Renting a Home

Is your mortgage underwater? (source)

 I'd like in this post to address what's turned out to be a topic of major importance. As many of you are probably aware, from reading or listening to or watching the news, home purchases are way down. Many mortgages are underwater. The housing bubble is collapsing as we speak (I say "collapsing" instead of "collapsed" because many of the commentators I read believe it's still got a ways to go). These trends affect many of us personally, in addition to being powerful macroeconomic drivers.

For decades, the federal government has pushed homeownership as a means of growing the economy. This despite the fact that, as of 2000 (the last published US Census), in Pennsylvania alone there was a glut of 500,000 homes. In other words, the commonwealth had 500,000 unoccupied residences, probably many of those in urban cores. For the nation as a whole, that number was 10.4 million. Also according to the 2000 Census, 13.6 million housing units were built between 1990 and 2000... apparently 10.4 million in excess of what the nation actually needed.

In other words, our economic growth, at least from 1990 on, insofar as it was built on housing and homeownership, was phantom growth. We chopped down endless acres of forests, poured endless of acres of concrete, put up endlessly hideous square feet of vinyl siding... so that well over 10 million homes could sit empty. What were we thinking?

But that's not what I want to write about today. Taking all the foregoing as necessary background, how do we move forward? If we accept as fact that home values have much further down to go (and how can they not, with such a glut on the market?), what sensible person, not already a homeowner, would make the decision to enter those ranks? For the first time in decades, it seems, it is not financially rational to purchase a home: you are practically guaranteed to lose money (on the other hand, if you have the cash to purchase one outright, you might prefer to do so for the security of tenure you'll be granting yourself).

I think the way forward is to return to renting as the major mode of home occupation. There are many benefits to renting, from increased mobility (less debt and no need to find a buyer before moving), to fewer maintenance costs, even to the ability of the savvy renter to negotiate lower monthly payments in return for services rendered (e.g., mowing the lawn). Many people think of renting as "temporary", as some sort of phase between living with one's parents and finally "growing up" and "owning" a home. I put owning in quotation marks because I think its arguable whether you or your bank really own the home you purportedly purchased. You might say you own it, but wait till you've lost your job and your unemployment runs out: that knock on the front door is the sheriff. At least, with renting, ownership is unambiguous: it's definitely not you (though it also might not be the landlord).

Renting need not be a phase. According to Time Magazine (9/6/2010), while the rate of homeownership in the US is 68%, the rate in Switzerland, e.g., is only 35%. And just 110 years ago, in the US, the rate was only 47%. This rate was only pushed up to its current high levels through proactive government efforts. Again according to Time, the idea of the 30-year mortgage was invented by the federal government in 1928, as a way of making homeownership affordable to more people; and, even then, it required the creation of a government entity, The Federal National Mortgage Association (Fannie Mae) to buy the mortgages off the books of the banks.

I guess what I'm saying is that it is much more likely that homeownership is the phase, and renting the norm. To return to the title of this piece, what do I mean by "renting a home"? Well, if renting is the norm and not homeownership, shouldn't we stop thinking of renting as a way to store our butts when we're not at work, but rather think of renting as renting a home? I think so. It's a shame that many municipalities zone renters out of the best neighborhoods on the rationale that they'll bring property values down. There may have been some logic to that in the past, when our cultural zeitgeist told renters there was no point in improving their residences since "they got nothing out of it". I think that's an idea due for throwing into the dustbin of history. I say again: it's time to think of renting as renting a home. Of course it makes sense to improve your home, whether you own it or rent it. Do you want to live somewhere uncomfortable, or antagonistic to your sense of self or aesthetics? No, and who would? And if you say "but you're just improving the place for your landlord", I might reply that I'd rather improve a home for a person than for a bank.

I'll close with a case study, as it were. My wife and I, as I'm sure some of you may have guessed by now, rent a home. It's on a lovely block in west Lancaster. We have great neighbors (some of whom also rent), a backyard, almost enough space to suit our needs, and the (mental) freedom to improve our home. Here are some of the things we've done to our apartment: turned the backyard into an extensive vegetable and flower garden; built a fence between the yard and the alley, and a gate between the yard and the street; installed ceiling fans in every room (much preferred over AC); painted the walls a pleasanter shade than white; installed racks for hanging vegetables, pots, and coats; and other miscellaneous things.

Pretty good list, right? I'll tell you the secret of how we did it. Actually, two secrets. First, we recognized that there's no way we could afford to own a home, and we didn't want to; this made it easy for us to leave that bit of cultural baggage behind and see our "dwelling unit," as planners say, as a home. Second, we have carefully cultivated a relationship with our landlord. This began as early as 18 months ago, when we were looking around for a place to live. One of our criteria for a good place was "a good landlord." I think that's a key goal for anyone looking to rent a home. If you've got a jerk for a landlord, move. If you meet a jerk of a landlord, but otherwise like the place, understand you'll probably be leaving when the lease runs out in a year; if you're looking to live somewhere longer than a year (say, in a home), then take the time to find a good landlord.

Once you have your good landlord, start cultivating that relationship. Before you even sign a lease, ask if he minds if you plant a garden. Ask who mows the lawn, and can you do it? Often (s)he'll be happy to let you mow, and pay you to boot. We get paid $10 per mow. Little things like this form the basis of a solid relationship, such that, when you eventually ask him to shell out $80 for a ceiling fan, on the proviso that you install it yourself (very easy, and saving a good chunk of money on labor), there's a good possibility of him saying yes. If there's hesitation, don't hesitate, yourself, to make the argument that, when you eventually move out (if you ever intend to), you've just improved the value of the place, at practically no cost. I've found this to be a strong argument. We've also convinced our landlord to pay for paint (and it helped we went to the Habitat Re-store to buy it, allowing us to paint our entire apartment for under $50). When your landlord knows you care enough not to waste his or her money, you've made that relationship stronger, and eased the way for future improvements you might like to do.

Rent your home! (source)

Finally, given the state of the national and global economy, you might be worried about the security of your employment. What happens if you lose your job and find rent difficult to make? This is a tough one. Dmitry Orlov has suggested, on his blog and in his book, Reinventing Collapse, that it is imperative for renters to "de-monetize" their relationship with their landlord. I've take the first tentative steps down that path by helping my landlord with basic home maintenance, for free. I don't mean to say I did that out of cold calculation; rather, I did what felt natural in a growing, mutually-beneficial relationship, but in may also help in the "Orlovian" sense, if I may be allowed to coin a term.

So, go forth! Rent a home. And don't feel like you're in some sort of pre-buying holding pattern. Being a renter may very well be your permanent condition, but there's nothing wrong with that.