Earlier this week we discussed why companies were buying up America’s houses, and in the process making it much more difficult for families to buy their own homes. More and more sources are criticizing this development, and pointing out its inherent dangers.
Now Big Business and Big Landlords are counter-attacking. A primary example of their propaganda is an article at Bloomberg titled “America Should Become a Nation of Renters“.
Rising real-estate prices are stoking fears that homeownership, long considered a core component of the American dream, is slipping out of reach for low- and moderate-income Americans. That may be so — but a nation of renters is not something to fear. In fact, it’s the opposite.
. . .
In coastal markets with strong demand for housing, market forces would normally have led to the replacement of single-family homes with duplexes and apartments. But existing homeowners are reluctant to agree to development with unknowable effects on the value of their most precious investments. The result is less development — and sky-high rents for any residents not lucky enough to own their own home.
As institutional investors increasingly enter the housing market, however, the incentives begin to shift. Large investors can expand or redevelop their properties themselves, because they benefit from a greater number of overall tenants, even if rents themselves dip.
Meanwhile, the increased availability of rental properties could benefit homeowners in declining areas of the country. They frequently cannot move to more prosperous areas because they can’t sell their homes for nearly enough to buy a new place somewhere else. In an economy with more rentals, however, they could afford to try a new place for a few years without the commitment of a mortgage or down payment.
A nation of renters could lead to a world where location decisions are driven far more by personal preferences and life-cycle demands. Younger workers might prefer the excitement of the city. A couple just starting a family could reunite with their parents or siblings in a small town.
The U.S. is not quite there yet, and not just because too many people are chasing too few apartments. To see the U.S. as a nation of renters requires a revision of the American dream of homeownership. This country was always more about new frontiers than comfortable settlements, anyway.
There’s more at the link.
Let’s tackle some of the article’s points.
- “market forces would normally have led to the replacement of single-family homes with duplexes and apartments”: In reality, market forces have not led to that, because most people don’t want to live in a duplex or apartment if they have a choice. That may work for singles or young couples, before the kids arrive. However, when it comes to families, their overwhelming preference is for more space, and greater privacy and peace and quiet, than they can find in more cramped dwellings. That’s why houses remain the preferred choice for so many of them.
- “As institutional investors increasingly enter the housing market, however, the incentives begin to shift”: Yes, they do, because the desires of families are not the primary concern of those investors. They want to maximize their return on investment. If they can cram more dwelling units into the same space that a single house requires, they can make more money – so it’s in their interest to do so. Our interest? Not so much.
- “the increased availability of rental properties could benefit homeowners in declining areas of the country”: Note the careful “could” instead of “will”. That’s because the corporate investors who will “increase the availability” of rental properties will ensure that they make every cent of rent they can squeeze out of their tenants. Rents are now so high in many cities that they equal (and in some cases exceed) the mortgage payment and associated costs that it would take to buy that dwelling outright. So much for “benefit”! What’s more, if you pay into a mortgage, you have the prospect of getting some or all of your money back (and perhaps even more) when you sell your home. When you pay that money in rent, it’s gone forever, with no return on your “investment” at all. (Why do you think many military families have for decades bought houses when they changed station, only to sell them [or keep them as an investment] and buy another when they’re posted somewhere else? They did so because they made money that way. If they’d lost money by doing so, they’d very quickly have stopped doing it!)
- “To see the U.S. as a nation of renters requires a revision of the American dream of homeownership. This country was always more about new frontiers than comfortable settlements, anyway.” Nice little touch of propaganda, there. What’s the first thing that our settlers did when they reached their “new frontiers”? They settled on their own land and built their own homes. I don’t recall reading about any apartment complexes in the Old West, or the settlers’ desperate desire to rent from someone else – do you?
Remember this scene from the 1939 movie “Stagecoach“?
We all remember how that turned out. The banker was arrested for stealing his depositors’ money.
One wonders how much of that attitude has permeated the modern business world, because what’s good for them – big business, Big Tech, Big Brother in general – is seldom good for us. It’s like advertisements urging us to “save $XXX on this product!” Tell you what. Go to the store with money in your pocket. Buy that product. Now, count out for me, in cash, the money in your pocket. If it isn’t greater than the amount with which you started out, you haven’t “saved” anything at all – instead, you’ve spent money. You’ve got less than when you began. So much for “save $XXX”!
Be deeply suspicious of any propaganda telling you that to give up or change your desires is actually good for you. That may work from a religious perspective, but it’s far from guaranteed in commercial, economic terms.