January 31, 2011
Rent or Buy?
At the beginning of the the material on Landlord-Tenant, I do a song and dance about how this country has fetishized homeownership in very strange and unproductive ways. I also try to convince the class that (in financial terms) renting is often the better long-term option. Quite frankly, I find this exercise to be one of the most difficult teaching moments of the year, as many students have completely internalized the maxim that renting amounts to "flushing money down the toilet every month."
A report from Trulia (a real-estate search engine) might force me to reassess my opinion. Trulia claims that the foreclosure crises has made it more practical to buy rather than rent a two-bedroom home in 72% of America's 50 largest cities. Pete Flint, CEO of Trulia, notes, "Since the start of the ‘Great Recession,’ many former homeowners have flooded the rental market. Following the principles of supply and demand, renting has become relatively more expensive than buying in most markets. Though necessary for achieving true economic recovery, stricter bank lending practices have also further aggravated the struggling housing market in the short term."
Top Cities to Rent v. Buy Top Cities to Buy v. Rent
1. New York 1. Miami
2. Seattle 2. Las Vegas
3. Kansas City 3. Arlington, TX
4. San Francisco 4. Mesa, AZ
5. Memphis 5. Phoenix
6. Los Angeles 6. Jacksonville
7. Forth Worth 7. Sacramento
8. Oakland 8. San Antonio
9. Portland 9. Fresno
10. Albuquerque 10. El Paso
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We rented for many years and couldn't wait to buy a home, and when we did, it was owing to the city's commitment to low and moderate housing (an extremely precious commodity in Santa Barbara) and a non-profit housing organization (plus our sweat equity) that allowed us the opportunity to buy our home (which came with stringent resale restrictions). Our mortgage payments are considerably lower than any comparable rentals in the area.
When we rented, we had all kinds of strange tenants as neighbors (from the criminal to the psychotic) and I can tell stories that you'd swear were the stuff of fiction (involving guns fired, indecent exposure, domestic violence, fire...). In addition, virtually everywhere we lived, landlords were negligent and irresponsible when it came to necessary repairs (be it leaky roofs, faulty or non-operable heaters, plumbing disasters, dangerous wiring...). What is more, rents were routinely raised in spite of such neglect, and often to amounts that compelled us to move elsewhere. Raising children when one lacks security of tenure is not a pleasant experience. Of course I suppose those with a higher income can avoid many of these problems, in which case the choice may be more difficult to make, but there's no way in the world that we would have ever thought renting preferable to home ownership. Landlord and tenant: terms tellingly rooted in feudalism and the relationship often an exquisite exemplification of an unconscionable adhesion contract.
Posted by: Patrick S. O'Donnell | Jan 31, 2011 5:08:57 PM