The Push To Rent Is A Scam And A Big Mistake


There’s a pendulum for everything over time. What’s good and bad for you seem to alternate. Dark chocolate’s bad, then good, and now (sadly) bad again, at least according to an analysis by Consumer Reports.

If all of life is subject to alternative whims of advice, then no surprise that housing is. Be a renter. No, own your own home. Oops, sorry, you can’t afford it; be a renter. Wait, government will step in and make it possible though various ways — own. Oops, sorry, too expensive, we’re not building enough, uh … maybe you want to be part of the “smart crowd,” yeah, that’s it, part of the smart crowd and rent, you wily Millennian or Gen-Zer.

The US government has pushed home ownership as almost part of a national destiny for more than a century, as an article in Pacific Standard explained years ago. Private industry also pushed it because of all the money to be made in mortgages, legal fees, insurance, and other services. Occasionally the house market crashes for one reason or another (like rising mortgage rates and inconceivably high prices), and then the advice is for people who can’t afford their own homes is to embrace their positions as renters and pretend that it’s a smarter move.

Jerusalem Demsas recently wrote in The Atlantic that a “homeownership society was a mistake.” That this is not where many people should break their backs because for many, “particularly young, middle-income and low-income families as well as Black people, it can be risky.” That it is consumption for many, not investment.

In many ways, that is a fair comment, and not just for the bottom 50% of the country by wealth distribution who store most of their wealth in home ownership. A home is maybe the only form of wealth where, if you need access to the value, you either need to give up something essential — your living space which then leaves you with the need of finding new housing — or to resign yourself to being a renter for life. To continue to pay someone else’s growth of wealth.

But even as a commodity, owning a home, while not necessarily for everyone, remains one of the best ways to limit housing costs, which is ultimately a form of wealth retention, if not growth.

The last few years have shown how brutal rent increases can be, but as the below figure from the Federal Reserve Bank of St. Louis shows, there’s nothing new in rental growth.

Now consider a home. Taxes and insurance and maintenance costs may increase, but the baseline cost of a 30-year mortgage is fixed. It may be a bite at first, and certainly pulling together a down payment is as well, but there is nothing like rent of living quarters to put an ongoing armlock on income. The entire concept of renting has the merciless logic of needing to not only increase rents, but to leave people in a position where they must rent.

Stop considering home ownership a way to increase wealth? Uh, okay, that’s fine. But let’s also stop pretending that renting is a clever financial move. It may be what a given person or family has to put up with, but that’s different from saying it’s a circumstance to be sought as a clever choice.



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