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You can find the current article at its original source at http://www.theguardian.com/commentisfree/2016/mar/09/end-the-renters-lament-owning-your-own-home-isnt-all-its-cracked-up-to-be
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| End the renter's lament. Owning your own home isn't all it's cracked up to be | End the renter's lament. Owning your own home isn't all it's cracked up to be |
| (6 months later) | |
| With negative gearing reforms back on the political agenda, we’re seeing a resurgence in impassioned pleas on behalf of those locked out of home ownership. | With negative gearing reforms back on the political agenda, we’re seeing a resurgence in impassioned pleas on behalf of those locked out of home ownership. |
| Personally, I’ve always been perfectly content for a landlord to bear the risk and stress of managing the places I’ve lived. I understand this attitude is uncommon. What I don’t understand is why. Examined dispassionately, home ownership doesn’t look appealing from either a “lifestyle’ or financial perspective. | Personally, I’ve always been perfectly content for a landlord to bear the risk and stress of managing the places I’ve lived. I understand this attitude is uncommon. What I don’t understand is why. Examined dispassionately, home ownership doesn’t look appealing from either a “lifestyle’ or financial perspective. |
| Consider the lifestyle angle. For the anti-rent brigade, the life of a tenant is painted as a succession of travails and indignities. The hanging of art or installation of shelving is forbidden. Parsimonious landlords effect temporary repairs to leaky and defective plumbing. Property agents lurk ceaselessly, hinting menacingly at the many would-be tenants who would be happy to take the property at a higher rent. And hanging constantly over all of this is the shadow of eviction (which in the anecdotes occurs always around Christmas, if not on Christmas Day). | Consider the lifestyle angle. For the anti-rent brigade, the life of a tenant is painted as a succession of travails and indignities. The hanging of art or installation of shelving is forbidden. Parsimonious landlords effect temporary repairs to leaky and defective plumbing. Property agents lurk ceaselessly, hinting menacingly at the many would-be tenants who would be happy to take the property at a higher rent. And hanging constantly over all of this is the shadow of eviction (which in the anecdotes occurs always around Christmas, if not on Christmas Day). |
| For vulnerable renters on the fringes of the property market, life as a tenant undoubtedly resembles the portrait painted in these horror stories. But this version of tenant life – one of unending subjugation to the whims of Dickensian villains – bears little resemblance to the lived experience of the vast bulk of Australian renters. For many, the compromises involved in renting – the limited freedom to alter the premises, the knowledge that the landlord may ask you to move on with only a few months’ notice – are easily outweighed by the flexibility and freedom which renting brings. | For vulnerable renters on the fringes of the property market, life as a tenant undoubtedly resembles the portrait painted in these horror stories. But this version of tenant life – one of unending subjugation to the whims of Dickensian villains – bears little resemblance to the lived experience of the vast bulk of Australian renters. For many, the compromises involved in renting – the limited freedom to alter the premises, the knowledge that the landlord may ask you to move on with only a few months’ notice – are easily outweighed by the flexibility and freedom which renting brings. |
| Unlike homeowners, renters aren’t tied down. They are free to move quickly and cheaply should they take a new job in a different city or suburb. As their children change schools, they can move to be within close commuting distance. If a suburb’s amenity starts to slide, they can simply move on: leaving homeowners to lose evenings at council meetings in efforts to arrest the decline. | Unlike homeowners, renters aren’t tied down. They are free to move quickly and cheaply should they take a new job in a different city or suburb. As their children change schools, they can move to be within close commuting distance. If a suburb’s amenity starts to slide, they can simply move on: leaving homeowners to lose evenings at council meetings in efforts to arrest the decline. |
| Unlike homeowners, renters don’t lie awake at night worrying about strata sinking funds or pest fumigation. They don’t have to shop around for insurance, or surf the net looking for an affordable plumber. If it turns out their house or apartment complex has latent structural defects, they move on, leaving the landlord to deal with the headache. | Unlike homeowners, renters don’t lie awake at night worrying about strata sinking funds or pest fumigation. They don’t have to shop around for insurance, or surf the net looking for an affordable plumber. If it turns out their house or apartment complex has latent structural defects, they move on, leaving the landlord to deal with the headache. |
| Unlike homeowners, renting families know that a strong sense of social belonging isn’t contingent upon living in the same house in the same street for decades. If anything, children who move frequently while growing up will have the benefit of a deeper appreciation of the diversity of the community. | Unlike homeowners, renting families know that a strong sense of social belonging isn’t contingent upon living in the same house in the same street for decades. If anything, children who move frequently while growing up will have the benefit of a deeper appreciation of the diversity of the community. |
| Now consider the financial side of things. The anti-rent brigade will tell you that home ownership is important because it allows you to build equity in a valuable and appreciating asset. Rent, on the other hand, is “dead money” - cash you’ll never see again. | Now consider the financial side of things. The anti-rent brigade will tell you that home ownership is important because it allows you to build equity in a valuable and appreciating asset. Rent, on the other hand, is “dead money” - cash you’ll never see again. |
| This is superficially persuasive. It is obviously true that paying off a mortgage leads to the steady acquisition of a valuable and hopefully appreciating asset, whereas renting does not. But any real analysis of the comparative financial appeal of owning and renting is obviously more complex than this. | This is superficially persuasive. It is obviously true that paying off a mortgage leads to the steady acquisition of a valuable and hopefully appreciating asset, whereas renting does not. But any real analysis of the comparative financial appeal of owning and renting is obviously more complex than this. |
| To start with, home ownership carries with it its own “dead money” obligations. Interest, rates, insurance, and routine maintenance are all costs which are simply thrown away. | To start with, home ownership carries with it its own “dead money” obligations. Interest, rates, insurance, and routine maintenance are all costs which are simply thrown away. |
| More significantly, proponents of home ownership usually ignore the fact that renters are free to invest – in whichever way they wish – the money they save by renting. Obviously home ownership looks appealing when compared to ownership of nothing at all. But this is the wrong approach: the proper comparison should be between investment in a home and investment of an alternative kind (like shares or superannuation). | More significantly, proponents of home ownership usually ignore the fact that renters are free to invest – in whichever way they wish – the money they save by renting. Obviously home ownership looks appealing when compared to ownership of nothing at all. But this is the wrong approach: the proper comparison should be between investment in a home and investment of an alternative kind (like shares or superannuation). |
| So how does home ownership stack up against other investments? When assessing this, it’s tempting to be beguiled by the experience of the baby boomers, who grew rich riding the wave of a property boom (and who would now have us think their wealth is the product of hard work and ingenuity). But there’s no foundation for optimism of this kind. Housing may well experience another boom in the coming decades, but to throw your lot in with property on this basis is to do no more than gamble. | So how does home ownership stack up against other investments? When assessing this, it’s tempting to be beguiled by the experience of the baby boomers, who grew rich riding the wave of a property boom (and who would now have us think their wealth is the product of hard work and ingenuity). But there’s no foundation for optimism of this kind. Housing may well experience another boom in the coming decades, but to throw your lot in with property on this basis is to do no more than gamble. |
| Given expert studies suggest that future property price growth will have to match the bar set by the market’s performance over the last six decades in order for home ownership to be more financially attractive than renting, it is a risky gamble indeed. | Given expert studies suggest that future property price growth will have to match the bar set by the market’s performance over the last six decades in order for home ownership to be more financially attractive than renting, it is a risky gamble indeed. |
| If you feel uncomfortable gambling with these stakes, and would prefer to assess the merits of home ownership from first principles, you’ll quickly find that home ownership punches below its weight. First, as economists often observe, property is as undiversified as an investment can be: almost all your worldly wealth is tied up in a particular property in a particular street in a particular suburb. | If you feel uncomfortable gambling with these stakes, and would prefer to assess the merits of home ownership from first principles, you’ll quickly find that home ownership punches below its weight. First, as economists often observe, property is as undiversified as an investment can be: almost all your worldly wealth is tied up in a particular property in a particular street in a particular suburb. |
| It is also subject to huge transaction costs. It’s impossible to buy or sell property without seeing many thousands of dollars disappear into the pockets of intermediaries and the state. You’re also constantly at the mercy of the whims of government – a decision to alter airport regulations or move a bus route can erode your net worth overnight. | It is also subject to huge transaction costs. It’s impossible to buy or sell property without seeing many thousands of dollars disappear into the pockets of intermediaries and the state. You’re also constantly at the mercy of the whims of government – a decision to alter airport regulations or move a bus route can erode your net worth overnight. |
| Moreover, it’s illiquid: you can’t just sell or buy a house in a day in the way you can with shares or managed funds. If you find yourself under financial pressure, it will usually be many months before a sale of property can be arranged. Worse, purchasers in such circumstances will often smell blood and take advantage of your dilemma to strike a hard bargain. | Moreover, it’s illiquid: you can’t just sell or buy a house in a day in the way you can with shares or managed funds. If you find yourself under financial pressure, it will usually be many months before a sale of property can be arranged. Worse, purchasers in such circumstances will often smell blood and take advantage of your dilemma to strike a hard bargain. |
| Why would anyone do this to themselves, when the alternatives are so attractive by comparison? The answer, I suspect, goes back to our collective cultural obsession with property ownership, which increasingly shapes national debate. One need only look to the way every development in the property market is breathlessly reported, and how our rumination on intergenerational inequality seem to swing inexorably back to the question of housing affordability. | Why would anyone do this to themselves, when the alternatives are so attractive by comparison? The answer, I suspect, goes back to our collective cultural obsession with property ownership, which increasingly shapes national debate. One need only look to the way every development in the property market is breathlessly reported, and how our rumination on intergenerational inequality seem to swing inexorably back to the question of housing affordability. |
| If, like me, you’re on the outside of the property market looking in, don’t buy into the hype: you can live a responsible and fulfilling life without owning your home. | If, like me, you’re on the outside of the property market looking in, don’t buy into the hype: you can live a responsible and fulfilling life without owning your home. |
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