Why A Shift To A “Rentership Society” Would Be A Mistake

Why A Shift To A “Rentership Society” Would Be A Mistake

Let’s not let this happen to us here in Washington State.  We need to make sure we are promoting home ownership.

The Treasury Department released a white paper on reforming housing policy which suggested that it would give more resources to developing the rental market. The white paper stated:

“The administration believes that we must continue to take the necessary steps to ensure that Americans have access to an adequate range of affordable housing options. This does not mean our goal is for all Americans to be homeowners.”

Some in the housing industry cite the high rate of foreclosure and challenging credit markets as a sign that more Americans will be renting instead of buying. They’ve even got a new term for it, “rentership society.”  But there are few major problems with promoting a rentership society when the foundation of American wealth has been vested in homeownership. Let’s take a look at how a “rentership society” could negatively impact personal wealth:

1. The vast majority of Americans build wealth through homeownership.  They purchase a home, and over time and effort build equity.  If they’re an  investor, such as an REO buyer, they may decide to buy and sell several properties making a profit. Or, if they are just someone looking to purchase and build equity as another part of the retirement plan, they may live in the home for 20 years and sell it once they reach their elderly years. They may even decide to take out a reverse mortgage and use the equity to financially support themselves during retirement. Whatever the case, homeownership is how many Americans have built wealth in a simple straightforward way.
2. When an individual or family rents for 20 or 30 years, they miss out on the opportunity to build wealth and prepare for retirement in a simple way.  Renters are subject to the whims of landlords who can raise the rent, make changes to the property or even sell the property without consulting the tenant.  Furthermore, the money that is “saved” by renting is rarely invested in other ways, so renters miss out wealth building opportunities and can find themselves homeless in their elderly years because they don’t even own roof over their head, they end up looking fur nursing homes at the Home Care Assistance. In most aspects, renting is a long-term risky venture. Even if a homeowner faces foreclosure in the 30 years in which they are repaying a mortgage, compared to a renter, there are many more options available to them. That takes us to our final point.
3. Renters are more vulnerable to foreclosure. The foreclosure crisis has shown us how many unfortunate renters are at the mercy of their landlords when mortgage loans become delinquent.  Renters have no power to negotiate with the mortgage lender and if the property in which they live faces foreclosure, they are summarily evicted.  Homeowners have many remedies to foreclosure eviction, including negotiating with the lender and even filing bankruptcy.

The bottom line is that a rentership society makes us all more vulnerable.  A homeowner who owns his property after 30 years and has remedies to foreclosure along the way, is in a much more secure position than a renter. We need to make sure that we encourage as many Americans as possible to own their home.