting richer and the middle and working classes sliding into precarity. The politically influential asset-owning elite—those whose fortunes balloon with each uptick in real estate or stock price values—have no incentive to disrupt the status quo, and plenty of incentive to make campaign contributions in election cycles aimed at securing even lower taxes on capital.

To make matters much worse, since 2008, QE policies have pumped trillions of dollars directly into the financial system on the basis of an empirically and theoretically flawed hypothesis that downstream portfolio rebalancing, trickle-down ‘wealth effects’ and ‘credit channel effects’ will stimulate economic growth and raise all boats on a rising tide. Empirical evidence shows what happens in practice is that QE-driven portfolio rebalancing simply causes asset prices to rise, generally without generating productive new real-economy assets. It would have been straightforward to instead use all that QE money-creation firepower to pay for the debt-free construction of new real public assets (a blessing in an economy in which the government sector is overleveraged), thereby enhancing the real productive capacity of the economy.

For example, zero-interest perpetual bonds could be purchased from central banks by special-purpose vehicles such as US or EU Infrastructure Development Funds, to pay for the construction of clean energy systems or improved railways on a sunk-cost basis in annual amounts agreed in negotiations between the Treasury and the central bank, and constrained appropriately by inflation cap targets. From a finance point of view, there is nothing technically difficult about such an arrangement. It is hard to understand why a productive pathway of this kind is not how QE has been implemented. If you have any policy influence, you might want to use it to push policymakers to adopt better, real-economy investment-funding QE policies in future rounds of QE.

Evolution Or Revolution?

History teaches us that when extreme inequality and the immiseration of the majority go too far, societies can reach a breaking point. From the French Revolution to the Arab Spring, populist anger, left unchecked, can boil over into chaos.

But things don’t have to go that way. A better path—an evolutionary path—would reverse the trend toward immiseration of the majority via serious, systemic reform. Among other measures, publicly funded housing initiatives could build large amounts of high-quality, low-cost not-for-profit rentals on public land, insulating a substantial portion of the population from market pressures. That would tend to bring down the price of housing and rents significantly; the city of Vienna’s experience has shown that maintaining a large stock of not-for-profit public housing limits the general housing price level, and can be achieved whilst maintaining high quality standards.

Going farther, as philosopher Ingrid Robeyns has proposed in her book Limitarianism: A case against extreme wealth, a generous cap on any individual’s personal wealth accumulation—for example, at 250 times the median income (ie currently about $20 million in the US)—could help recouple wealth accumulation to contributive merit. The idea of such a limit may horrify some IFC readers, but it could be implemented in a way consistent with free-market principles. A personal wealth limit could break the self-reinforcing spiral of rentier wealth dynamics without discouraging entrepreneurial effort by redirecting excess wealth into public-benefit foundations, incentivising wealthy families and entrepreneurs to compete for status amongst their peers on the basis of who can build the greatest foundations rather than who accumulates the largest private wealth hoards. After all, if a man can’t be happy with a personal fortune of $20 million, lack of wealth isn’t the root of his unhappiness, and owning $40 million or $400 million or $40 billion probably won’t make him happier. Moreover, note that in a limitarian system with a $20 million wealth cap, there would be many more multi-millionaires than presently, since a fortune of $20 billion, for example, can be divided into 1,000 fortunes of $20 million.

What You Can Do

If you’re reading this, chances are that you are part of the asset-owning elite—and/or advising members of it. You may agree in principle that extreme housing unaffordability and, more generally, self-reinforcing rentier wealth-hoarding is a problem that should be addressed, but you’re likely thinking that doing anything about this is not your job—that influencing macroeconomic policy is way above your pay grade. But here’s the thing: extreme and rising asset-ownership concentration is breeding instability. Unaffordable housing is the key factor making life increasingly intolerable for the majority. If this isn’t corrected before the pitchforks come out, even your gated community or offshore trust fund might not be safe. Why not join forces with others to fund think-tank projects to co-design regulatory reforms and financial mechanisms that could bring housing costs way down? Why not use your political influence to help push such reforms through the policy apparatus in your country?

Supporting reforms that radically reduce the price of housing, and reforms that push a reform of QE so that, in future, it pays for new public infrastructure on a sunk-cost basis rather than simply driving asset price inflation, isn’t just altruistic; it is a matter of your enlightened long-term self-interest. Stable societies are good for business. Affordable housing means higher disposable incomes, stronger consumer demand, and more robust economies. It also means preventing the eventual appearance of torches and pitchforks on your front lawn. Neofeudalism is not a desirable state for society to be in, and let’s face it, Neofeudalism is not a condition that will emerge in future if we don’t change course. We’re already well into it.

We don’t need to be non-player characters (NPCs), inert bystanders who wait passively for the pitchforks to come out. We can get ahead of the game by initiating major reforms to bring housing prices and rents radically back down—say, by at least half, or even by more than 75 per cent in seriously overpriced housing markets. Let’s tell our finance ministers and central bankers that we want them to work together to deploy tools like Quantitative Easing more intelligently and productively than hitherto—by using QE to fund the construction of real new assets owned by public trusts, eg renewable energy capacity, EV recharging networks, better public transit systems, and public housing cooperatives, thereby increasing real-economy productive capacity and rebuilding affordability for the middle and working classes, rather than continuing to double down on grotesque levels of asset-price inflation and intensifying, self-reinforcing rentier privilege.

And consider this: if your reaction to Ingrid Robeyns’ limitarian idea is horror and dismay, reworking the financial system to ensure provision of easily affordable, good-quality housing for everyone may be the single most effective action likely to prevent limitarianism from gaining traction. A contented middle- and working-class majority that finds life affordable and agreeable is not going to get too exercised about the existence of ultra-high-net-worth family fortunes, nor will it pick up pitchforks and march on your manor house with burning torches. Pensez-y.

Nils Burkhard Zimmermann
Nils Zimmermann is a Consultant on climate policy and clean energy finance solutions for the World Bank in Washington DC, specialising in the techno-economic assessment of green technologies. Nils has a Master's degree in natural resources management from Simon Fraser University.