They knew. They didn't care. It ended up being a good deal for both groups.

Is renting from the landlord precisely what the problem is? Middleman or not, it is an apartment that a normal local person can't use.

You can't stop the free market. Once it's out of the bag, given a long enough time-frame without volatility (technological innovation/political turbulence/labor/etc.) it always returns to feudalism. Sand aggregates into the form of a pyramid in the absence of winds. So do societies.

For the love of god, please learn what feudalism actually is. It isn't someone renting out land it is a government structured via a system of sworn allegiances.