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> renting is better to society as a whole. Care to explain? I would say that widespread renting is actually quite terrible. It means that property is kept in

> renting is better to society as a whole. Care to explain? I would say that widespread renting is actually quite terrible. It means that property is kept in the hands of class of landowners (and when wealth is concentrated, this also tends to concentrate power); that instead of investing one's income, renters are basically paying off the owner's mortgage; that generally, people prefer to own, and so widespread renting is a sign of being unable to participate in the real estate market; that it generally is associated with a rentier economy. So, no, I do not think renting is better. At all.

ucaetano 9y ago
> Care to explain? Sure! Caveat: please ignore taxes, emotional value and a few other country-specific details. When you're buying a home, you're doing 3 independent things: 1) Borrowing money (optional) 2) Making a capital investment into an illiquid, immovable asset 3) Renting an asset that you own to yourself for you own usage Give how much little money you have (compared to a company) and how your earnings and spending might oscillate, having so much of your assets locked up in an illiquid, immovable, single piece is a bad idea. It prevents you from moving around and taking a new job, for example. Also, given your individual risk, you have to pay interest rates much higher than what you'd expect from an institutional investor. Also, you don't have any economies of scale for renting out, selling, doing maintenance, etc. Now if an institutional investor bought a large stock of housing and rented it out, it is: 1) Borrowing money at lower rates than you 2) Making capital investment in thousands of individual, immovable assets 3) Renting an asset to you With a much larger scale, the institutional investor has massive gains in economies of scale on selling, buying, renting, fixing, etc. Also, it is able to spread the risk of a single house or resident across its entire base, essentially transforming the individual risk into a financial cost to the renters, reducing the exposure to extreme events. Finally, renting increases an individual's mobility, allowing for better allocation of jobs to different places in a country, improving economic growth and enabling the economy to adapt faster to changing situations. PS: NIMBYism fucks this up. This only works if new housing is allowed to be built freely based on supply and demand, which is not the case in the most "progressive" parts of the US (Bay Area, for example).
- dv_dt 9y ago
  If you're borrowing at a fixed interest rate (or buying outright), you're also locking in price for housing against future rent increases.. and, currently in CA, against uncontrolled property tax increases too. It doesn't really prevent you from moving to another job, one could always rent out the owned property and rent in your new location. (Though if the area you own in has crashed in prices that's a more difficult proposition...)
  - ucaetano 9y ago
    > If you're borrowing at a fixed interest rate (or buying outright), you're also locking in price for housing against future rent increases.. and, currently in CA, against uncontrolled property tax increases too. Again, that's irrelevant from a financial perspective. The rates are priced to account for the risk of increase, and in this case the markets are liquid and competitive enough to allow correct market pricing. > It doesn't really prevent you from moving to another job, one could always rent out the owned property and rent in your new location. (Though if the area you own in has crashed in prices that's a more difficult proposition...) There is a large overhead cost to renting out, which is significantly higher than the overhead cost of renting a home. Renting out is essentially a part-time job.
    - dv_dt 9y ago
      > Again, that's irrelevant from a financial perspective. The rates are priced to account for the risk of increase, and in this case the markets are liquid and competitive enough to allow correct market pricing. The markets can be irrational for longer than you can stay solvent. You can pull out silly tropes like some concept of "correct market pricing". Which means "correct" according to some group of concerns vs some other group of concerns. Rarely do we get to directly design markets, and designed changes often go vastly wrong with unintended side effects. It's not irrelevant from a life stability perspective if you get priced out of your domicile for rent increases, vs keeping it for an owned property. People can individually value that stability or not, but it's a real consideration. There is also large overhead in not choosing the time that one wants to move if rents increase uncontrollably.

ucaetano 9y ago

> Care to explain? Sure! Caveat: please ignore taxes, emotional value and a few other country-specific details. When you're buying a home, you're doing 3 independent things: 1) Borrowing money (optional) 2) Making a capital investment into an illiquid, immovable asset 3) Renting an asset that you own to yourself for you own usage Give how much little money you have (compared to a company) and how your earnings and spending might oscillate, having so much of your assets locked up in an illiquid, immovable, single piece is a bad idea. It prevents you from moving around and taking a new job, for example. Also, given your individual risk, you have to pay interest rates much higher than what you'd expect from an institutional investor. Also, you don't have any economies of scale for renting out, selling, doing maintenance, etc. Now if an institutional investor bought a large stock of housing and rented it out, it is: 1) Borrowing money at lower rates than you 2) Making capital investment in thousands of individual, immovable assets 3) Renting an asset to you With a much larger scale, the institutional investor has massive gains in economies of scale on selling, buying, renting, fixing, etc. Also, it is able to spread the risk of a single house or resident across its entire base, essentially transforming the individual risk into a financial cost to the renters, reducing the exposure to extreme events. Finally, renting increases an individual's mobility, allowing for better allocation of jobs to different places in a country, improving economic growth and enabling the economy to adapt faster to changing situations. PS: NIMBYism fucks this up. This only works if new housing is allowed to be built freely based on supply and demand, which is not the case in the most "progressive" parts of the US (Bay Area, for example).

dv_dt 9y ago
If you're borrowing at a fixed interest rate (or buying outright), you're also locking in price for housing against future rent increases.. and, currently in CA, against uncontrolled property tax increases too. It doesn't really prevent you from moving to another job, one could always rent out the owned property and rent in your new location. (Though if the area you own in has crashed in prices that's a more difficult proposition...)
- ucaetano 9y ago
  > If you're borrowing at a fixed interest rate (or buying outright), you're also locking in price for housing against future rent increases.. and, currently in CA, against uncontrolled property tax increases too. Again, that's irrelevant from a financial perspective. The rates are priced to account for the risk of increase, and in this case the markets are liquid and competitive enough to allow correct market pricing. > It doesn't really prevent you from moving to another job, one could always rent out the owned property and rent in your new location. (Though if the area you own in has crashed in prices that's a more difficult proposition...) There is a large overhead cost to renting out, which is significantly higher than the overhead cost of renting a home. Renting out is essentially a part-time job.
  - dv_dt 9y ago
    > Again, that's irrelevant from a financial perspective. The rates are priced to account for the risk of increase, and in this case the markets are liquid and competitive enough to allow correct market pricing. The markets can be irrational for longer than you can stay solvent. You can pull out silly tropes like some concept of "correct market pricing". Which means "correct" according to some group of concerns vs some other group of concerns. Rarely do we get to directly design markets, and designed changes often go vastly wrong with unintended side effects. It's not irrelevant from a life stability perspective if you get priced out of your domicile for rent increases, vs keeping it for an owned property. People can individually value that stability or not, but it's a real consideration. There is also large overhead in not choosing the time that one wants to move if rents increase uncontrollably.