Rethinking rent: Maybe we should stop trying to be a nation of homeowners
boston.com
boston.com
The author alludes to that in the article, but I think he needs to play it up more. For many people, this seems the real default, and buying a home is just outward evidence of that. Buying a home is a statement of commitment, that you will be there for at least as long as needed to make up the closing costs and what-have-you. Whether the house is just a byproduct of that attitude, or meant to directly project it, I don't know. But I don't think that everyone should make that sort of commitment, or that we should disproportionately laud those that do.
This is not a critique against people who desire security and stability, this is a critique against the attitude that you must be secure and stable to be worthy. I've seen it make a lot of people around me become depressed, because they simultaneously desire a more interesting life but fear being branded as flighty and irresponsible. Maybe this is their own problem, for being unable to reason their way out of this internal battle, but it is ubiquitous enough that it indicates a more fundamental brokenness.
I also wonder about the reported psychological benefits the author mentions. I wonder how much of this is induced by the belief that home ownership is meant to make you happy. If it doesn't then there is something wrong with you, not with your decision to buy. Not that there aren't happy homeowners, but that there are unhappy ones. It's the same with a lot of defaults; everyone else seems happy enough with them, why aren't you? Perhaps one of the biggest defaults, and the one that drives a lot of this, is the belief that those who follow the defaults are happier deeper than the image they project.
On the other hand, owning your own property empowers you in ways that should not be discounted. To give simple example, consider the problem of "gentrification." This happens when there is a poor neighborhood that over time attracts a young, usually creative crowd. This leads to pressure for housing there, that in turn leads to speculators and developers who improve/replace buildings further driving the process until the character of the neighborhood is totally changed.
This is a pattern that people observe over and over again. This process is at its worst when the original neighborhood has few or no owner occupants. In these situations there is little to stop a developer from being able to go through and completely change the character of the neighborhood en masse and overnight. Worst of all, the original residents don't benefit form this process-- their rent rises and when they stop being able to afford living there, they have no choice but to leave.
On the other hand, when there is a mix of ownership and rentership in the neighborhood the gentrification process proceeds much more slowly and in a way that benefits the original residents who, if they choose to leave, enjoy a profit in the sale, not steadily increasing rents.
Also, if you ever try to get involved in your local community, you will find that nobody really cares about you if they know you're going to be gone in a year. The people that have influence in the community are the folks that stick around.
We live in a very young-thinking age, anxious to throw out established wisdom and forge our own way. However, I fear that we are too eager to discount the wisdom in established wisdom. I'm not saying that we have to swallow it wholesale. But there's a reason it came into existence in the first place.
My peer group has no concept of "community". We don't belong to one. Or rather, we belong to a new one every two years, which amounts to the same thing.
We pay lip service to the ideas of helping our neighbors and building strong communities, but we have no idea what those words actually mean. We try to fulfill these ideals through national politics, but it's not the same thing as actually helping your neighbor, personally, in real life.
So sure, people need to rent and move around when they are young and finding their way. But eventually it's good to settle down and belong to a place. In the aggregate, it builds a stronger society.
I went to a church around here on Christmas (I'm an atheist, but I like the carols), and it was startling to interact with people outside my peer group. Some of the parishioners had lived in San Diego for decades. They had known each other for decades. They knew who had children, and who was elderly, and who was sick and needed help. They knew who was widowed and who had children overseas in Iraq and could use a nice meal with friends. When someone moved away, it was a big event, and everybody was sad to see them leave.
When I'm sick or need help, my facebook friends send me nice messages. It's not the same.
Damn, I sound old for a guy that's 26.
I am European and I moved to California some months ago. I find it both amusing and mysterious that people here in the U.S. talk about "community" so much. I really don't get it.
Civic volunteerism is an old American virtue. It will probably be gone in 50 years, for better or worse.
I think good will and volunteerism should not be expected of anyone. If good will and volunteerism become a norm, something one is expected to do, then "true good will" and "true volunteerism" (the ones which stem from one's heart, not from any social norms) lose their value.
Their neighbors have a key to their home, during winter they perform "church service" by clearing the snow off the sidewalks and when I go to visit I'm surprised to find out that the neighbors know who I am and where I'm from.
This is not just a single household in Germany. I've stayed with many of my family members in different parts of Southern Germany and I find it to be similar.
This, contrasts highly with South Africa where the idea of community does not exist. This in part is because of the high rate of crime and the 8-foot, spiked and electrified, walls that people have placed around their homes.
If I was given the choice I would prefer having a community than not.
There are over 500 people in Europe. Only 80 million of those are from Germany. Neither is Germany a good representative of Europe, nor are most Germans exactly role models. Your over-generalization would be offending to many people. Since my skin is too thick, I found it amusing instead.
I don't doubt that there are advantages in being part of the community. I understand it's part of the American culture. Though I try to fit in and be a good guest in this beautiful "land of the free", this "be part of your community" thing borders "psychological coercion" on my book.
And, you are the one who generalised yourself as been "European." If you didn't want to be placed in to the common pot of the 47 other countries in Europe then perhaps you should have specified your own country?
Germany has the 2nd highest population of 82 million and is a country of which I am a citizen. That makes me a European, and a member of the EU. Does this mean my own experience and own opinion are less valid than yours because you're from a different country?
My skin is not as thick. But this is probably because you've offended me directly.
Alexis de Tocqueville (1805 to 1859) said in Democracy in America that was one of the characteristics of Americans, to self-organize to help their communities. It still is. This results partly from European persons who had this tendency immigrating to America while other Europeans stayed in Europe.
However, your argument that people who had this tendency came to America and the other stayed in Europe does sound sketchy. I am an engineer, not an historian, but if I remember right, the ones who came to America were the starved, and the persecuted. If you were an aristocrat in England or the Netherlands in the 16th, 17th or 18th century, why would you bother to risk your pleasant life of luxury and debauchery to cross the Atlantic in a fragile vessel?
Helping a sick neighbor hopefully helps to keep them from dying, which helps keep their house off the market, which helps to preserve your ability to sell -- nobody wants to buy on a street everybody's selling on.
Keeping the neighborhood clean preserves your property values, which is easier to see.
Looking out for your neighbors, or at least giving them the impression you are, means it's more likely they'll look out for you, which means they're more likely to investigate or call the cops when they see a prowler outside your home.
I have no problem with helping others, but I have a problem with being "pressured" to help others who may not be worthy of my time. If I am going to be forced to "help my community", the least I can do is profit from that.
This can manifest in small ways. I have a small little driveway and a lot of sidewalk. My neighbors will often snowblow my sidewalk for me after a storm, which I appreciate. (I am legally obligated to clear the sidewalk, my driveway I can do at my leisure.) They get cookies and kudos. Another neighbor just came over and helped me trim my apple tree. They will get some apples and we'll make some applesauce for them next fall. When my pets get out, people know where to return them. We've gotten rides from our neighbors when our car was suddenly undrivable, and an we once performed an emergency babysitting. We've cared for pets while their owners were away on short notice.
When the assholes across the street moved, nobody cared, because they contributed nothing to our little local cul-de-sac but loud, vaguely dangerous children that ran around a lot. (Others have children that run around a lot, but without the menace.) There's another asshole who moved in more recently who has done nothing but make withdrawals on their social capital, and now nobody wants to talk to them since they never reciprocate and every conversation seems to wander into something they need. (If they don't need anything, they will simply ignore you if you say hello.)
None of these things are major, but it is often the little things that help. More extremely, you just never know when a job or something will pop up. It's less targeted than networking at a user group, but it can happen.
Bear in mind as I say this that I am fairly asocial. My wife ends up doing a lot of this quite naturally. But I at least support her in it. Also, my kid is only seven months old; I'm sure as he reaches school age my involvement will be even more interesting to talk about. We deliberately moved into an area with a lot of community activities for children and parents.
Oh... and this is the dreaded "suburbs", where I have found a better, more cohesive community than any city location I've ever lived in. But, not only "may" your mileage vary, your mileage will vary.
(Geography matters more than I realized. We chose a house in a "court", which is a little stubby road that has ten-ish houses on it that all face each other. I think that natural geographic division helps a lot. I bet the rows of houses on the main road have a much more diffuse community because there are no natural boundaries. In this aspect, perhaps my little chunk of suburbia is more village-like than some others.)
Then why are people so afraid of something bad happening that they need to build securities and seek stability to ease their worries? Why do they crave for stability when the world itself is in constant flux -- with everybody in it as well? Is it some fundamental belief of not ever having enough, manifesting itself in barricading oneself inside things that at least seem rock solid?
While I've "tossed my money down the drain", I've been able to live on the coast, in a mountain town (wanted to learn snowboarding) and in Amsterdam, to name 3 places.
Is having the unique experiences worth it? To me, they were.
Biggest advantage of home ownership? Freedom to do what you like with it; I can hack my own home.
But - I'm outside the US and I pay far less (half) in mortgage payments than I would in rent.
This is nothing more than a government-mandated insurance policy. Landlords require higher margins due to the risk of freeloaders. Also, landlords may avoid renting to those most likely to be "helped" by such policies.
It is ironic that today's laws make home ownership a safer choice if one defaults on payments -- In most states, foreclosure takes much longer than eviction. So, given the choice between renting and taking on an interest-only, no money down home loan, the less risky choice for a family is ownership. Of course, those families couldn't get such a loan today.
I'm either lucky or super picky because my landlords have usually been great about fixing stuff.
That area had big problems before the crisis started. For some reason, people seem to have given up on it long ago.
Also, I am not sure that having a professional landlord would ensure timely repairs. I lived in a house in Cleveland Heights where the landlord's philosophy was to wait to make repairs until a problem ballooned out of control.
Instead of fixing a slow washing machine drain pipe, he waited until it was completely clogged. At that point, doing laundry meant a flooded basement. My roommates and I had to go down there with buckets to bail it out until he had the problem fixed a month later. Every time we called him he would assure that someone was "stopping by next week."
We also had cracks in our plaster walls that spread so much that the entire wall crumbled to bits. This happened in several places. His "handyman" came buy and did the worst repair job I have ever witnessed. It almost looked worse that the bare lath!
I too have heard horror stories of seemingly irrational landlords. One problem is that many people watched too much late-nite get-rich-quick TV and bought rental properties they themselves couldn't afford to keep up.
Your experience in The Heights is surprising given that rents are relatively high there. One would think preserving a rental unit would be worthwhile.
Is it a risk and possibly a poor choice to own a house? Versus other investments, possibly. Versus consumption and other disposable income spending, absolutely not. There a lot of people that could do better if there were more knowledgeable about ways to save capital, but it the absence of the knowledge, owning a home is not a bad default.
Does it? This presumes that for those entire 10 years, the family never refinanced the house, and never used that refinancing to pull equity out. I don't have any statistics in front of me, but given as big a market as there was for refinance deals, I imagine the number of homes being cash-out refinanced was nowhere near negligible. I can imagine the temptation was quite large for anyone not independently wealthy, but wanting to live the good life anyway.
Does anyone have a source for numbers of homes refinanced out of all possible homes in the past 10 years? Even more interesting to me would be statistics on the amount that tended to be cashed out in said transactions.
You can achieve the same thing by renting and regularly putting a portion of your income away into quality assets : but the temptation to liquidate part of your portfolio always will remain strong. This is where people come unstuck.
The danger is in this advice/thought process being taken to apply to all property, regardless of location. I can foresee far-flung suburbs with long commutes continually falling in value as people factor in the cost of transport to their overall living costs.
The government should exit the property incentive market. No tax deductibility for renting or buying. No incentives or guarantees for high-risk mortgages. Let the free will of the people decide what is the best for them. The only laws in place should govern the quality of the property, and against unfair eviction/foreclosure. And there should be laws in place to allow for longer term tenancies. On any commercial property, it's easy to get 10-12 year leases on a property. It's rare to get more than a 12 month lease on a rental property : probably precisely because it's easier to evict a commercial tenant than a residential tenant. The more government controls are put on tenancies, the worse the overall effect for tenants (like rent control, which results in a good deal for a few tenants, and a bad deal for most)
If you could sign a 10-year lease on a house and be allowed to modify the interior (paint, floorcoverings, etc) then the merits of onwnership vs renting could be more equally compared.
This is also true for payroll taxes.
Most people don't have $100k in equity these days.
The potential payoff from selling your home isn't "security", its counting your chickens before they've hatched.
If apartments and condos were quieter, I would probably have continued to rent. Being not "settled down" at this point in time, the flexibility and lack of hassle dealing with ownership issues (especially maintenance) are definite pluses. Or I might have purchased a condo or coop unit.
As people natter on about more efficient living, I continue to wonder whether there is a model that could incentivise the construction of apartment units that make a serious attempt at soundproofing. I guestimate 10% - 25% additional construction cost, depending on degree of soundproofing and on economies of scale. Hopefully toward the lower end, even with good soundproofing, particularly if there were a significant amount of such construction occurring.
(I don't know about retrofitting, although I am skeptical as to its being effective in many situations.)
How hard/expensive would it be to do as a retrofit?
There is an online magazine called "Design Build Magazine" that had an article on soundproofing/fireproofing. You are right though. Maybe I should do some research into soundproofing and write a "How to Soundproof Your Apartment or House for Cheap, Guaranteed ebook" I'll even give you a free copy as your cut.
Question about this soundproofing: How is it with 20-40Hz sounds? Out of curiousity.
At the higher freq (4000+ Hz) you should see drops of 50 to 70% for a 1/4 inch piece. Using 100 dB again we have: 10 000 000 * 0.40 => 4 000 000 log(4.0E6) => 9.602 or 96.02 in dB for a 1/4 inch piece (much better! A clearly obvious change)
Another thing to remember is that 1/4 + 1/4 != 1/2 Say we use the 30 Hz example it would be: 0.85 * 0.85 => 0.7225 or a 27.75% reduction, NOT an additive reduction of 15%
For reference of how loud things are:
Motorcycle right beside you: 100 dB Subway train about 200' away: 95 dB
See: http://www.gcaudio.com/resources/howtos/loudness.html For a full chart.
Hope this clears up some things :)
I've lived in apartments, but it's never been the treble that bothered me, and I never figured that we'd ever see a bass-proofing that would meet my needs. So... I switched to renting houses. (And eventually buying one.)
Why not rent a house actually?
On the other hand, it's a massive liability. Reduced mobility, little to no protection against disasters(fire, flood, tornado), property taxes, maintenance and repairs, unpredictable market forces, and so on.
I rent a house.. it's the best of both worlds.
In the US, that is not currently possible. So the solution indeed is to buy a house and hope that by the time you reach retirement and cannot work anymore, you at least have a home and maybe the tiny bit of money you were able to save will suffice to pay your bills and food.
The solution in the US is not to fix social security and ensure those who rent today will have enough to rent when they retire, it is to reduce the cost of home ownership, so by the time you are 65 you already own a home you can afford to live in because you own it after only 15 years of hard work, not 30+.