>Absent distortions it doesn't make sense for most people to buy a house -- it's inherently non-diversified, low liquidity, high transaction costs. But American

>Absent distortions it doesn't make sense for most people to buy a house -- it's inherently non-diversified, low liquidity, high transaction costs. But American society has for some bizarre reason decided that home ownership is the sine qua non of human civilization and so every level of government intervenes to distort the market in favor of homeownership. The thing is? Leases are... very inflexible. In many ways, it's less flexible than buying. Here is the essential problem: If I have a rational, profit-maximizing landlord, every time my lease is up for renewal, he increases my rent to what it would cost me to rent an equivalent place elsewhere plus just under what it would cost me to move. On the other side of that, if I take a longer lease, I'm in a seriously bad position if something changes in my life and I need to move. This is especially dramatic in commercial real-estate, where the business owner is usually asked to personally co-sign the lease, and where there are fewer laws requiring the landlord to reasonably try to rent vacant units to other people. (and where the tenant is more likely to be able to keep paying rent after moving.) Three to five years of rent is nearly always more than 6% of the purchase price of the property.