I often wonder how this story ends. I think there’s two paths:
The first, where we don’t make substantial change and renting for life becomes a norm for all but the wealthiest of the wealthiest. First in the large coastal cities then in more and more American cities over time.
The second, where we rezone our cities and orient them around robust mass transit systems. We build tons of infill housing to keep up with demand and reduce our reliance on private transportation to accommodate the influx of people.
If I was betting I’d bet on #1, but I hope we can do #2.
We can also have option 4, which is to nullify zoning codes, some fire codes, deeds restrictions, among other things that stop houses from being built. We also need to reduce HOA power at least temporarily, to allow various forms of expansion on the lots in single family homes (there is plenty of land to build a smaller house in most of those). Then we let the market take care of it, perhaps assisted by some small-scale government programs. House prices and rents will fall, which can hopefully put some private equity landholders with leveraged positions under water, forcing them to liquidate the houses. It is inevitable that some individual owners might be hit with this too, but a one time bailout can be offered. This can then trigger a large surplus in housing such that it starts to become more or less affordable again over a few years.
They do only if you presume that the only reason someone would need to rent is because they’re young childless professionals. There are many different life situations that might necessitate a single family home rental. Apartments are not large, townhouses don’t exist in some places, etc.
Although I do agree we would be better off with fewer single family rentals, that number is definitely not zero.
I'm open to the idea of being wrong, so please do tell me if so.
> My line of thinking is around
Rent seeking (or rent-seeking) is an economic concept that occurs when an entity seeks to gain added wealth without any reciprocal contribution of productivity.
and
> That said, it’s possible for landlords to engage in rent-seeking behavior.
So, I understand that rent in rent seeking is not and nothing to do with 'rent payments', so to speak.
It's more a question of are landlords trying to extract value without producing anything. My opinion is, in many cases, yes.
Especially someone like Invitation Homes, who essentially aim to corner a particular housing market for the sole purpose of extracting additional money from said units.
If this is not considered rent seeking behavior, I'll cede that point.
This is true but it's not hard to address. Just scale the tax based on rental affordability and desired units. Incentivize landlords to provide affordable options for people who can't buy and punish them for restricting supply that forces buyers to move "down" the ladder and occupy homes that would otherwise be affordable to their lower income neighbors.
We have an abundance of landlords. Landlords provide lots of value. I own a house and when I tell my friends about all the shit that I have to do to maintain my house, a common refrain is, "that's why we rent."
A lot of people are intimidated by replaced a furnace that just broke and having their kitchen destroyed by a water leak.
You're not actually providing any value. You're just offsetting the cost and more than likely profiting by doing so. Renting versus owning when it comes to maintenance and repairs functions more like insurance, where you're paying more per month versus paying more upfront in a sort of bet against probability. That's assuming the landlord actually does maintenance or repairs instead of neglecting those issues. Regarding that bet against the cost of upkeep for the shortest term, months, renting's probably the most expensive option. Short term, two to five years, renting's cheapest or can be the cheapest (assuming you don't live in a trailer home or one of those sheds converted into a tiny house). Long term, more than five years, renting's once again the most expensive option. Renting for the renter only makes sense in a very specific context.
Another factor is home owner's insurance. Home owner's insurance is far more likely to cover high cost replacements than renter's insurance, and often is far more comprehensive in coverage. Renter's insurance might only cover up to $50,000 depending on your policy and exclude things like vehicles or special equipment like HAM radios. It also often doesn't cover certain natural disasters like earthquakes or tornadoes, which makes it harder for people in places like Memphis Tennessee to recover after those events.
Providing value, in a broader sense, would be paying a specialist to come in and fix the furnace. Something a modern homeowner would likely do anyways due to either the mechanical complexity, time involved, or level of skill required. That's money going to a dedicated job that's likely from a local business since HVAC and plumbing tend to be trades. The homeowner's upfront expense is more, but ignoring things like regional wealth extraction the local economy is strengthened because of it.
Finding reliable professionals is difficult. They're also expensive.
Homeowners insurance is great. I've used it on a few occasions. Unfortunately, it doesn't cover expensive things that break at full cost. So if something breaks and it was older, you're on the hook.
You don't have to convince me renting is a bad financial move, that's why I don't rent, but you can't pretend like there is no benefit to renting.
After the things I've already mentioned, renting gives you much more freedom to move. That's a big deal if you're looking for work, for example.
Some people like to move around and experience different places before settling down. Renting provides value to those people.
Renting is definitely more expensive. You're paying for more. Free maintenance, no concern for depreciation, mobility and whatever other other things I don't consider.
Home ownership has been stressful. I think it's a better move, that's why I do it but I also know people who prefer not to.
Note that #2 doesn't necessarily fix the complaints that this situation generates. By physical necessity, infill transit-oriented density requires multi-family housing. Multi-family housing requires some organization to manage the building as a whole, which means either apartments or condos. So people will still be renters (or at the mercy of an HOA), they just won't have to put up with the rent being too damn high year after year.
Also I think your scenarios accurately describe the options for the ~5-10 year future, but if you're talking the 50+ year future, I think that will involve depopulation. Either fast (famines, plagues, and wars kill everyone off), medium (global warming steadily makes more areas uninhabitable and increases the rate of natural disasters) or slow (people stop having kids because it's too damn expensive and housing is too damn crowded). The future there is like Detroit but worldwide: lots of urban prairie, decrepit old homes that people can't afford to maintain, people clustering together in wealthier enclaves, rampant crime in the hinterlands where people on the margin live. On the plus side, houses will be super cheap: just pick one and move in.
> Multi-family housing requires some organization to manage the building as a whole, which means either apartments or condos. So people will still be renters
In eastern europe you own your apartment. The owners form a housing Association that own ms the building as a whole and the land.
It sounds like it, though I never thought that a condo might not be a worldwide thing.
It's an ownership structure where you own the insides of your unit and can do what you want with it, but everything outside the walls (shared building, common areas, lawn, parking lots/garages, etc.) is owned by a homeowner's association (HOA). You pay the HOA monthly dues - sometimes small ones, sometimes large ones, depending on what they do for you - which are set by the HOA themselves, and the HOA can have rules on what you're allowed to do on the outside of your unit. Repairs to common building infrastructure is the HOA's responsibility, repairs to your unit is your responsibility. The HOA is controlled by a board of directors that are elected from the set of homeowners. You own the equity in your own unit and can resell it for a profit.
#2 didn't help Europe - it's the exact same story over here and housing close to mass transit disproportionally shot up in price.
If anything it's the places unreachable by anything but a car that remained affordable.
Case in point: one couple I know bought an apartment(so not even a detached house) in a place without any public transport whatsoever because it was roughly half the price per unit area comparing to the equivalent in the city. They now need a car to do even the most basic things, but at least they have their own place to live.
As long as real estate is seen as an investment opportunity, this will continue.
I would like to see more distribution in jobs. Starting with remote jobs and continuing with distributed work locations for non-remote jobs (to smaller cities and towns).
That wouldn't fundamentally fix the issue in the long run, just delay it until housing also becomes completely unaffordable in the mid-size cities people move to from the too-expensive big cities.
The first, where we don’t make substantial change and renting for life becomes a norm for all but the wealthiest of the wealthiest. First in the large coastal cities then in more and more American cities over time.
The second, where we rezone our cities and orient them around robust mass transit systems. We build tons of infill housing to keep up with demand and reduce our reliance on private transportation to accommodate the influx of people.
If I was betting I’d bet on #1, but I hope we can do #2.