Proposing an Alternative To Renting or Owning a House: Publicly-Owned Housing (theatlantic.com) 318
"Renting is terrible. Owning is worse. A third option is necessary," argues a recent article in the Atlantic, "a way to rent without making someone else rich."
It's written by Shane Phillips, who's the Housing Inititiative Project Manager at UCLA's Lewis Center for Regional Policy Studies: 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. Something has gone catastrophically wrong, and the problem won't be solved by doubling down on homeownership; we've seen where that leads. But our current model of renting — a lifetime of uncertainty only to make someone else rich — won't do the job either. We need something new, an innovation on par with the government's development of 30-year mortgages nearly a century ago. We need a housing option that combines the accessibility, flexibility, and limited risk of renting with some of the stability and wealth-generating potential of homeownership.
His suggested solutiion? A public-ownership rental option: 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.
As the loans were paid down, the equity would accrue to the tenants, minus the cost of operating and maintaining the building, administrative costs, and so on. Unlike rent-to-own programs, however, this option would never require that the tenant take out a mortgage. A renter would never truly "own" her unit. But she would claim a stake in the public portfolio of properties and be able to draw on that asset, perhaps in the form of monthly payments after a few years of renting, or larger dividends later in life, much like Social Security. The benefit could be transferred to any publicly owned apartment, allowing tenants to build wealth without being locked in place. After 35 or 40 years, a tenant might no longer owe any rent at all...
Renting in a public-ownership building would be an option for the large number of middle-income individuals who lack the resources or the immediate desire to become homeowners.
It's written by Shane Phillips, who's the Housing Inititiative Project Manager at UCLA's Lewis Center for Regional Policy Studies: 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. Something has gone catastrophically wrong, and the problem won't be solved by doubling down on homeownership; we've seen where that leads. But our current model of renting — a lifetime of uncertainty only to make someone else rich — won't do the job either. We need something new, an innovation on par with the government's development of 30-year mortgages nearly a century ago. We need a housing option that combines the accessibility, flexibility, and limited risk of renting with some of the stability and wealth-generating potential of homeownership.
His suggested solutiion? A public-ownership rental option: 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.
As the loans were paid down, the equity would accrue to the tenants, minus the cost of operating and maintaining the building, administrative costs, and so on. Unlike rent-to-own programs, however, this option would never require that the tenant take out a mortgage. A renter would never truly "own" her unit. But she would claim a stake in the public portfolio of properties and be able to draw on that asset, perhaps in the form of monthly payments after a few years of renting, or larger dividends later in life, much like Social Security. The benefit could be transferred to any publicly owned apartment, allowing tenants to build wealth without being locked in place. After 35 or 40 years, a tenant might no longer owe any rent at all...
Renting in a public-ownership building would be an option for the large number of middle-income individuals who lack the resources or the immediate desire to become homeowners.
public variant of British lease-hold (Score:3)
Re:public variant of British lease-hold (Score:5, Informative)
TFS says equity accrues to the renter, so no, this is not like a lease-hold.
TFS is very muddled with no clear description of who is paying for this scheme, how "equity" is going to accrue, how the NIMBYs are going to be overcome, or even why the government needs to be involved in financing or running the rentals. Why not just issue more building permits to private builders?
Re:public variant of British lease-hold (Score:5, Informative)
Something which has been a "thing" in the UK for some time now is the concept of "rent to own" in housing - you either buy a chunk of the property but rent the rest with an option to buy more chunks down the line, or you start accruing collateral in the property the longer you live there, and you have more rights than a standard tenant. The actual owner of the property is a special purpose organization which is intended to see its ownership share reduced over time.
Eventually, you own the property - or you can walk away at any point in time and sell your share back to the SPO. But it means that you can have a fairly substantial fund built up while not taking on more responsibility than a normal tenant.
Re:public variant of British lease-hold (Score:5, Informative)
Something which has been a "thing" in the UK for some time now is the concept of "rent to own" in housing - you either buy a chunk of the property but rent the rest with an option to buy more chunks down the line, or you start accruing collateral in the property the longer you live there, and you have more rights than a standard tenant. The actual owner of the property is a special purpose organization which is intended to see its ownership share reduced over time.
I can see these terms getting confusing right fast!
The US has its own different thing called "rent to own" regarding housing. It is quite different from what you described in the UK.
Here in rent-to-own, it is a form of lease, where your rent is higher to cover both normal rent and an additional amount goes towards paying down the lease.
After so many years (5ish?) this extra amount paid more or less substitutes for the down payment on purchasing the property.
That down payment is still for a mortgage. The idea is that rent-to-own is for people without credit and who wouldn't qualify for a mortgage.
That extra rent paying towards a mortgage is what builds up their credit to enable them to get a mortgage once the rent-to-own period is up.
Ideally anyway.
Additionally, here the two parties involved are the tenant and the homeowner. The same types of people involved when outright purchasing a house. We don't have any form of special organization involved (not to my knowledge)
You also don't get any extra rights than a normal tenant renting a property would have.
I've heard of other risks involved with them too.
I can easily see people in the US hearing the UK term but having a mental image of the US form, which is really not a great setup here.
(Sorry if you already knew all of that.. but until your post I too would have assumed no difference in "rent to own" in other countries, so at least one of us learned today!)
Re: public variant of British lease-hold (Score:3)
Re: public variant of British lease-hold (Score:4, Interesting)
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Many islamic banks have a similar scheme because they're not allowed to lend money. If you want to buy a house, the bank buys it, and you rent-to-own it from the bank.
It's mostly just equivalent to a mortgage except for terminology except that the customer has the ability to walk away with only the loss of the equity they've accumulated to date, rather than having to default or declare bankruptcy and lose everything.
Re:public variant of British lease-hold (Score:5, Interesting)
TFS is under the impression that in a normal economy owning the house you live in generates wealth. That has only been true since about 2003, and it's the reason nobody today can afford a house without risking total financial ruin (and economic collapse) if interest rates return to some kind of sane rate.
The house you live in is, on average, a reasonably stable store of wealth, and the mortgages most people have make it a nice forced savings plan, so it does encourage stability. A house you rent to someone else can be a mildly profitable asset, but mostly because of tax deductions.
A big part of the solution to the problem the first few lines of the summary discussed is realizing that the place you live cannot really accrue value at a greater rate than inflation because shelter is the biggest component of living expenses. That correction in the housing market will hurt, but it's got to happen sometime. Another part of the solution is recognizing that the 10%/year economic growth enjoyed by American boomers during much of their productive years is very atypical.
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TFS is under the impression that in a normal economy owning the house you live in generates wealth. That has only been true since about 2003
Err no, you have always accrued wealth in owning a house. That wealth simply is capped at the value of the house. 2003 hasn't changed anything other than being a point where barriers were so significant that a large portion of the population has been forced into a situation where they pay money *without* accruing wealth - i.e. paying rent and making someone else wealthy.
The point of home ownership isn't to have a cash flow generating asset for 99% of people, even now.
Re:public variant of British lease-hold (Score:4, Interesting)
People like to say this, without doing the math.
In reality, on average, renting is cheaper than buying. But how? Well, if you're a landlord then everything to do with the house, maintentance, improvements, the interest on your mortgage, is a business expense. Suppose that adds up to 20%. You give 10% to the tenants, keep 10% yourself, you both "make" money. The tenants also get the advantage of flexibility. Everything else being equal, people who own houses tend to have lower incomes than people who rent because they lack the flexibility to move to pursue job opportunities.
Robert Schiller got a Nobel prize in economics for studying irrational economic behaviours, home-buying being one of them. That's irrational in an economic sense. There are lots of very good non-economic reasons to buy a house. The problem is, people have been sold the "it's a good investment" line so hard they believe things like your quote above. So they expect a return on investment. And you can't have a return on investment for a dead asset for very long.
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with no clear description of who is paying for this scheme
The question is not who is paying for the scheme, the question is who is not profiting. The entire equation looks to be identical to the normal purchase equation with the exception that the government has taken on the loan risk and the bankers don't profit on a difference in interest rates vs inflation. Ultimately the money still comes from the same place initially (government) and goes to the same place eventually (home owner equity) but with less skimming in the middle.
A shell game to pretend arithmetic doesn't exist (Score:5, Informative)
Yeah the arithmetic is always the same no matter how you move things around.
It sounds to me like somebody started out with the idea that government should somehow run housing, so they started trying to make a plan for how. First they figured the government could buy houses and rent them out. Then somebody pointed out that renting is renting - how does adding government bureaucracy help? So they started throwing in different parts and moving things around until they or their audience lost track of what all needs to be paid for, and how it would be paid for.
In the end, buying a house costs $X.
Maintenance costs are $Y / year.
Sending the money to Washington and back, with a congresscritter taking their cut, doesn't make it cheaper.
Re:A shell game to pretend arithmetic doesn't exis (Score:5, Informative)
That's not really true. The Government is surprisingly good at keeping overhead costs low. Take healthcare, for example. The lowest estimate I could find was that 17% of the cost in the private system is due to administrative overhead. Contrast that with Medicare, where administrative costs are ~2%
Waste seems to happen mostly in public-private partnerships. Military contractors are among the most notable offenders.
I'm reminded of a scene from Hell on Wheels, a drama about the building of the transcontinental railroad. In the scene, Thomas Durant berated his surveyor for proposing a straight track. His reasoning was that they were compensated per mile of track laid, so they should take a more serpentine route. "We are suckling on the infinite teat of the federal government." Efficiency just isn't good for business.
That kind of thinking is why Eisenhower warned us about the military industrial complex. See, if you hire a private company to do government work, their only goal is to extract as much money as they can, while spending as little as possible. That's guaranteed to be inefficient.
Re:A shell game to pretend arithmetic doesn't exis (Score:4, Informative)
That's not really true. The Government is surprisingly good at keeping overhead costs low. Take healthcare, for example. The lowest estimate I could find was that 17% of the cost in the private system is due to administrative overhead. Contrast that with Medicare, where administrative costs are ~2%
But are you making a fair comparison? What is included in the 17% and 2% costs? Is insurance collection included in the 17%? Because the cost of tax collection and tax collection dead-weight is probably not included in the 2% and neither is premium collection. What about accounting, auditing, fraud issues, marketing and buildings? They are as far as I can read from the rather old article below not included in the 2% (they say 3%) either. And the Medicare administration is tax-exempt. There are other differences as well. But my point is not that the public-private health care system is less expensive (I think you have quite a mess on your hands wrt health care in the USA) but rather that a quick web search seems to indicate that your numbers cannot really be used for the argument you are using them for (and please post links to your sources).
https://www.forbes.com/sites/theapothecary/2011/06/30/the-myth-of-medicares-low-administrative-costs/
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I don't follow. The point was that privatization is necessarily wasteful.
Further, we need government investment in infrastructure as the private sector simply won't build out to unprofitable (or even less profitable) areas. Taking rural broadband as a modern example, there is endless waste (and more than a little fraud) because we've privatized the entire rollout! It takes heavy regulation and a lot of oversight to make a public-private partnership successful, though the need for the private entity to pr
Re: public variant of British lease-hold (Score:4, Interesting)
Theoretical equity after paying all the upkeep and management fees....so no equity
Why is that? Upkeep, management fees and interest due are all very well understood quantities, which any property management firm can figure out for you. Those do not add up to a full market rent by a long shot. My first rental property, on which I had to pay crazy interest because the bank wouldn't give me a decent mortgage, broke even. That is: the rents paid for upkeep, management fees, interest and loan repayments. So in 20 years, the tenants would have paid off my mortgage and I would own the building free and clear. And in the subsequent years, after some of the loan had been repaid, it actually generated a small income for me.
If I were a nice fellow like Shane Philips (which I am not), I could choose not to repay that mortgage and sell the building after 20 years to pay back the bank, take a reasonable dividend for myself out of the rent, and set aside the rest for the tenants, to be paid out when their lease is up. That's basically what this scheme is.
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It's literately proposing a "co-op" model that already exists. The co-op model does require tenants to actually participate in maintenance activities, more incentive to take care of the property.
The reason cities got out of managing rentals was entirely because they didn't want to maintain them, so they sold them off to private owners, who then raised rents as much as they could get away with, then sold the property to developers who didn't put it back into the public, but rather turned them into luxury con
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Why would you expect that to be significantly different than any other apartment building?
Because, according to TFS, the rules are 1. Move in. 2. Pay rent.
Did you notice that "pass a credit check" is not on the list?
If you include a credit check, you are only renting to those who can already find housing in the private rental market.
You are also opening the system up to lawsuits since government agencies will be using private credit bureaus to control access to a taxpayer-funded entitlement program.
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Hell yeah! (Score:2)
What now? (Score:2, Insightful)
"Renting is terrible. Owning is worse.
[citation needed]
Where's that?
Not sure I understand what he's on about. My wife and I bought our 4 bdrm, 2.5 bath, 2,500 sqft (ranch) home on 1/2 acre lot, with an in-ground pool here in Va Beach in 1993 for $160k and I paid it off (early) in 2011 and it would list now at $465k. I was born in 1963 so am pretty close the start of Gen X. I'm debt-free. Live below your means, pay off your debts as soon as possible -- pay off CC every month -- don't buy stuff you don't need and save. Oh, and don't have ki
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Re: What now? (Score:2)
If you're in your late 20's with no kids and didn't blow your income on Good Times that should be No Problem, even if you've been working minimum wage jobs. Life is about choices and consequences, and while I don't mind helping people dig out from under their self inflicted problems I don't think they shoul
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Combination of down payment and then making the montly note plus insurance plus taxes and then saving for whatever fixes need doing (A/C, roof, septic, well are all over $5k when something breaks it seems). Add in having enough discipline to not refinance/HELOC it out when it spikes in value to buy wasteful things
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I mean, similar story here, bought house in 2004 for $200k.
Re:What now? (Score:5, Interesting)
$160K in 1993 to $465K in 2021 is an annual rate of return of about 3.89%. You'd have done way, way better putting that $160K in the stock market in an index fund that followed the S&P index. Even investing $160K in 2011 when you paid off your house would have yielded $657K, or $200K beyond your house's current value over only 10 years.
From a financial perspective only, owning real estate is rarely a spectacular investment. What it can do is force people to save and build up equity rather than fritter away their money. A disciplined investor, however, is often better off renting in the long run.
Here's a pretty good video [youtube.com] on the subject. However, in North America, home ownership is somehow treated as more virtuous than renting, and renters are looked down on.
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Sure the ROI would have (probably) been better investing that money in the stock market instead of a house, but where would I have lived? As you mentioned, renting would have cost more and I would have ended up owning nothing. Over that time, I did also invest via my 401k and had other savings so the home equity simply adds to my net worth.
Perhaps some of the problem is increased home valuations, but a larger part of the problem is that wages have been pretty flat or haven't kept up with inflation. That
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You rent and invest what would have been the down payment. While rent may cost more than a mortgage, it is typically about the same as or less than the total cost of ownership of a house if you include property taxes and maintenance (the rule of thumb is to budget 1% of the purchase price for property taxes and another 1% for maintenance.)
The video I linked to crunched the numbers (or maybe part 2 did; the video I linked was part 1 of a series.)
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D'oh, the 1% for taxes and 1% for maintenance is an annual amount, obviously.
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Yeah, but he can't live in his money market account, now can he. So was he suppose to live in his parents basement while investing monthly the money he used for that silly mortgage?
Re: What now? (Score:3)
It's the leverage that makes you money. And banks don't loan you the same amount at low interest rates if you tell them you are putting the money in the share market rather than buying property.
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"It's the leverage that makes you money."
I don't quite follow that. Mortgage rates in 1993 were around 6 or 7% and as we've established, the annual rate of return on his house was about 3.89%. That's called losing money.
Anyway, watch the video I posted (and the second video in the same series.) The guy crunches the numbers.
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Perhaps, but you have to live someplace. Which is better: "losing" some of your money to a mortgage (vs. what it might've earned invested elsewhere) or losing all of your rent every month? After 30 years (or less...I paid off my mortgage in about 21 years) of mortgage payments, the property owner has a place to live, free and cl
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You're not following. In a lot of scenarios, you'd end up with more money by paying rent and investing the savings from not having to make a downpayment, pay property taxes, or maintain a property in the stock market.
Unfortunately, few people are disciplined enough to do that.
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So his analysis that home ownership has all these costs, but renting is a sterile transaction where you can stay in the same plac
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It depends where you rent. If you rent a house from a private person, sure... there's the danger of having to move if the owner sells the place. That exact thing happened to me recently.
But if you rent from a corporation whose business is renting properties out, that is not going to happen. And at least where I live (Ontario, Canada), tenants have a lot of rights and it's very difficult for landlords to just kick you out for no good reason (and doing fake renovations so you can raise the rent would def
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What you say is true, except since 2003 when the housing market in most places went insane. The OP is either mistaken about his house's current value or he really made a bad investment, because most real estate has appreciated a lot more than that, all in the last 15 years or so. That's why it's unaffordable.
The 2008 crash in the US reset things a bit, but then unrealistic valuations just kept trucking back on up. Here in Canada it did not reset in 2008, so things are even more over-valued.
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That's true. The Canadian market is insane. I actually do own my own place now, but that's despite the financial analysis, not because of it.
The Canadian bubble has to burst at some point. House prices here are completely unsustainable. The very first house that I bought back in 1992 cost about 3.25x my annual salary. The house I bought recently would cost probably 8x the salary of someone just starting their career, and that's if they're in a good career.
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When I bought my house, the amount I had to pay off was set. I did pay it off, it was a purchase, not an 'investment'.
If I was renting, I would be at the mercy of the landlord hiking the rent.
So from a financing perspective, though it may not be the best return, it does get rid of a huge expenditure when it is paid off and limits your ongoing liabilities in the event of a boom real estate market.
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1993 for $160k and I paid it off (early) in 2011 and it would list now at $465k.
Yeah, this is kind of the problem.
My parents bought their property in the UK in 1997 for £45,000. A nice, tidy, 3-bed semi-detached modern build with a nice garden in a nice area.
By the time I was looking for property around 2005, the cheapest equivalent to what my parents bought was a 2-bed semi-detached in the same area, and they were going for £125,000.
When my parents sold their property in 2014, it went for £205,000.
Theres nothing in the area for £45,000. Studio apartments go f
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I'd imagine that £205,000 in London would get you a third of a parking spot, if you were lucky.
The problem in many places (certainly most cities in Canada, where I live) is lack of housing supply along with opaque information. For example, houses in cities in Canada nowadays generally receive multiple bids, but bidders can't know what the highest current bid is. So people who really want the house tend to overbid. Real estate agents love opaqueness because it increases their commissions.
As an e
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The lack of housing is definitely an issue, but its not always the driver - the same town Im talking about doubled in size during the same period, but that doubling didn't slow down the house price rise at all.
Re: What now? (Score:2)
Where I live a two bed maisonette is £200-£220. Three bed is £350-450k. Four bed £500-600k. Weâ(TM)re still stuck with a mortgage being 4x your salary. Average wage of around £30k will only get you £120k, even in rough areas you wonâ(TM)t find a decent home that doesnâ(TM)t need any work done to it for less than that, on top of needing to raise at least 10% deposit. Only positive is interest is low at the moment. Renting,
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Renting, you're paying 50% more than you would if you were paying off a mortgage.
Yup, and theres a very good reason for that - the property owner is responsible for basically anything going wrong with the property, plus taxes etc.
Since moving from the UK we have been renting our UK property out, and yes the rental rate is about 40% higher than the mortgage we have on the property. But lets break down some of the things I have to pay when I dont have to pay when occupying the property:
* Income tax on the rental income - theres no relief for just covering the mortgage, that was ended a w
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1993 for $160k and I paid it off (early) in 2011 and it would list now at $465k.
Yeah, this is kind of the problem.
Increased home valuations may be part of the problem, but I think I read that wages have been pretty flat over the years and, if so, this prevents people from saving and affording a home. The rich get richer, the poor get poorer and the middle are stuck or trending downward ...
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The rich get richer, the poor get poorer and the middle are stuck or trending downward ...
This is too simplistic - my wifes family were *poor* when she was growing up. Both parents made redundant multiple times in the 70s and 80s, living in council housing, never had new clothes etc.
In the late 1980s they had scrimped enough together to start taking part in the "right to buy" sell off of council property - you could buy the council property you were in at a fairly decent price, with a government backed mortgage. So they could pick up a 3-bed council property for around £25,000 around the
Re:What now? (Score:5, Insightful)
I think this is a 2008-crash reference.
Wow, you missed the point Yes, as a (baby) baby boomer, things worked out great for you. That's (part of) the point of the article. When you say "I bought this for $160k and now it's worth $465k, things are great" you sound like "I bought bitcoin at $5. It's now $60,000. Things are great".
The World You Grew Up In Is Gone
Your house purchase price was around the national average and took the average family less than 18 years to pay off. (Wow, you couldn't have hit the average numbers more exactly.) Now, more women are in the workplace so the average family has two incomes and it now takes the average family 27 years to pay off a house. (And yes, both are based on the traditional percent of your household income, not how long it actually takes) Similarly, when you went to college a minimum wage job could pay for (public school) tuition at 20 hours/week. Now, it takes 73 hours/week (again, for public school). Which doesn't leave much time for class, what with you working more than 10 hours/day.
If you wonder why the phrase "ok boomer" started trending, it's because your (condescending) advice is no longer relevant. And because you act as though it was your good decisions and not circumstances that led to where you are. By the time your generation was where the millennials are, you owned 4.4x as much wealth. Do you think that's because of avocado toast, or because your parents heavily subsidized things like your tuition and then you didn't pay it forward?
Re:What now? (Score:5, Insightful)
Your advice includes "most people in your generation will not be able to afford kids." And I don't even know if your advice is good anymore. Is living within your means is a good plan if your debt hole is deep enough? Maybe letting it snowball to as large a size as possible before it collapses on your estate when you're dead is reasonable.
So far, you match it to a tee. Let's go deeper into what you said.
I didn't mean that your parents literally wrote a check for your individual tuition. I meant, as a generation, your parents paid higher taxes so the price of tuition was lower for each student, you included. I also meant that you (again, generationally) then wanted lower taxes and a higher burden was placed on the students. That's why tuition, inflation adjusted, has gone up 4x in the past 25 years. (Notice, after adjusting for inflation.)
You are proud of your working through school for 6 years. Let's say school is equivalent to a fulltime job. If you went the school for 6 years, that means 2/3 of the time you were in school and you worked the other 1/3. That's about 4,000 hours of being paid. If you did that at a minimum wage job in 1972, you should have just been able to cover your tuition and taxes, but not room and board or vehicles or fun. So you lived at home, borrowed money and got grants to make those possible (money is fungible). Today, your work you are proud of would have covered your tuition for one year out of six. And that completely discounts things like "FICA and taxes", "room and board" or "my own vehicles".
I'm not trying to say that you shouldn't be proud of what you accomplished. I am saying that people in your position now cannot do it. I'm very much saying that you looking back and thinking "That was hard but also fun and worth it" is looking back at a time that Millennials and Gen Z say "that's all you had to do? That's nothing." You're bragging about being savvy saving money on a mechanic by doing your own maintenance and that's just not relevant to people who cannot afford their schoolbooks, let alone a vehicle to perform maintenance on.
To put it a different way, think about the life advice one of the Walmart heirs might give you. It's very solid advice on which charities to donate to to mingle with the right people to... yada yada. But it doesn't matter because it's completely outside of the world you live in.
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In established cities that means more condominiums. So government in their planning rules can demand that all commercial and retail space cap off all structures with residential units for sale or rent (really ramp up the number the drive competition and to make those properties more accessible to purchase for those who are less competitive (don't be a dick).
Also ban carparks open to the sky, get building space above those carparks. Every single mall should have at least town houses above their carparks, simply really stupid not to because of the many benefits it provides to the development. Every single commercial and retail development should by law be capped off with residential apartments available for sale or rent, by law (it makes sense and it was just a silly oversight to not do it but regulate it and force it to make sure it happens all of the time)
Overly prescriptive solution to local problems you know nothing about. Exactly the kind of thoughtfulness one can expect from those who go around calling others names.
Rent to own (Score:4, Insightful)
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This is just called rent-to-own
TFS says "fair market rent". Rent-to-own means you pay above-market rent to accrue equity.
So some extra money just magically appears from somewhere (most likely the taxpayer) and makes everything work.
Education is one root cause (Score:2)
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I want to say I remember seeing an article that explained that, for builders, not only can they make more profit selling larger, more luxurious (and expensive) home on a purely proportional basis, but the margins on luxury components are larger, so they make an even greater fraction of profit for luxury homes. So even if they have complete freedom on what to build in a lot, they are incentivized to build larger, more-luxurious homes, right up to whatever the market will bear.
Builder and developers will sur
That has never been tried before..... (Score:4, Insightful)
Please explain (Score:5, Insightful)
and the problem won't be solved by doubling down on homeownership; we've seen where that leads.
Where does/did this lead? I am not agreeing or disagreeing with the statement, I don't understand fully what it refers to. The article doesn't clearly support the statement or really explain it.
Re:Please explain (Score:5, Insightful)
From the summary:
and the problem won't be solved by doubling down on homeownership; we've seen where that leads.
Where does/did this lead? I am not agreeing or disagreeing with the statement, I don't understand fully what it refers to. The article doesn't clearly support the statement or really explain it.
It leads away from his thesis.
Re: (Score:2)
Reservation housing (Score:3)
Or.... (Score:2)
Buy a really nice 5th wheel or tiny house every 10-15 years and bank and invest your money if kids aren't on the table.
If you finally get enough to throw down on some land then do it and just add a garage sized cement pad, add a pre-fab covering, dig a well, install electric and sewage and sidestep a house completely. Now you can have your cake and eat it too...
No stake in it (Score:5, Insightful)
Having known a few landlords in the past (not ones stuck with "city" properties), there's not a lot of "getting rich". Renters don't care about what they rent, beyond getting back their security deposit, Having to do thousands of dollars in repairs each time the renter changed doesn't leave you rich.
Now make the government the landlord. Governments notoriously don't give a crap about anything outside of the "show place" parts of town. As mentioned before, we have had government owned-and-run rental housing over the decades, and most were torn down after they proved to uncontrollably BAD.
But, each generation thinks they can do what failed before, better than the last generation, or they've simply never learned about how bad things got, so it seems so wonder this time.
bzz Rent will be higher than market rate (Score:2)
So your rent gets you a home AND something more (equity). So, all else equal, the rent will be *higher*.
With a normal rental at market rates, you can invest the extra money in *whatever you want*. So a normal rental is strictly better.
The mortgage industry would scream bloody murder (Score:2)
Cabrini Green (Score:2)
Lack of social mobility (Score:5, Informative)
Renting is not always bad (Score:5, Informative)
But our current model of renting — a lifetime of uncertainty only to make someone else rich — won't do the job either.
This is just an assertion stated as fact without serious persuasive argument that it is true.
Owning a house ties you down to one geographical location, limiting your jobs search and other career options to what is possible by you living in one particular address. It becomes particularly sub optimal for a couple with two specialized degrees. If you just rented, without owning the home/apartment, you can move where the jobs are. If one wants to leave the job for personal time or getting a degree to change career path, home ownership would weigh you down heavily.
The 30 year fixed mortgage "innovation" is basically allowing ordinary people to acquire something with a leverage of 1 to 4. You pay 20% down, but get 100% of the appreciation of the asset, 1 to 4 leverage! Such a leverage was available to common man only through home ownership and asset backed mortgage. I was an immigrant then, took on a 1 to 10 leverage to buy a home in 1998, without paying Private Mortgage Insurance. ( I used to listen to the radio program by Bruce Williams, Shocked to learn so many Americans who have lived in this country since birth, older than I am did not know about taking 80% primary mortgage, 10% secondary mortgage to get 1 to 10 leverage without PMI! I learned how ill informed most people are by their questions. Landed in America in Aug 1990, that weekend newspaper ad section had private check printing for 6$ for 200 checks. I knew enough to decline the bank's offer to print my checks for 20$ for 200 before I even opened an account in Sun Trust Savings, TX.)
But now the investment opportunities have multiplied. Stock trading, even option trading is possible for ordinary people. In 1995 Schwab gave me 45$ commission trade, considered a discount brokerage for giving such cheap trade while the full service brokerages charged 149$ per trade. The lessons and truisms of that age, "Take the biggest housing loan the bank is willing to give you and pay down the mortgage diligently, you will retire rich" is not true any more. Rent, dont own, invest the money you save for the long term in the stock market. Pledge the stocks to borrow and trade and get some small prudent leverage, not 1 to 4, but decent like 1.5 or so. There is no guarantee this will beat real-estate, but it is not like there is no other opportunity for the common man.
Disclosure: I own rental properties and REITs. Simply stated if more people rent, my income from these assets will increase.
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The problem is that if you do buy a house, you can just sell it at a inflated rate down the line, and move.
Nothing more, and nothing less.
Easy.
Difference in price could even outscale the rent on the mortgage.
Is owning that bad? (Score:2)
Renting carries certain intrinsic advantages over ownership, for individuals as well as society. One is flexibility, and the access to opportunity that accompanies it. Think of a woman who buys a home in one part of town, takes a new job in another area a few years later, and is then stuck with a 90-minute commute, or of a man who turns down the better job because he doesn't want to sell his home or be saddled with a long commute.
I thought we specifically made home ownership easier so people would "settle down" and create a more stable society? And with so many companies switching to full time remote now isn't this far less of an issue than it was historically?
Renting offers diversification of risk. Renters are able to invest their resources in a wider array of assets, and they arenâ(TM)t stuck holding the bag if their regional economy dries up and home prices fall.
Sure, while building zero equity. I realize there was a housing crisis but let's not throw the baby out with the bathwater. For basically most of US history homes have been an incredible investment. It's just a matter of timing.
I bought my house in 2007. If I had sold
Worst Idea Imaginable (Score:5, Insightful)
the equity would accrue to the tenants, minus the cost of operating and maintaining the building, administrative costs, and so on
I'm sure everyone wants to have their finances tied to how effectively a government program can manage its cost overruns.
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Yes, but can the tenants have negative equity? Because there options on this are:
- Negative equity
- Higher cost than market rate
- Taxpayer subsidized
What they really don't want to tell you is that it's the third option they're banking on.
No different from the projects we have now. (Score:5, Insightful)
The only difference between this scheme and the current low-income housing projects is that everyone would be eligible to get an apartment. Because "everyone" owns these properties, no one owns them. None of the occupants feel any pride of ownership and they do not maintain the property. Have you every visited one of the projects in Chicago, or St Louis, or New York, or Detroit? I am not interested i having the government take responsibility for the place I live, thank you.
How is Owning Worse? (Score:4, Insightful)
I read the article, and the only evidence that "ownership is worse" is a reference to mortgages that are "underwater," or that the property's value is less than the amount owed.
To me, that is a risk that can be mitigated by doing sufficient research on neighborhood prior sales, having more than a minimum down payment, and trying to get the best loan rate possible.
I realize that many Gen-X and Millennials are probably not now, nor may ever be in a position to own a home. This plan may in fact be a good thing for many people, but let's not go around making up excuses to pump up what appears to be an expansion of public housing.
As a happy and successful homeowner... (Score:2)
As someone who didn't and doesn't need this kind of solution, man will I say that it is absolutely brilliant. It has my full support.
This is certainly the kind of thing that improves communities, of all kinds. It'll improve traffic and transit too.
Time for me to put my money where my mouth is. Clicking the link now.
Meet your new landlord: Liberal Government (Score:2)
superannuation kick start (Score:2)
In Australia we have compulsory superannuation. The most important purchase a person makes is their home. The difficulty is raising capital for the deposit for that first home. The biggest saving a person can make is not paying a lifetimes rent.
Put these all together and it is a no brainer to use super to pay the initial deposit. When you finish paying off the home put extra into super to 'pay back' the mortgage deposit.
There is also a call for super funds to lend for home loans to benefit members, it is an
If owning were "worse" it wouldn't be such fun. (Score:2)
I bought wisely, paid off my modest rural homes and love the extremely low overhead coupled with control over my property.
Tenants are far less free to use their quarters as they see fit, while ownership confers great advantages and comforts. Tenants are stuck with other tenants and suffer from having to share spaces.
When you own you (if you chose accordingly) are free to do much more than a tenant. When I wanted more workshop space I built it. When I wanted to raise chickens I was free to do that. I can tar
An idiot (Score:2)
> "Renting is terrible. Owning is worse. A third option is necessary," argues a recent article in the Atlantic, "a way to rent without making someone else rich."
Lol how about buying it and then rent it to yourself, to make yourself rich? Oh wait you said that was worse.
Or maybe we could stop using zoning laws to forbid people from building affordable houses because that would stop houses from appreciating in value (also known as becoming increasingly unaffordable).
It works for apartments (Score:2)
For apartments, you could rent an empty shell, and fit it out yourself, as is common for commercial leases.
Rents would continue to be set at the market rate for an an empty apartment.
When moving, you could sell the rights for an amount that should correspond to the value of your improvements.
Or look at the successful model in Singapore, with 99 year leases:
https://en.wikipedia.org/wiki/... [wikipedia.org]
Though I'm not sure how well the racial quotas in building would be accepted in the US.
For houses, people want to own, a
We had this for centuries (Score:2)
Here in Bay Area we have many co-ops that will buy the house from a pool, and let you "rent to own". For Muslims who want to avoid paying interest, for example, this has been a good choice for a long while.
And others do this too.
Don't present ancient ideas as if they were new.
(Also lack of equity in housing is more of "by design". Old houses in Cupertino are listed for $2,000,000 while the owners only paid 10% of that. By restricting new housing they made sure to reap all the benefits of the decades long gr
Overall... (Score:2)
The article is a tripe "what if" starting off with the flat statement that renting is bad and owning is worse".
Having both rented in my life (who hasn't) and owned, I can agree that renting isn't ideal but being able to simply call for a repair is quite nice vs having to have the resource to make the repair your self.
It cost me quite a lot of money in the near past to deal with a water main leak on my side of the meter. And it points up a problem with this "what if " proposal. SOMEONE has to maintain fund
I don't see how this would really work out? (Score:5, Insightful)
I know from watching my dad try to invest in several 4 family units to rent out; it's not that easy to "get rich" by becoming a landlord. I also know ONE guy who did become a self-made millionaire as one, but it took him a good 35 years or so of continually reinvesting earnings in new properties and a lot of labor doing his own repairs to them. (He had only a high school education and someone started him on the path to making money with rentals when they gave him the opportunity to buy one really cheap if he fixed it up himself, and paid them back over time.) He just focused on that goal continuously from there, not knowing anything else he could do to make a living.
With renting, everyone wants to look at it from the renter's angle. They pay all this money out to temporarily live in a place that's not theirs, and when they move out - they have nothing to show for it. The thing is though? It costs a lot of money to maintain a roof over one's head, and too many people just don't want to face that fact after growing up to adulthood under the roof of parents or guardians who covered all of that for them.
The last time I rented a townhouse apartment, it was as part of relocating to a new city for a job. The monthly rent was about $200 less than what I wound up paying a year later on my mortgage when I bought a house in a city nearby. But the guy I rented it from was still trapped in a mortgage of his own on that townhouse, which he unfortunately purchased at a high point in the housing market. I did a little research and realized my rent was only netting him about a $75-100 a month profit after covering his cost for his mortgage. And while I was there, a major repair was required to the master bathroom. (Shower stall had to be torn out and replaced.) So there's a good chance that wiped out ALL the profit he made on me the whole time I stayed there.
So yeah -- this assertion that renting is categorically "terrible" for renters and a new housing model is needed? I'd say that's pretty questionable, since by and large, the cost of rent accurately reflects what it really costs to hold onto and maintain the rental property itself. Renting at "market rates" under this new model would, I think, wind up where people were still asked to pay about the same amount of rent they do from a traditional landlord who owns the property currently. Any discounts below that price would be reflected by a lack of willingness to perform maintenance/upkeep. (Don't forget, these rental properties need to be insured too. Renters usually only pay for cheaper "renter's insurance" that covers what they own ... not damage to a property itself if it burns down or what-not.)
Re: (Score:2, Informative)
Move in & pay rent...
Tried & failed, more socialist loser think.
Unlike brilliant capitalist ideas like trickle down economics, the 'Kansas experiment' and subprime mortgages.
Re: Tragedy of the Commons (Score:3, Insightful)
Re: (Score:2, Informative)
"Trickle down economics" is a lefturd strawman. [youtube.com]
-jcr
No it isn't: https://en.wikipedia.org/wiki/... [wikipedia.org] ... The concept was invented in the US during the 1890s. Back then they used to call it 'The horse and sparrow theory' based on the idea that the horse (the capitalist) eats all the oats and the birds (the lowly citizenry) then come and pick what oats are left out of the horse's turds. It kind of sums up how you right-turds want the world to work.
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Yes, but it is kind of funny that the bozos who came up with that analogy didn't pick up on just how condescending it is.
Like the phrase "trickle-down economics", the "horse and sparrow" analogy was used by the critics of supply-side stimulus, not its advocates.
Re:Tragedy of the Commons (Score:4, Informative)
Let me fix that for you: Democrats demagogued supply side economics as "trickle-down" as a way of stirring up class envy during all of Reagan's term.
Nice attempt at blame shifting, but:
...
It's kind of hard to sell 'trickle down,' so the supply-side formula was the only way to get a tax policy that was really 'trickle down.' Supply-side is 'trickle-down' theory.
—David Stockman, The Atlantic. Director of the Office of Management and Budget (1981–1985) under President Ronald Reagan.
Your move
Re: (Score:2)
I don't agree with the "socialist loser" bit; but here are just some of the ways the proposed approach fails, based on things we have already tried:
People don't like paying rent for property other people own. That doesn't just apply to small-time owners, it applies to the Government, the Property Managers, Big Brother, or whomever else is the owner instead of the occupier. This will be seen as no different to renting.
You might think that the above problem will be lessened if the occupier either: 1) pays les
Re: (Score:2)
Unless they really thrash it, their holding deposit should generally cover it, especially if it's a months worth of rent. It's quite amusing listening to people complain the evil landlord wouldn't give them back their holding deposit after they let the property fall into dereliction.
They care then, but at that point it's to late.
Re:Boomer (Score:5, Informative)
In the lead up to an election in Australia, one party proposed getting rid of the generous negative gearing benefits given to property investors. The other party was committed to keeping them. So they tried a "Think of the children!" argument: they found a family where the "investor" was a young couple buying a house for their baby.
The media tore that to shreds: why should Australia care about a family buying a house for an infant when adults are struggling?
The party favouring keeping negative gearing won the election.
Re: (Score:2)
I think the only way we are going to make housing affordable is to ditch negative gearing.
I think the only way to do it is to stop allowing it for new aquisitions but keeping older ones. give existing people 5 years before its cut from them too.
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I lived in a country....BLAH, BLAH
What is it with you foreign conservatives who like to shit on progressive policies by likening the Democrats to your commie leaders back in your "country" without ever specifying what that country is. You guys just love your unverifiable anecdotal horseshit, don't you? I've seen this happen so many goddamn times on slashdot and elsewhere. Are you afraid that we'll call you out on your bullshit if you name the country and we fact check you? Name the fucking country with this 40-year waiting list. I bet you
Re:Communism (Score:5, Interesting)
Re:Communism (Score:5, Insightful)
Free markets are defined by the rules that govern them, not their absence. That requires a government that is... yes... *in control* of business and private wealth, and setting boundaries.
Arguing that this can be done corruptly or badly isn't a blanket argument against all efforts to address the problem, any more than you can argue that we should get rid of all police because some of them over there acted badly.
Property is a prime candidate for overhauling the rules of buying and selling. Government putting restrictions on private wealth and rent-seeking behavior IS NOT COMMUNISM.
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"calling absolutely every idea that tries...." perhaps you were replying to someone else, since I commented only on the idea in the original post, which proposed government funded co-op housing in which everyone owns shares, enabling people to move from place to place while retaining their shares of the (I presume) country wide non-profit co-op (if not country wide, how are you going to move from L.A. to N.Y.C. and retain your ownership). While my personal experience was with a government funded coop where
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Capitalism doesn't add up, except for the wealthy.
Socialism is the way of the future and has only been made unsuccessful by capital putting trade embargoes on socialist countries until they give up and come back under capitalist control. Collectives can form very successful businesses.
Currency is only a counter of labour and goods. Capital has no intrinsic value apart from inflation and speculation.
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Socialism has failed everywhere it's been tried.
Assuming the American definition of "socialism" where it's the same as communism and communism is the same as Stalinism.
Strong men create good times. Good times create weak men. Weak men create bad times. Bad times create strong men.
Bullshit.
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The projects would actually be a wonderful place to start such a program, helping those who need it the most.
You've already got the government-operated housing, you just need to work out a system to let the residents accrue an ownership stake in the endeavor, and to cash out when they're ready to move on to non-public housing.
Re: A solution for him... (Score:5, Insightful)
That's not true at all.
There are problems, but I'd hardly call it a failure. I run a non-profit that operates a computer lab in a section 8 development. (formerly HUD Neighborhood Networks) It's clean, well-maintained, and virtually crime-free. I don't even lock my car doors when I'm there.
If there is any real problem, its that it is very difficult for residents to save. If they would exempt savings from the assets and income, it would make it much easier for people to get their lives together and move out. As it stands now, they're forced to spend windfalls quickly to avoid losing it to higher rent. That is, it actively discourages good financial habits.
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You should tell that to all the governments which successfully run government operating housing around the world. What you said was an abject failure is actually quite normal for example in many countries in Europe.
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https://en.wikipedia.org/wiki/... [wikipedia.org]
Just because the USA is abjectly worthless at running programs for the poor because fundamentally, it hates poor people and acknowledging that they exist, doesn't mean that you can't have government operated housing that works.
But yeah, it's hard to believe that it'll work in America. The scheme inconveniences the wealthy, so it'll never fly.