Anyway

In the midst of the U.S. hous­ing crisis, Paul Ked­rosky asks, quite reas­on­ably, Why Do We Want People to Own Homes? I’ve been won­der­ing that myself. Is it because people think houses are a good invest­ment? Because they have sen­ti­ment­al attach­ments to the idea of own­ing the roof over their head? Because they want to be sure no-one can toss them out of their home? Because every­one else does?

I remem­ber years ago in Aus­tralia (where almost every­one also wants to own their own home) talk­ing to a Ger­man immig­rant who com­plained bit­terly that he could­n’t rent any­where nice to live and so he had to buy a house. He would have been much hap­pi­er rent­ing, as people com­monly do in Ger­many. Maybe the rent­al prop­er­ties are bet­ter in Ger­many because so many people rent, or maybe part of it is because in Ger­many it’s com­mon to make modi­fic­a­tions to an apart­ment you rent, for example by renov­at­ing the kit­chen (you own the appli­ances, the cab­in­ets, etc, and take them with you if you move). People often rent the same apart­ment for 20 years or more, which is longer than many people in North Amer­ica stay in houses they buy, so it’s worth their time and effort to make it a nice place to live.

Dif­fer­ent coun­tries, dif­fer­ent ideas. For us ten years ago, there were a couple of reas­ons to buy rather than rent. We saw it as a reas­on­able invest­ment, we wanted to live in a house with a garden, and I wanted a couple of cats. So buy­ing made sense (many land­lords don’t like pets).

As house prices climb to the extent that it’s ques­tion­able how good an invest­ment they are (how high can they keep going?), it’ll be inter­est­ing to see what hap­pens. Here in Van­couver house prices have been rising to the extent that many land­lords are selling the rent­al houses to people who ren­ov­ate and move in them­selves, rather than rent­ing them out. For fam­il­ies with chil­dren in loc­al schools, hav­ing the land­lord sell the house out from under them is extremely dis­rupt­ive, espe­cially when they can afford to rent, but can­’t afford to buy, in the area they’re liv­ing in. From the land­lord’s per­spect­ive, they’re cash­ing in on the cap­it­al gains rather than tak­ing a rent that just can­’t com­pare as a return on their invest­ment. Either the house prices will have to come down, or the rents will have to go up, unless people are will­ing to con­tin­ue to gamble on mak­ing their money from cap­it­al gains.

And in the U.S., own­ing the house does­n’t mean someone can­’t turf you out if you default on a pay­ment or two. The Eco­nom­ist has an art­icle in this week’s magazine about the U.S. hous­ing crisis, point­ing out that fore­clos­ure pro­ceed­ings can take months in some states, but less than a month in Texas. Which makes me won­der even more why people buy­ing houses they could­n’t afford did­n’t rent instead.