The rise of the forever renters | Hacker News Reader

The rise of the forever renters

wsj.com

38 pointsbelter72 comments

Alternatively, the kind of real estate that these "forever renters" would like to buy are either not built or not available at the prices that they can afford. I wasn't able to buy in San Francisco or Boston without a two hour commute, but renting was achievable. Now that I live in a middle cost-of-living area making a remote salary, I was able to buy at a reasonable price relative to renting.

On top of that, the labor market as it is rewards those who are willing to be flexible with their city of residence in many industries, and the transaction costs of moving are more expensive when you are buying and selling real estate. Further, the costs of buying in many cities are higher than renting for time periods of less than 10 years. This is again an article that couches structural issues as personal decisions.

Due to immigration, the demand is practically inexhaustible. You cannot build fast enough to fix the problem.

What will all those new people do, maybe some fraction will build homes...

For places like the US, which this article is about, we are nowhere near a high rate of immigration, and population growth is nowhere near historical rates.

What is at historical rates is restriction on the ability to build homes. We have never had greater artificial restrictions on growth than now. Our history do the past century is coming up with ways to prevent the natural densification that humanity has used throughout its history.

> densification that humanity has used throughout its history.

Yeah! Didn't the Romans, like, invent "concretum" for building 40 story condo towers?

We densified throughout history; what gives now?

US code pretty much universally bans anything as dense as Roman cities.

Part of it is cars, part of it is exclusionary zoning.

I'm not in the US. There are housing crises in other countries not caused by weird US problems.

The problem with renting is that it's so expensive that it's hard to stop renting. How, in this market, do you save enough to buy when you can't afford to pay less rent? Most people are being squeezed between a rock and a hard place.

Live with your parents, save money, then buy.

Some people don’t have that luxury

“just don’t be poor”

Also "be born somewhere with decent employment options".

Tons of people move to find work.

“Just have well off parents”

They didn't gave me a cent. Just living with them and not paying rent and food meant I could save almost 100% of income. After 13 years I was able to buy apartment.

So .. they gave you a room and food, both of which have considerable value and cost others a considerable proportion of their early income?

How much additional money would your parents have were they not paying for your food? How much could they earn on AirBnB if they had that room spare?

Not to try and compete about who’s got a bigger chip on their shoulder, but for context I have financially supported my parents and at no point was living with them an option while keeping my career. Not paying rent and food in a high cost of living area requires you to have a parent able to afford a high cost of living area.

It’s extremely frustrating to me when people suggest this policy as if everyone has access to this privilege when most people, in the Bay area especially, don’t. (Hence the snark, for which I apologize, I am sure I have blind spots on privileges I had that you didn’t)

Unfortunately, the answer is roommates.

Thus, the squeeze, sometimes literally. When costs rise faster than incomes, people are forced to accept a lower quality of life, such as longer commutes and living with roommates, both of which can be stressful.

I understand that this is just the way things are right now, but we need more housing so that way fewer people have to resort to these measures.

To make matters worse, renting often means dealing with annual rental increases. Since the pandemic started my apartment rent has gone up roughly 8% per year, compared to the annual 2-3% raises I get for good performance at work. Some people have to contend with much more dramatic rent increases. Many people end up getting priced out of renting due to rent increases, forcing them to either move further away (which means longer commutes or even switching jobs) or downsize/downgrade, such as living in a smaller space or living with roommates. A fixed-rate mortgage would shield me from rent increases, but the price of a mortgage is substantially higher than market rents on equivalent properties in my area (San Francisco Bay Area), and home ownership has many costs that are not fixed, such as maintenance, HOA dues, property taxes, and insurance.

It's truly sad to see the price of owning or renting a home rising faster than most people's ability to keep pace. There's a major homelessness crisis in California, and one of the causes is very high home prices and rents.

California's AB 1482 gets renters some relief, though it may not apply in your case. It limits rent increases to 5% + CPI, or 10%, whichever is lower.

If you just happened to have a spare $200k lying around to make a 20% down payment on a million dollar condo in the Bay Area in the low interest rate era, you'd be paying the same as a renter, but fixed, and with equity.

Pretty much my situation in the Netherlands, my overal costs rise like 6~8% and my pay raises like 2~4%. Im pretty much forced to job hop every 2~3 year to make up and keep up with rising costs of living.

That is with me owning my own house i also have a sibling that will most likely end up being a forever renter. His rent has increased so much the past 6~7 years. That he now pays way more in rent then i do for my mortgage like almost €150~200 more in a shittier neighbourhood in the same city.

Ever since the dawn of 'trickle down economics', wealth has only continued to be distributed upwards and is becoming increasingly concentrated at the top.

This is because the cost of everything except labour has increased, forcing many to try and do more with less. It is completely and utterly unsustainable and I doubt anybody young will ever experience the kind of prosperity that came after WW2.

You can't even rely on getting a decent white collar job and climbing up the ladder any more - loyalty is expected from an employer but no longer offered in return.

That is not true. Cost of everything except housing in high demand cities decreased dramatically during latest few decades.

Calculate how many hours should average Joe work to buy 100 gallons of gasoline, to buy a fridge, to buy 100 kg of chicken breast now vs then.

Well, cost of everything except housing, medical, education, and transportation. Great that chicken breasts are still cheap I guess.

Housing outside of cities has also risen considerably.

There's no easy answer, beyond the two infinite (and equally, vague) options : "make more", and/or "spend less".

Many who make it have the key advantage of having been nurtured into that outcome across their first 2-3 decades of life, by a strong or effective family foundation. And from there, naturally, the so-called network effect opens that gap yet wider.

So it stands to reason that, for those outside that advantaged demographic, some degree of 'breaking the mould' is often required, in order to raise oneself up.

And there are so many ways.

Conversely, so many factors of inertia and lock-in. The average salary is so easily spoken for, in a life of weekly car payments, weekly phone payments and expensive phone plans, digital subscriptions for music, movies, TV, apps, games, quizzes, every spare dollar going to the endless and essential bargains on Amazon and Aliexpress, 1 x coffee or 1 x beer @ $5 a pop, throwaway fashion, neverending rubbish processed and convenience food in the trolley, while paying others to cook and deliver us food, a brand new service entering the market every day with an accompanying "small fee". A million ways and reasons to turn your money into the profit of others.

Renting is underrated, especially in the US I feel where people are constantly encouraged to buy a house.

https://www.iwillteachyoutoberich.com/renting-is-not-a-waste...

Maybe in the market this very moment it's tougher to buy, but I bought in 2020 and my mortgage + other expenses pretty much match what I was paying in an expensive city (Seattle). I didn't buy in Seattle but it's an easy drive away.

And my house is 3k sqft vs the 800 I had in the city. And that space is put to work: Proper office, guestroom, gym room, much larger and nicer kitchen (which in turn saves me even more money because I cook more), charcoal grill outside, room for more guitars and drums, proper dining room for hosting family gatherings, a porch I can sit and smoke on. The list goes on.

Grocery store is walkable and the neighborhood is nice to walk in for exercise. City experiences are 20-40 min away depending on which city I wanna hang out in. I guess I have to have a car but I had one in the city anyways since I liked to drive to destinations around Seattle. It's an old Civic still kicking so it's pretty cheap all told.

For the same money per month, locked in for years. If I renewed my lease in 2020 during the pandemic instead of owning, I'd be materially less well off.

What city do you live in now? When I lived in Seattle, most of the suburbs with 3k sqft houses weren't that walkable.

I moved to a Tacoma suburb instead. Tacoma is a very cool city in its own right! It's my main city I do stuff in.

It must be nice to get a mortgage at ~3.1% or less.

Do you realize that you would be paying over 50% more per month for that same mortgage today?

Would you still consider that a super good deal that you can't imagine anyone not taking?

Rate lock-in isn't that great with a high interest rate, because you are going to need to pay thousands to refinance.

I get where you're coming from, but it's a different analysis today than it was 3 years ago.

Oh yeah right now - it's time to rent. If this was the economy in summer of 2020, I would've probably kept rolling with my apartment (which I did like a lot) while continuing to stash away liquid savings for when buying a house became a good deal again.

But this article is about "Forever" Renters. I highly doubt buying a house will never be worth it if you follow the above path.

I agree with Ramit that it shouldn’t be characterized as throwing your money away.

But.

What it leaves out is by purchasing you’ve essentially fixed your cost of housing.

Which is important when you consider.

1. Inflation

2. The ever increasing wealth divide allowing landlords to charge more for rent knowing their tenants can never qualify for the alternative of buying their own home instead.

This is something I wish I understood earlier.

You're certainly setting a floor for your monthly housing costs, but there's all sorts of maintenance costs that crop up, unexpected repairs, and ever-increasing property taxes. I don't know any homeowners who would describe their housing costs as "fixed" and stress-free.

> You're certainly setting a floor for your monthly housing costs, but there's all sorts of maintenance costs that crop up, unexpected repairs, and ever-increasing property taxes.

As a renter, these costs are essentially passed on to you anyway, so there's functionally no difference.

The difference is in predictability.

When you sign a 12 month lease, you know more or less how much you'll spend towards housing for the next year and it's easy to accurately predict a cost ceiling.

When you own a home, you know the minimum you'll spend is the mortgage+taxes but in an unlucky year your AC goes out and you get a hole in the roof that insurance doesn't cover and suddenly you've spent 20k that you didn't plan on.

Only if you have the planning capabilities of a 5-year old.

A house doesn't have that many things that can go wrong with it that would be unforseen expenses.

AC, water pipe leak, appliance breakdown, roof replacement. None of these cost above $8k, and for bigger things there is home insurance (e.g. tree fell on a house). Many of these things can be mitigated with a cheap fix that will last you those 12 months until you have the funds to do it properly.

Also, I see this sentiment a lot from people who have no problem dropping a $15-20k down payment on an car, but somehow spending that money for home maintenance is "scary" and "unpredictable".

> What it leaves out is by purchasing you’ve essentially fixed your cost of housing.

You’ve fixed the minimum cost of your housing. You need to budget for unpredictable extras.

With renting, I know my maximum spend over a shorter timeline.

Okay, would you say the same thing about renting your car? Your computer? Your bed? Your toothbrush?

Where do you draw the limit? Because you could justify being a forever renter about anything with your logic.

Being a forever renter is being dependent on the whim of those who lend you "your" stuff. It's only natural that many people do not want that kind of lifestyle.

The decision is really surprisingly multi-dimensional and, no, most people don't even scratch the surface of it. I thought this calculator was brilliant a decade ago, and my opinions hasn't changed.

https://www.nytimes.com/interactive/2014/upshot/buy-rent-cal...

Do you have a non-paywalled alternative? The archived versions don't seem to work.

Having possibility to get a 30-years fixed rate mortgage with low interest rate with option to refinance at any moment - renting could not be underrated vs owning.

Buying a place to live is ridiculously affordable in US comparing to other developed nations.

er, ok? if the US has strict rules about not being evicted, and proper enforced rights to pets and making changes to rental properties, and some sort of mortgage affordability checking that takes into account rent you've paid for, that sounds excellent.

Except that almost every landlord I've ever had has treated me like second-class citizen or a child, constantly invaded my privacy, and skimped on all the costs that you're supposed to be saving. No guests at any time. No candles. Inspections for "safety" every 1-2 weeks, often with no notice because of a contrived emergency. Wouldn't fix the freezer part of the refrigerator because the lease only said it has a refrigerator, not a fridge+freezer. Going off on long political and cultural rants against my generation and political party every time we interact. Cameras pointed at my front door 24/7, with detailed tracking of my overnight guests (for a lease that would only allow 2 weeks of overnight guests a year).

If you don't own your home, you don't own your life.

You have had some weird ass f'd up landlords. I had 5 before buying and none were remotely that shitty.

Sounds like a civil suit for invasion of privacy to me (at least in the US). And if I just got lucky, then stronger renters laws are needed.

This sounds about average for New Orleans although the one tracking my overnight guests was in California

A blog post supported by some twitter screenshots?

If there are arguments in favor of renting, this definitely isn't it.

I’m not wealthy by the standards discussed in the article but I’m a forever renter (a different kind than those in the article).

I like living in dense cities, I dislike large living spaces, and I dislike being responsible for anything or doing any maintenance. Renting a small cheap apartment is something that fits my lifestyle and lets me do quite well financially.

> I dislike being responsible for anything or doing any maintenance

Unfortunately so do a lot of property owners who rent out the spaces.

I’ve been renting cheap places in medium/large cities for 20+ years. So far it hasn’t been my experience. But my standards are probably lower than most people’s.

This has been my only experience in HCOL areas. Either the tenants do the maintenance or no maintenance occurs. Despite the fact that this is actually illegal in some instances, landlords are aware that legal action is not worthwhile from a tenants perspective.

Its not so bad if you move around every year or two because landlords will do maintenance between tenants, or if you're renting higher-end properties. But if you're a forever-renter of cheap apartments, it can be quite a problem.

From the article:

"Homes in Scranton—which is a roughly two-hour drive from Philadelphia, New York City and Syracuse and is now known for being where the hit mockumentary show “The Office” took place—are listed at a median price of $179,900 on listing platform Realtor.com. With a $150,000, 30-year mortgage at a rate of 7% on such a home, average monthly payments would be around $1,000. "

Homes are affordable. Just not where most people would like to live.

I can afford to buy a house but it makes more sense economically to buy assets instead. A house is not an asset in my view unless you buy it to rent out.

And buying a house to rent out might not be the best way to invest long term.

I highly recommend actually sitting down and doing a detailed value/cost comparison of what makes most sense over the long term. The result might surprise you. It certainly surprised me when I did it.

I wonder how the housing market will cope when we start seeing falling demographics around the world.

You don't need to wonder. Look to Japan for the broad strokes: property in cities will still have value while rural areas fall into decay.

In more words: young people will crowd into cities in order to meet other young people and find work, while aged areas descend into irrelevance and whatever this is: [1]

Due to this, Greater Tokyo now contains 1/3rd the population of Japan[2]. While you can find a number of articles claiming it's cheap compared to metros in other countries, or horrifically expensive[3][4], whichever it may be it is certainly better than what's in [1].

[1] https://unusualplaces.org/nagoro-a-creepy-japanese-village-w...

[2] https://en.wikipedia.org/wiki/Greater_Tokyo_Area

[3] https://www.reuters.com/markets/asia/surging-tokyo-property-...

[4] https://www.businessinsider.com/america-build-like-tokyo-hou...

https://archive.ph/RRnUx

No mention of CLT Community Land Trusts.

https://groundedsolutions.org/strengthening-neighborhoods/co...

If you want to increase home ownership, you either need to change renters priorities, or pay them more, or make buying a house more affordable.

I think this all boils down to steering all economic policy toward increasing the labor share of income.

Old idea of mine was to institute renters old age insurance systems sort of like social security. Tax rentals and use the money to provide a subsidy for retired renters. I've gotten any number of objections when I've mentioned it. But I think it's fair when you consider the tax advantages homeowners and landlords get.

If you will pay renters more - prices will simply go up. The only solution is to increase available for rent housing.

Good solution could be city owned condos with apartments for rent.

These developments are being built "stick and brick" style, with highly flammable softwood two-by-fours for their framing structures and less-than-an-inch thick brick veneers for the overlay over the Teflon building wrap. I don't want to be at the mercy of someone else's misplaced cigarette, grease fire, or electrical short circuit. We need to build more affordable, smaller homes instead of more ugly McMansions and apartment buildings.

Additional reading: https://www.bloomberg.com/news/features/2019-02-13/why-ameri...

Non-paywalled version: https://archive.is/rfnFz

Are they happy?

I don’t understand how people are happy even when buying. The vast majority of homes I see being built around here have pretty much zero yards. How can anyone be happy when your neighbors are nearly close enough to reach out the window and touch on every side?

Kids don’t play outside anymore. The more room you have for their screens the better. /s

It’s an issue all around the United States. That and HOA’s. HOA’s had originally been a good thing (help a community pool together resources to pay for services the city can’t afford to provide). Things like paving, trash, landscaping, etc. Now, people see it as a business that they can run a “neighborhood” and charge $400/mo for each dwelling under their control. Add that to mortgage and insurance and some people end up having to pay more vs renting in the same area.

Most people who commented here that they moved further out to afford the space is pretty much the status-quo since 1960. Push people to the burbs. Jack up the city price. “Don’t worry, there’s always another sucker”.

HOAs were never originally a good thing. From their very beginnings in the early 1900s, they served to exclude racial and religious minorities from buying homes.

These racial/religious covenants were only struck down in 1968 with the Fair Housing Act. But because HOAs still get to investigate, interview, and reject prospective buyers, many of them still discriminate unofficially. As a consequence, some minorities (e.g., Black people) are underrepresented in HOA neighborhoods.

This is exactly what they turn us into: subscribers. They want us to keep paying them month after month, year after year a portion of our earnings forever. It’s the exact definition of indentured servant. It’s insidious and evil.

What do you think homeownership entails? No maintenance, carefree profits from ever increasing land rents only? No property taxes?

Who is "they" here, beyond the typical business person?

It’s generational ownership. My house will be paid off by the time I die. My kids will inherit it and probably in 25 years house prices will be so high that no one will be able to afford a house. I truly envision the situation so dire that they may need to both live in our house with 2 families but that will be better than suckling off the rest of the hedge funds buying up all the houses and developers forcing prices sky high.

Hedge funds need to be barred from owning single family homes. Them buying tens of thousands of homes is hurting the country and future generations.

Houses don't last forever, you pay taxes, have to make fixes (sometimes really big ones), you need insurance and most people have a mortgage.

Even if you're able to buy a house outright, and the future maintenance is no bother, who's to say that anyone in your family will want to hang on to your idea of good property? Maybe they'll sell it for cash, or turn around and rent it. The odds of a single average dwelling staying in one family for a LONG time can't be that high.

When you rent, you are still paying for taxes, fixes, insurance, mortgage, and all other costs associated with the home you live in.

But you pay even more, on top of all of that, so that the landlord can make a profit. Otherwise, there is no incentive to rent the home out.

If you own your own home, though, you are not paying for anyone else's livelihood: that profit all goes to you in the form of reduced living expenses. And in the end, you pay off your mortgage and now outright own an asset that can benefit your descendants for generations (whether they choose to keep it or sell it).

With proper care houses lasts hundreds of years. You could easily rent Airbnb in a house from 16-th century or even older somewhere in Europe.

Apart from that, few people can afford a house without a loan from the bank. As long as you have to pay back this loan, the house doesn't belong to you, but to the bank. Where I come from, this loan is so high that you need 20 - 30 years to pay it back. If you become unemployed, you're pretty much fucked.

Reply on news.ycombinator.com