LANDLORDING: RENTING vs OWNING
Why Buy When You Can Rent
by Julie Johnson, Past President, RHA
Every day you are seeing articles in the news about the value of renting. Of course, this has been a mantra of mine for the past several years.
Home ownership is not for everyone. However, much to my chagrin, owning trumped renting and policy after policy was set in place to help Americans live the dream. It appears as if the collapse of the U.S. housing market has changed all that. Many are now redefining the American dream, making it socially acceptable to mail in a rent check instead of a mortgage payment.
Policies explicitly encouraging home ownership date back to the Great Depression. During the crisis of the 1930s, when half of all mortgages went into default, a series of federal measures were enacted to help troubled homeowners, laying the foundation for a government active in the housing market.
Over the last half-century, Freddie and Fannie had a similar mandate, expanding homeownership but also getting caught in the 2008 crisis, ultimately requiring rescue.
All of the above policies have helped the demand for rentals to steadily rise, making it a natural place for many to look for solutions. This momentum should be taken advantage of and as rental property owners we should be leading the parade to provide everyone details about the value of rental housing. So here are a few:
· For the past four years, households earning $50,000 or more have been the fastest-growing segment of the apartment market. The area median income (AMI) for Seattle-Bellevue area is $81,400 which means they could afford to pay $2,035 a month for rent.
· Many higher income renters could buy homes but prefer to rent because they want to maintain a flexible lifestyle,
with easy access to work and the amenities of the city. Others rent because they want to take advantage of the low transactions costs, at least relative to those involved in homeownership. Still others rent to avoid the risk of a potentially volatile home purchase market.
· For working families with more modest incomes, rental housing provides a place to live during such life transitions as a job change or divorce. Renting also enables households to save to purchase a home. In
combination with higher-income renters, these "middle market" households are sufficient in number
and purchasing power to support a viable market for the construction, maintenance and management of
good-quality rental housing.
· For those at the bottom of the income distribution, renting is not a matter of choice. Indeed, some 70% of the nation's 7 million lowest‑income renters pay more than half their incomes for housing. This
leaves almost nothing to cover food, medicine, and other essentials, let alone for education, retirement
savings and other investments that would secure their futures.
Reprinted by Permission. Courtesy of the Rental Housing Association of Puget Sound, Washington State. From the September 2011 issue of “Update.” Visit www.rha-ps.com