Over the past few years, I’ve heard a lot of people argue that renting a home is better than buying one. I bought into that idea at first, because it was easier to believe I would always rent than it was to believe I could ever afford a home. Why shouldn’t we all rent? Think of the freedom!
There’s a dark story behind those hopeful headlines, though.
Real estate is sold to people as an investment (property value in the United States of America alone is worth $14.488 trillion). Forget the very basic need to have somewhere safe and warm to sleep, somewhere secure to store your things, somewhere for your children to grow up. While adequate housing is a human right, over 1 billion people live without access and over 100 million people are considered homeless. This while some people earn billions buying and selling property the disappearing middle class, and rising millennial generation, can’t afford.
Few people can afford a home outright, so renting (or squatting) is the only option. Renting is not a new phenomenon. With the rise of the agrarian society, tribal leaders and settlers staked their claims to land (often land that already “belonged” to indigenous tribes). They developed the land, made it more agriculturally productive and populations grew. If a lord or king claimed ownership of the land, villagers paid homage—an early form of rent—in exchange for security and somewhere to live.
Today’s lords and kings top the 20 Richest Real Estate Tycoons on the Forbes Billionaires List. Buy low, sell high, invest in the growing rental market. If you live in a city like the one I live in (Victoria, BC, Canada), you invest in the booming rental market, fix all the apartment patio railings, and then increase the rent by $500 a month.
Just over the water from Victoria is Vancouver, where you pay an average $2,020 for a one-bedroom apartment.
Why is renting better than buying?
When you can’t afford to buy (or you don’t want to commit), you rent. But, if you can’t afford the rent, what do you do?
If you’re one of the nomad RV-ers in Jessica Bruder’s “Nomadland,” you find an affordable, used van to live in and you take to the road. You try to find free places to camp, you come up with visual tricks to ward off the suspicion that you’re living in your van on a Walmart parking lot, or you work temporary jobs for companies like Amazon or state parks where you can camp close to work while earning enough to pay the lot fees.
This book pointed to a particularly troubling trend regarding the rising costs of housing, and is a stark reminder that we’re all just one big f*-up away from being homeless (or houseless as these nomads prefer to think about it). Lose your job, go out of business, get divorced, and you could find yourself trying to afford a $2,000 apartment (plus important things like food and laundry) on a $2,000 monthly government-assisted income (if you qualify).
Rent is an ongoing cost, like those annoying subscription fees we all pay for services like Netflix, but way more expensive, and almost impossible to cancel. And, like subscription software, you never own it. Netflix can cancel your subscription at any time. Your landlord can sell the house, giving you three months to find something new…if they follow the rules of being a good human being.
Buying a home is risky—of course! Houses break, they require insurance and maintenance. You could end up with a lemon or it could be wiped out by a natural disaster not covered by your insurance policy. And if you buy more than you can afford, it could break you financially. We’re stuck between a rock and a hard place, where the usual benefits of renting (cheaper, more flexible, with a resident handyman) no longer outweigh the benefits of homeownership. After all, you can always sell a house (or add it to the rental market).
As the middle class continues to disappear and the gap between the haves and the have-not’s increases, as rent eats more of our savings, you have to wonder where this is all going to end up.
“Nomadland” depressed me and made me angry that we allow people, who have worked hard their whole lives, to be without somewhere to sleep with reliable heating and a bathroom. I have to hope that there are viable solutions to this big mess. Are there?
Universal Basic Income
Finland is currently doing a 2-year pilot of a Universal Basic Income (UBI) program, where 2,000 unemployed people receive €560 a month for free, no strings attached and tax-free. Hardly much to live on, it roughly equals unemployment benefits there, the program will test whether this method is more effective and flexible than existing welfare programs. Pair that with Finland’s existing social benefits like free university and health care, and it has potential to make a real difference.
Here in Canada, the province of Ontario is also piloting a UBI program, where participants earning under $34,000 a year (single) or $48,000 (as a couple) a year will receive additional income from the government (less 50% of any income they earn through work).
The idea is that UBI will cover basic living costs: housing, healthcare, food, not much else. But it’s something.
Universal Basic Services
In October, I read about an alternative to UBI where instead of receiving a monthly cheque, you just receive free services. The proposal put forth by University College London’s Institute for Global Prosperity, calls for a Universal Basic Services program that includes rent-free social housing, meals, local transportation, and internet access. The idea was proposed as a solution to impending mass job losses to artificial intelligence and robotics.
What about getting rid of the need for a full-time income? I’m lucky to live in a province with a few off-grid communities that provide interesting ideas for future affordable living solutions. Lasqueti Island is home to 400 people, produces its own energy, and even has a free store where people can pick up what they need.
Community members would need to be able to afford the building costs for a home and solar panels or a windmill, but once you have that set up, along with a barter system, sustainable agriculture, and the social services provided by your country, you don’t need to worry about much extra income.
Cooperative Land, Energy, and Business Ownership
I was intrigued by one of the last chapters in Naomi Klein’s “No is Not Enough”, regarding energy cooperatives in Europe. Farmers, citizen groups, and energy cooperatives own about half of Germany’s renewable energy facilities. How about co-buying a housing complex and running it as a cooperative (you probably already have a few of these in your city), or buying land to share? In this case, cooperative members own a share of the property but not any assets, though there are possibly other models I haven’t discovered yet.
One interesting proposal is for a Cooperative Land Bank, where residents own the land, but companies can invest in commercial or industrial buildings and lease land from the cooperative.
None of these solutions are perfect. For example, we don’t know if a model like Lasqueti Island is possible to scale at the big-city level. But, they do provide some answers. As real estate investors continue to cheer on increasing real estate prices, and home-flipping continues to be a television sensation, it’s important that something is there for all the people who won’t be able to afford to buy or rent investors’ fabulous, expensive homes in the future.
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