Renters vs. Buyers - Renting Better for America?

I think owner-occupied homes are better maintained than investor-owned homes. The mortgage rates reflect this fact. The housing stock must be well maintained in order to be of use to the next generation. Blighted areas develop when landlords or owners do not maintain their buildings. As a landlord for many years, I know that renters often cause damage in rental property. I doubt that owners cause as much damage to their own homes because they know they are destroying their own investment.

I think owner-occupied homes are better maintained than investor-owned homes. The mortgage rates reflect this fact. The housing stock must be well maintained in order to be of use to the next generation. Blighted areas develop when landlords or owners do not maintain their buildings. As a landlord for many years, I know that renters often cause damage in rental property. I doubt that owners cause as much damage to their own homes because they know they are destroying their own investment.

Renters as a class of people are not the same class of people as owners. It isn't that a person who might otherwise own says when they rent that they don't care about the place or maintenance. It is just that the rental person is a different type than a owner person.

right... 407's logic confuses correlation with causation.

Low income folks are generally renters. Of course there isn't going to be a lot of "maintaining" going on in lower end neighborhoods. And yet there is a ton of maintenance going on in high end rental buildings... often more than co-ops in the same neighborhoods.

Not to mention, the attempt to make everyone an owwner certainly did WONDERS for blighted neighborhoods, no? It created a whole lot more of 'em.

"Blighted areas develop when landlords or owners do not maintain their buildings. "

Yes, all of those luxury rental buildings near Lincoln Center, in BPC, and Gramercy Park look BLIGHTED for sure. Not. Please actualy READ the entire article before commenting, the author addresses this.

I'm not even necessarily talking about class, I'm just saying that renters do not have the same incentive to maintain the property as do owners, because renters do not profit from a well-maintained house. I know of "high class" people who have rented homes and ignored terrible problems.

A friend of mine rented out her house to a well-off couple. A branch fell and put a hole through the roof. The tenants never said anything about the hole and water came into the attic for months. My owner friend found out about the hole in the roof when she went home. The tenants just didn't pay any attention to the condition of the house.

On the other side of the equation, investors will not maintain their properties as well when just renting them out. Do you think that owners going to pay the extra cost for the best bathroom fixtures, kitchen renovations, plumbing repairs, etc. No, they're not. Investors are going to spend as little as possible in order to keep their profits as high as possible.

I say New York City is a different case than the rest of this country.

Look, I know of "low-income" people who went off and bought their own homes and used that purchase as a step up the economic ladder. They did not create blight. How are all these renters going to help themselves up the ladder? They can't make any profit.

On the other hand, owners are not going to pay anything to fix their houses when the bank is at the door. Quite a few will actively damage them. Take a look at the ghost towns developing in California, Florid and the Rust Belt. Or BPC in 6 months.

All these renters are just going to sit around and ask for more rent control, as opposed to improving their properties, selling them for a profit. and moving somewhere else. Do we really want a whole nation of people looking for the next handout? At least Habitat for Humanity required sweat equity in properties.

It's too simplistic to argue that renters cause blight and landlords do not. The article contemplates the whole United States, not just Manhattan. Applying analysis of Manhattan's real estate market to the article in question shows only that you have not, you know, read the article prior to commenting.

> They did not create blight. How are all these renters going to help themselves up the ladder? They
> can't make any profit.

Well, the answer has proven to not be "let them take mortgages they can't afford". That not only screwed them, that created a whole lot more blight when they got foreclosed on.

You can play semantics with blame, but the idea of home ownership for all created a WHOLE lot of blight. Look at Bakersfield, CA.

"Yes, all of those luxury rental buildings near Lincoln Center, in BPC, and Gramercy Park look BLIGHTED for sure. Not. Please actualy READ the entire article before commenting, the author addresses this."

Right on...

BTW, is someone really inferring that owners don't create blight?

You're saying there aren't owners with cars on blocks and the house falling apart?

I never said landlords did not cause blight. I said landlords, owners, and renters caused blight when they did not maintain the properties. Renters cause blight when they pay artificially low rents so that landlords do not have enough money to maintain their properties. Landlords and owners can also cause blight sue to their negligence.

did you actually read the article?

I still maintain that owners have less reason to cause blight then do their renting neighbors, and their neighbor's landlord. If you maintain your property well, you will sell for a higher price. Overpaying for the property and losing it in distress should not be the normal scenario.

"Overpaying for the property and losing it in distress should not be the normal scenario. "

But that's the point: many people have overpaid for property and are losing it in distress. This has become normal, as a result of idiot tax policies that encourage homeownership among those unable to afford same. It doesn't follow, then, that people who own property maintain it any better than people who rent.

Mere possession is no guarantee of maintenance.

> did you actually read the article?

So, I take that as a no...

and the jackasses didn't realize that all the policies to make buying more affordable just raised priced by the amount of the effective subsidy...

banks 'unintentionally' becoming the largest landowner...hmmm haven't i read this somewhere before..gosh, those stupid conspiracy theorists..hmmmmmm...

Part of the problem here is that leverage is becoming a thing of the past. Or, rather, all investors across all asset classes will have to get by with less leverage than they have in the (recent) past. This can't help but depress real estate prices for years to come...

Yeah, I read the article. I called the end of the suburban dream of home ownership fifteen years ago when I moved away from the suburbs and turned in my car keys.

If rental property is so wonderfully maintained, why are the interest rates higher for loans on investor-owned property than they are on primary residences? The interest rates take into account the value of the properties over time. In the past, owned properties have held their values better.

I don't think it was the idiot tax policies that messed this up. Mortgage interest has been deductible for a long time and we were fine. If anything, the tax policy got more sane when it allowed people to take their profit and buy less expensive homes.

"Mere possession is no guarantee of maintenance."

I never said it was a guarantee, just that it was more likely.

Now, idiot bankers, agents, appraisers, and buyers who sold and took loans they could not afford have blown up the system. Whose fault is that? Sure, the labor market if hurt by the housing market. We have known that for a long time.

"If rental property is so wonderfully maintained, why are the interest rates higher for loans on investor-owned property than they are on primary residences? The interest rates take into account the value of the properties over time."

Incorrect... they take into account the likelihood of payback...

> Mortgage interest has been deductible for a long time and we were fine.

We weren't "fine". This led to the biggest RE bubble in history, over many years.

If you think things are "fine" look outside...

Interest rates for investor-owned property loans are likely higher because those loans are considered higher risk. Just like if you issue junk debt vs AAA-rate debt.

What this has to do with the issue at hand, though, is unclear. "Higher risk investment" does not translate into "will be poorly maintained."

it does if you are making things up.

The chance of payback of the loan has to do with the value of property. The mortgage is more likely to be paid back if the house is well-maintained and can be sold in the market for a good price. The condition of the house is a determining factor in its value.

When I say a long time, I mean 25-30 years, or more. The mortgage interest deduction has been around a long time and was broadly applied to everyone in this country, giving owners some incentive to buy and maintain properties. I do not believe the mortgage interest deduction caused this bubble.

"I don't think it was the idiot tax policies that messed this up."

I would say the tax change exempting $250k/$500k profit for a house you lived in for 2 of 5 years played a large part in this mess. But that's way off topic.

> The chance of payback of the loan has to do with the value of property.

You're just digging yourself into a hole here. This is not correct... it is the ability of the buyer to pay back the loan.

Investors pay more because they can own multiple properties and have different risk profiles.

Sorry, the logic is just weak.

And the buyer is more able to pay back the loan if his house holds its value and he can sell it and use the profit to pay off the loan. Why are you missing that?

Certainly, investors have different risk profiles, I agree with you there. How highly leveraged an investor is will probably determine how much money he has to repair his buildings.

"And the buyer is more able to pay back the loan if his house holds its value and he can sell it and use the profit to pay off the loan. Why are you missing that? "

And folks that don't paint their houses brown can sell them for more.

I'm not missing that, you are simple missing the point. You are using incorrect logic to make your invalid point.

Maybe a lot of people in this country got hung with bad deals because they did not understand the risks inherent in adjustable rate mortgages.These low teaser rates which reset higher later on and crush people are a big part of the problem. It is similar to all of these tax abatement condo units in the city, something else I will not touch.

"I'm not missing that, you are simple missing the point. You are using incorrect logic to make your invalid point. "

Fine, lay out my incorrect logic and my invalid point. I suppose we just disagree about this issue, but, at this time, I am not quite sure where we disagree or what point of view you hold.

People did not understand the risks of ARMs because people don't want to read fine print, consider either complexity or ambiguity, or take responsibility for decisions they make.

I agree that the tax deductibility of interest did not create the real estate bubble, however, it combined with the Fed's easy money policy was fuel for the fire. Low interest rates and tax subsidies made ARMs more attractive. Combine that with the issuance of subprime mortgages to marginal borrowers, and, well, you have a conflagration.

> Fine, lay out my incorrect logic and my invalid point.

You used different interest rates as "evidence" of one factor, and completely ignored the other more significant factor being the difference, making the logic invalid.

We disagree on exactly what I said earlier.... your initial statement was incorrect, confusing correlation with causation.

"People did not understand the risks of ARMs because people don't want to read fine print, consider either complexity or ambiguity, or take responsibility for decisions they make."

Exactly, I agree with you here. We all know that when a buyer goes to closing, he or she has to sign a hundred pages of documents while the seller twiddles his thumbs. Did any of these sellers know what they were signing up for or the possible ramifications? It is pretty clear they did not know the risks.

I still maintain that is is more likely that an owner will maintain their property better than an investor will. Whether the maintenance of properties find itself into the interest rates for investment properties is something we disagree on.

Speaking of responsibility, with ownership comes responsibility, to quote an old phrase. I am glad that I am almost out of the rental game as I could not even count on tenants to tell me when something was wrong, never mind do anything about it. I won't be renting to any rent stabilized people either, that's a fool's game. Let someone else get stuck with that.

> I still maintain that is is more likely that an owner will maintain their property better than an
> investor will.

Which also ignores all the fix up and flip work done by... well, investors...

And, as I've said, I've seen TONS of owner-residents have horribly maintained houses.

> Speaking of responsibility, with ownership comes responsibility

And who says an investor who doesn't live there doesn't have responsiblility?
Again, you are making sweeping generalizations with no evidence.

If anything, you now have two interested parties interested in maintaining a residence.... those living in it, and those who own it.

There are many owner-occupied houses/apartments that I have come across that are poorly maintained. There are also many owner-occupied houses/apartments that I have come across that are well maintained.

As for those two interested parties, the one who lives in it ignores the problems, and the one who owns it does not see the problems because he is not around. Yes, of course, the investor has responsibilities, but it is easy for him to ignore those responsibilities when he is not personally affected by the conditions of the unit. Why else does the city have hot line numbers for tenants who are not getting enough heat? It is easy to freeze someone else out to make a buck, hard to do that to yourself.

I have seen tons of horribly maintained rental houses sitting next to pristine owner-occupied houses. So, what have we proven? Both sides can mess up, I don't question that. I guess our argument is over who screws up the most?

"As for those two interested parties, the one who lives in it ignores the problems, and the one who owns it does not see the problems because he is not around."

That is an INCREDIBLE generalization.

There are TONS of renters who care about the problems. Hell, many landlords complain that tenants complain too much.

When you have to rely on sweeping stereotypes, the argument is pretty much lost.

> Why else does the city have hot line numbers for tenants who are not getting enough heat?

Wait, aren't these the same tenants you just said ignore the problem?

Wow, your logic is pretty bad.

"I have seen tons of horribly maintained rental houses sitting next to pristine owner-occupied houses. So, what have we proven? "

We've proven you have an single anecdote, and using it to make sweeping generalizations is the worst logic mistake you've made today.

It seems to me that two propisitions here are defensible:

(1) Some owner-occupied housing is poorly maintained
(2) Some renter-occupied housing is poorly maintained

If these propositions are defensible, then it follows that:
(3) Some owner-occupied housing is well maintained
(4) Some renter-occupied housing is well maintained.

Confidently speaking in universals (all owner-occupied housing is pristine, etc.) tells me nothing but that you are over-confident in your assertions.

Ah, nyc10022, let's leave it at that. You are also relying on your incredible generalizations. I still claim that private property is one thing that has helped this country get ahead. I have some good rental stories from when I traveled in Russia but I'll leave them for another thread. There are no utopias.

Private property rights have helped this country get ahead. It does not follow, however, that all, or even most, people should own real estate.

"The social science research literature detailing the impacts of homeownership includes documented studies from the social sciences, medicine, psychology, and other fields. Overall, economists, sociologists and other social scientists have found significant, positive homeownership-related impacts on a large set of outcomes associated with households and communities.[10]

This research finds a homeowner’s stakeholder status encourages the owner to take an active role in bettering their neighborhood. As an example, research indicates that homeowners are more likely to maintain and improve their homes and be involved in local social and political organizations and activities. As a result, communities with large numbers of homeowners possess increased public amenities, reduced crime and greater environmental awareness.

Moreover, homeowners are more likely to improve and maintain their residences due to their ownership stake.[11] As a result, neighborhoods of homeowners tend to be better maintained, leading to more attractive and safer communities. To the benefit of their neighborhoods, home-owning households are more socially involved in community affairs. This is due to both the fact that homeowners expect to remain in the community for a longer period of time and that homeowners have an ownership stake in the neighborhood. Dipasquale and Glaeser (1999) find that homeownership has a positive impact on the provision of a variety of types of social capital including membership in non-professional organizations, knowledge of local officials, voting in local elections, involvement with community problems, church attendance and home security.[12]
"

[10] Two recent, comprehensive literature reviews detailing the impacts of homeownership are:

W. M. Rohe, G. McCarthy, S. Van Zandt, The social benefits and costs of homeownership: A critical assessment of the research, Research Institute for Housing America, Working Paper No. 00-01 (2000).

R. Dietz and D. Haurin, The social and private micro-level consequences of homeownership, Journal of Urban Economics 54 (2003) 401-50.
[11] N. S. Mayer, Rehabilitation decisions in rental housing: An empirical analysis, Journal of Urban Economics 10 (1981) 76-94.

[12] D. DiPasquale, E. L. Glaeser, Incentives and social capital: are homeowners better citizens? Journal of Urban Economics 45 (1999) 354-384.

From:

http://www.nahb.org/generic.aspx?sectionID=734&genericContentID=98440#_ednref10

Sure, is is published on the Nation Association of House Builders website so maybe it is suspect. The source papers are probably worth reading...

The source papers probably are worth reading but note that the summary of these papers doesn't speak in universals ("neighborhoods of homeowners tend to be better maintained," etc.)

None of this refutes the proposition "Some owner-occupied housing is poorly maintained."

Dave

"Some owner-occupied housing is poorly maintained."

Yes, I agree, some owner-occupied property is poorly maintained. I still think, generally speaking, that owner-occupied property fares better. We are trying to aim for a policy that gives us the best possible outcome.

As an owner in New York, I have not faced the kind of problems that I have seen in the rental units of my friends. Our services are well-maintained, no problems with heat, water, or plumbing that are not taken care of in a timely manner.

"As an example, research indicates that homeowners are more likely to maintain and improve their homes and be involved in local social and political organizations and activities. "

You are again confusing correlation with causation. Without basic logical concepts, you are going to have a hard time proving anything.

> You are also relying on your incredible generalizations.

No, I'm not. That you can't tell the difference doesn't speak well for your logic.

> I still claim that private property is one thing that has helped this country get ahead.

"Private property rights have helped this country get ahead. It does not follow, however, that all, or even most, people should own real estate."

Bingo.

In fact, the original logic is backward. The pursuit of private property drives innovation and growth.
But you don't then just hand out property evenly each year, right?

So why would then subsidies and handouts suddently make for getting ahead?

"As an example, research indicates that homeowners are more likely to maintain and improve their homes and be involved in local social and political organizations and activities.

You are again confusing correlation with causation. Without basic logical concepts, you are going to have a hard time proving anything."

These are not my words, this is a quote from the article.

"The pursuit of private property drives innovation and growth.
But you don't then just hand out property evenly each year, right?

So why would then subsidies and handouts suddenly make for getting ahead? "

Private property should be paid for through work and not handed out. I worked hard to buy every house I have ever owned. Sure, tax policies made it a little easier to buy the properties, but I still had to cover the mortgage and all repair expenses.