It's quite disappointing that very nearly the entire discussion here misses the key proposal of the article:
A public-ownership rental option might solve this problem, at least in part. The foundation of the program would be quite simple: public ownership of housing, acquired or built with government loans—though run by local for-profit or nonprofit property managers—and rented at market prices. No saving for a down payment (or being given one by family) and no qualifying for a mortgage. The only requirements for participation in the public-ownership option would be (1) move in, and (2) pay rent.
Though admittedly, the lede is well-buried nine 'graphs in, and the clickbait title has succeeded in self-sabotaging this particular discussion.
The idea and organisational structure behind it strike me as potentially interesting and a notable shift in addressing what I'm seeing as a Big Problem.
Not mentioned in the article is the concept of land banks, instituted in some countries, and parts of the US, though not within California where the Russel Lewis Centre is located (UCLA). Contributing tax-lien and abandoned properties to such a public ownership rental proposal would be tremendously useful.
UCLA's Russell Lewis Centre is the organisation making the proposal.
There are some co-housing and community-housing projects, as well as NYC's venerated housing co-ops (for better and worse). There are some community / sustainable housing initiatives in Davis and Chico California, that I'm aware of (I'd need to research on specifics), though I'm not sure they follow this model specifically.
There's the prospect that occurs to me of working with land banks (mostly practiced in the Midwest / East Coast in the US) as a way of acquiring land.
The proposal itself seems striking to me. Yours is the only comment that's actually cottened on to the main thrust of the article.
Let's see. My house I bought 12 years ago is now worth double what I paid for it - but I didn't pay full price because the house I sold prior cleared me enough to pay for nearly half of this house in one go. Now I live in a 2,400 sq ft midcentury ranch for a price that's less than people are now paying for a 2 BR apartment in my area. Yeah. Owning sucks!
People talk about the flexibility of renting. I don't get it. You have to sign a 12 month lease. On average then you're 6 months away from being able to get out of your lease. In my area you can sell a house within 90 days and it's been that way for over 40 years! Of course now houses are on the market for 10 days and people are bidding them up - that's not normal, but still I can sell a house faster than I can get out of a lease.
Don't even get me started on the difference owning vs. renting makes on your retirement planning! I live in a high tax area and my taxes are HALF of the rent of a 2 BR townhome!
> My house I bought 12 years ago is now worth double what I paid for it
This is not as strong of a financial case as one might think. AAPL stock I bought less than 2 years ago is now worth more than double what I paid for it. If you don't want to have to pick a winner, the Nasdaq composite doubled in the past 2 years, and if you feel like the Nasdaq is too risky because of 2000 then the SP500 doubled in the past 5. All of the money that you spent up front on that house could have been invested elsewhere instead with better returns.
True but you buy a house with leverage. So if you put 20% down and the house doubles in value your return is 500%, on top of being able to deduct your taxes and most of your monthly payment (as interest), and when you sell (after 2 years) you don’t pay taxes on $250k of the proceeds ($500k per couple).
True - but you gotta live somewhere. And I had 3 kids living at home so a 2 BR apartment wasn't going to cut it. So, paying the same as I'd pay in rent for less housing, enjoying tax breaks and doubling my asset value - that's a win!
> I can sell a house faster than I can get out of a lease.
Closing on a house = pain. You have inspections, appraisal, loan applications, contingencies, counter offers, staging, open houses, closed showings, and at least an entire day of signing papers. It takes nearly a month on average to close on a house. That's not a passive month either. If you're selling, you'll need to vacate your house for showings at whatever day and time is convenient for the buyer. And if you're moving to another house you get to do this twice. I've found an apartment, signed a lease, and moved in in a single weekend before.
You can also find leases shorter than 12 months. And if your landlord isn't a total jerk (or some giant faceless private equity company) then you can usually talk to them as reasonable adults do. Even better if you have a potential replacement lined up for your rental. Breaking a lease isn't a crime. You can do it, if you need to.
You are building a strawman to support your views, and I can as easily build one against the renting.
Dealing with landlord is a pain. You have to adhere to contracts often no pets, even putting up a painting is an ordeal. Not to mention rent increases.
Owning a house is a bigger responsibility with way bigger rewards and freedoms. Also your rent money is not sucked out into the void.
The main issue with owning as far as I'm concerned is the transaction costs involved in buying or selling. I never considered owning until I had the opportunity to save in the ballpark of 50% or more versus renting and I thought there was a good probability I would never move again. If I moved, I'd expect it would cost at least 6% of the value of my home. Maybe more like 10%. I can't imagine buying with the expectation of moving in the forseeable future. This is what lack of flexibility means. Getting out of a lease might have a cost, but nowhere near as much.
You also may not relate to markets where there is no particular trend in prices over and above inflation. My home is almost 30 years old and has not appreciated except maybe temporarily this past year. Most of the country/world is not SF or Vancouver.
Finally, your penultimate sentence sounds like you may not be paying interest on a mortgage, which obviously is a significant addition to expenses. And there are a lot of little things that add up if you make a spreadsheet, when you own rather than rent. Constant maintenance too.
Oh and "within 90 days" implies any time of year is as good as any other - I'm not particularly knowledgeable, but I would have assumed that you have a much better chance if you put a property on the market in the spring, so practically speaking, the window is once a year, like a 12 month lease, no?
I have never owned property in my life. Have lived in 6 cities in 3 countries the last 11 years. All savings have gone into S&P 500, AAPL, TSLA, MSFT, SQ, Bitcoin, some tech IPOs. 401K/IRA is consistently maxed. My overall return on investment is probably multi-hundred percent (or more) by now. I personally don't find any of my decisions senseless.
Renters don't pay property taxes or maintenance either which is more money they can invest. I also don't have to worry about doing the lawn or other the plumbing and other hassles. The free cash flow and flexibility of renting seem more advantageous of buying and eventually not having a payment. Renters can always choose to buy something later with their liquid investments too, so it's not like they're locked out forever. I'd much rather invest in the S&P500 than some overpriced McMansion or 50 year old bungalow.
Your point on the time to get out of a lease vs house is just one issue. There are significant in-and-out costs in terms of lawyers, realtors, etc that exist only when selling. And unless you hold for a longer period, and your market is strong, your gain may either not exist or not be sufficient to cover these friction costs.
The foundational economic concept is risk and volatility mitigation, and it's found everywhere from home insurance to leasing private jets. Real estate is just another asset.
Ownership means responsibilities. Renting is great for those who want to minimize those responsibilities with the associated overhead and surprises, and lease terms vary wildly with some being as short as a few weeks.
Arbitrary comparisons don't really challenge anything about the fact that renting and buying are just different financial operations that you can tailor to your specific situation. There's no right answer.
> Those losses aren’t equitably distributed, either: Nearly 2 million mortgages are underwater in the U.S., and they’re disproportionately concentrated in Black and Latino communities. Tenants in coastal cities, meanwhile, know the pain of forking over more and more rent every year, unable to save for a down payment and living at the mercy of sometimes unscrupulous landlords.
> The housing situation is only getting worse—more expensive, more inequitable, more precarious. As prices have continued their climb in the country’s most economically dynamic regions, it’s no longer feasible for working-class residents to seek out the best opportunities there. Instead, younger and lower-income residents are being pushed out to places where jobs are less plentiful and lucrative
> Largely as a consequence of housing prices, Generation X held less than half as much wealth in 2019 as Baby Boomers of the same age did two decades earlier, and Millennials are on course to hold even less.
I'm glad it worked out for you bud. Just remember there are 6,999,999,999 more people on this planet besides yourself.
I love the flexibility of my house - paint a wall, hang my tv, run speaker wire to my surrounds by going up in my attic, have a squat rack in my garage, etc.
But after replacing my 30 year old roof, 10 year old water heater, and 20 year old furnace all in the same month? Yeah. Owning isn’t always great. But on the bright side, unless an emergency happens, I’ve got many years to recoup those costs. Just hurts writing out that many checks all in one go.
Renting is many things, but it sure isn't flexible. If I get a new job while there are still 5 months left on my lease, I either need to eat a pretty hefty cost to get a second apartment now or take my chances that I'll be able to find a good apartment later (in addition to suffering the long commute for months). It might take a little time and effort for a sale to go through but at least I can choose when to start the process, and the fees don't need to be paid out of pocket when I move. And with buying a home, what you see is what you get, whereas with renting there is a huge unknown in the landlord/management that incentivizes you to stick with the devil you know. On top of this, the value of flexibility is itself questionable - maybe you'll get a new job in 5 months, maybe you'll be there 5 years; owning carries the risk you may have to sell at a sub-optimal time and take a loss, but renting is guaranteed to burn the money. In my opinion, renting makes more sense in situations like fixed term work contracts where you don't have flexibility.
You typically pay that after you sell with money from the sale. Yes if your home value hasn't increased by a few percent since you purchased it you will suffer a net loss, but you'll never be in a position where you can't afford the loss.
They say that the reason owning is terrible is because it's not as flexible as renting - you can't easily move to where work is. But I'm not sure that's as big of a problem in a covid/post covid world where WFH has become common. Also, I don't think that a society that is rootless is all that great of an outcome - people who own are more invested in their communities and will be more likely to get involved in improving them.
I'm glad I bought 11 years ago. My house is easily worth 2X what I paid then. If I'd been renting all this time I'd be paying at least 2X in rent compared to what my mortgage is. And I'd be subject to the whims of owners who decide to sell and make the renters move.
It's way too early to draw any conclusions about the "post covid" world considering we aren't in it yet. My personal opinion is that it is going to be a lot closer to the pre covid world than people think.
> If I'd been renting all this time I'd be paying at least 2X in rent compared to what my mortgage is
This is generally not the case. Rents on a property take a long time to catch up to the mortgage payment. Of course market conditions vary by location, but I suspect if a lot of homeowners ran the numbers (total mortgage + interest, closing costs, taxes and property maintenance compared to incremental annual rent, difference invested in S&P 500 or something riskier), the conclusion would be different.
Yeah... I'm renting a two bedroom apartment in the middle of a nice area for $1200 a month (with rent costs split with my partner). All utilities (water, trash, electricity) are included in that cost, and they have a full time staff that maintains the grounds.
This means I'm living in a nice area for only $600 a month.
If I wanted to live in a home in the same area, that $600 wouldn't even cover the interest on the mortgage, much less all the other costs that come with living in a home.
In the mean time, I have been saving thousands of dollars every month and investing it. Over the past couple of years, I managed to completely pay off over $50,000 worth of debt and also saved up around $140,000 (most of which is invested in stock market index funds).
If I want to move to another state to pursue other job opportunities, I can do that whenever I want at the drop of the hat. All it would cost me to terminate my lease early is two month's worth of rent.
So yeah... pros and cons. I'm still not convinced that buying a house is worth it over renting.
> This is generally not the case. Rents on a property take a long time to catch up to the mortgage payment.
Over the last 10 years, though, I think this has been a pretty common occurrence in a lot of areas. My mortgage + property tax is right around $1k/month - admittedly I bought near the housing market bottom. Rent on similar properties in my location is getting close to $2k/month. My mortgage will be paid off in about 2 years (15 year mortgage with some extra principal payments)
I have moved away from the city centre, cutting my rent from 950€ to 550€ per month for the same apartment size. I am toying with the idea of moving somewhere else, either temporarily (to see Asia), or permanently (to be closer to mountains). Later, I might want a bigger, nicer apartment, or something in a quieter area.
My friend just bought an apartment, and it's a stressful, expensive affair. In Germany, you should expect 12% of the purchase price in various taxes and fees. You still have to pay monthly expenses, which are still 10-20% of your "rent". That's on top of maintenance, which if I recall is around 2% of the value of the building, ever year. There's a chance she might get slapped with random repairs, something that's never on my mind.
Owning a house seems even worse. Selling her house felt like a weight off my mom's shoulders. She spent so much time and energy keeping that house.
I was looking at around the same time, and I really struggled to trace the cost of renting vs buying over time, and to find where the lines intersect. It makes it a very dubious investment for me.
---
Side note: I have noticed that many articles from American magazines phrase everything in terms of race, gender and political affiliation, something I rarely see in local publications. This article is a good example. Does it add anything meaningful to the article?
At times, in certain cases, it can serve to "align" the article relative to readers' expectations and beliefs. When the article is promoting a controversial position, it can help to show readers that "people like them" agree with it.
In most cases, though, it's more likely included as a sort of "Carthago delenda est" to beat the drum for the author's preferred cultural crusade.
I've always felt that buying an apartment is a dubious proposition. I don't like the idea of being vulnerable to the whims of the building management and the other unit owners. I would only ever buy a standalone house.
As to your side note: No, it adds nothing. It's just paying homage to the new national religion of wokeism.
I'm sure much of it is scoring woke points, but in the USA there has been historically (and still today) discrimination in housing with regards to race, some of it even institutionalised.
> The foundation of the program would be quite simple: public ownership of housing, acquired or built with government loans—though run by local for-profit or nonprofit property managers—and rented at market price.
I'm not an economist, but "market price" in this context does not seem very sensible. If I have the choice of paying the same rent for traditional housing versus housing that I can build equity in, I would end up wanting the equity. So really that should be worth more and command a higher price.
If instead they're going to fix the price of public rents so that you're not paying a premium for it, then it's not really market price and will lead to a lot of the same issues that rent control does.
Readit News
A public-ownership rental option might solve this problem, at least in part. The foundation of the program would be quite simple: public ownership of housing, acquired or built with government loans—though run by local for-profit or nonprofit property managers—and rented at market prices. No saving for a down payment (or being given one by family) and no qualifying for a mortgage. The only requirements for participation in the public-ownership option would be (1) move in, and (2) pay rent.
Though admittedly, the lede is well-buried nine 'graphs in, and the clickbait title has succeeded in self-sabotaging this particular discussion.
The idea and organisational structure behind it strike me as potentially interesting and a notable shift in addressing what I'm seeing as a Big Problem.
Not mentioned in the article is the concept of land banks, instituted in some countries, and parts of the US, though not within California where the Russel Lewis Centre is located (UCLA). Contributing tax-lien and abandoned properties to such a public ownership rental proposal would be tremendously useful.
There is a book, with presumably more information: The Affordable City: Strategies for Putting Housing Within Reach. https://www.bibliovault.org/BV.book.epl?ISBN=9781642831337
Somewhat inexplicably, the article fails to mention this.
I'm not fully understanding the concept and would like to know more about public ownership for renters in practice.
There are some co-housing and community-housing projects, as well as NYC's venerated housing co-ops (for better and worse). There are some community / sustainable housing initiatives in Davis and Chico California, that I'm aware of (I'd need to research on specifics), though I'm not sure they follow this model specifically.
There's the prospect that occurs to me of working with land banks (mostly practiced in the Midwest / East Coast in the US) as a way of acquiring land.
The proposal itself seems striking to me. Yours is the only comment that's actually cottened on to the main thrust of the article.
People talk about the flexibility of renting. I don't get it. You have to sign a 12 month lease. On average then you're 6 months away from being able to get out of your lease. In my area you can sell a house within 90 days and it's been that way for over 40 years! Of course now houses are on the market for 10 days and people are bidding them up - that's not normal, but still I can sell a house faster than I can get out of a lease.
Don't even get me started on the difference owning vs. renting makes on your retirement planning! I live in a high tax area and my taxes are HALF of the rent of a 2 BR townhome!
Renting makes no sense.
This is not as strong of a financial case as one might think. AAPL stock I bought less than 2 years ago is now worth more than double what I paid for it. If you don't want to have to pick a winner, the Nasdaq composite doubled in the past 2 years, and if you feel like the Nasdaq is too risky because of 2000 then the SP500 doubled in the past 5. All of the money that you spent up front on that house could have been invested elsewhere instead with better returns.
He is living his life and you have virtual paper and potential gains.
Owning a house is more than a bet against inflation and financial crash.
Closing on a house = pain. You have inspections, appraisal, loan applications, contingencies, counter offers, staging, open houses, closed showings, and at least an entire day of signing papers. It takes nearly a month on average to close on a house. That's not a passive month either. If you're selling, you'll need to vacate your house for showings at whatever day and time is convenient for the buyer. And if you're moving to another house you get to do this twice. I've found an apartment, signed a lease, and moved in in a single weekend before.
You can also find leases shorter than 12 months. And if your landlord isn't a total jerk (or some giant faceless private equity company) then you can usually talk to them as reasonable adults do. Even better if you have a potential replacement lined up for your rental. Breaking a lease isn't a crime. You can do it, if you need to.
Dealing with landlord is a pain. You have to adhere to contracts often no pets, even putting up a painting is an ordeal. Not to mention rent increases.
Owning a house is a bigger responsibility with way bigger rewards and freedoms. Also your rent money is not sucked out into the void.
You also may not relate to markets where there is no particular trend in prices over and above inflation. My home is almost 30 years old and has not appreciated except maybe temporarily this past year. Most of the country/world is not SF or Vancouver.
Finally, your penultimate sentence sounds like you may not be paying interest on a mortgage, which obviously is a significant addition to expenses. And there are a lot of little things that add up if you make a spreadsheet, when you own rather than rent. Constant maintenance too.
Oh and "within 90 days" implies any time of year is as good as any other - I'm not particularly knowledgeable, but I would have assumed that you have a much better chance if you put a property on the market in the spring, so practically speaking, the window is once a year, like a 12 month lease, no?
Ownership means responsibilities. Renting is great for those who want to minimize those responsibilities with the associated overhead and surprises, and lease terms vary wildly with some being as short as a few weeks.
Arbitrary comparisons don't really challenge anything about the fact that renting and buying are just different financial operations that you can tailor to your specific situation. There's no right answer.
> Those losses aren’t equitably distributed, either: Nearly 2 million mortgages are underwater in the U.S., and they’re disproportionately concentrated in Black and Latino communities. Tenants in coastal cities, meanwhile, know the pain of forking over more and more rent every year, unable to save for a down payment and living at the mercy of sometimes unscrupulous landlords.
> The housing situation is only getting worse—more expensive, more inequitable, more precarious. As prices have continued their climb in the country’s most economically dynamic regions, it’s no longer feasible for working-class residents to seek out the best opportunities there. Instead, younger and lower-income residents are being pushed out to places where jobs are less plentiful and lucrative
> Largely as a consequence of housing prices, Generation X held less than half as much wealth in 2019 as Baby Boomers of the same age did two decades earlier, and Millennials are on course to hold even less.
I'm glad it worked out for you bud. Just remember there are 6,999,999,999 more people on this planet besides yourself.
But after replacing my 30 year old roof, 10 year old water heater, and 20 year old furnace all in the same month? Yeah. Owning isn’t always great. But on the bright side, unless an emergency happens, I’ve got many years to recoup those costs. Just hurts writing out that many checks all in one go.
In some sense you restore the house to where it was before years of use.
I'm glad I bought 11 years ago. My house is easily worth 2X what I paid then. If I'd been renting all this time I'd be paying at least 2X in rent compared to what my mortgage is. And I'd be subject to the whims of owners who decide to sell and make the renters move.
> If I'd been renting all this time I'd be paying at least 2X in rent compared to what my mortgage is
This is generally not the case. Rents on a property take a long time to catch up to the mortgage payment. Of course market conditions vary by location, but I suspect if a lot of homeowners ran the numbers (total mortgage + interest, closing costs, taxes and property maintenance compared to incremental annual rent, difference invested in S&P 500 or something riskier), the conclusion would be different.
This means I'm living in a nice area for only $600 a month.
If I wanted to live in a home in the same area, that $600 wouldn't even cover the interest on the mortgage, much less all the other costs that come with living in a home.
In the mean time, I have been saving thousands of dollars every month and investing it. Over the past couple of years, I managed to completely pay off over $50,000 worth of debt and also saved up around $140,000 (most of which is invested in stock market index funds).
If I want to move to another state to pursue other job opportunities, I can do that whenever I want at the drop of the hat. All it would cost me to terminate my lease early is two month's worth of rent.
So yeah... pros and cons. I'm still not convinced that buying a house is worth it over renting.
Over the last 10 years, though, I think this has been a pretty common occurrence in a lot of areas. My mortgage + property tax is right around $1k/month - admittedly I bought near the housing market bottom. Rent on similar properties in my location is getting close to $2k/month. My mortgage will be paid off in about 2 years (15 year mortgage with some extra principal payments)
My friend just bought an apartment, and it's a stressful, expensive affair. In Germany, you should expect 12% of the purchase price in various taxes and fees. You still have to pay monthly expenses, which are still 10-20% of your "rent". That's on top of maintenance, which if I recall is around 2% of the value of the building, ever year. There's a chance she might get slapped with random repairs, something that's never on my mind.
Owning a house seems even worse. Selling her house felt like a weight off my mom's shoulders. She spent so much time and energy keeping that house.
I was looking at around the same time, and I really struggled to trace the cost of renting vs buying over time, and to find where the lines intersect. It makes it a very dubious investment for me.
---
Side note: I have noticed that many articles from American magazines phrase everything in terms of race, gender and political affiliation, something I rarely see in local publications. This article is a good example. Does it add anything meaningful to the article?
At times, in certain cases, it can serve to "align" the article relative to readers' expectations and beliefs. When the article is promoting a controversial position, it can help to show readers that "people like them" agree with it.
In most cases, though, it's more likely included as a sort of "Carthago delenda est" to beat the drum for the author's preferred cultural crusade.
As to your side note: No, it adds nothing. It's just paying homage to the new national religion of wokeism.
I'm not an economist, but "market price" in this context does not seem very sensible. If I have the choice of paying the same rent for traditional housing versus housing that I can build equity in, I would end up wanting the equity. So really that should be worth more and command a higher price.
If instead they're going to fix the price of public rents so that you're not paying a premium for it, then it's not really market price and will lead to a lot of the same issues that rent control does.