Rack-rent
From Wikipedia, the free encyclopedia
Rack-rent denotes two different concepts: 1. an excessive or extortionate rent, or 2. the full rent of a property, including both land and improvements
The second definition is equivalent to the economic rent of the land plus interest on capital improvements plus depreciation and maintenance -- the normal market rent of a property -- and is not inherently excessive or extortionate.
Historically, however, rack-rent has often been a term of protest used to denote an unjustly excessive rent (the word "rack" evoking the medieval torture device), usually one paid by a tenant farmer. The two conceptions of rack-rent both apply when excessive, extortionate rent is obtained by threat of eviction resulting in uncompensated dispossession of improvements the tenant himself has made. I.e., by charging rack-rent, the landowner unjustly uses his power over the land effectively to confiscate, and then to charge the tenant interest and depreciation on, the capital improvements the tenant himself has made to the land and is expected to maintain. This sense of the term is economically meaningful, and distinct from the market rent.
