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Oh. My. God. (Or, as the bottle of olive oil sold in the NYC deli where I worked says, O Dio Mio.)
Are you aware that property taxes are generally higher - and often much higher - on rental property than on owner-occupied homes of equal value? Same for insurance and even for mortgages.
I'll get you some numbers tonight but for now I can tell you that median homeowner income (circa 2010) is almost exactly 2x median renter income. In the 1980s, median renter income was approx 60% of homeowner income; since then homeowners have increased their income advantage over renters.
So what - renters don't pay property taxes or insurance. Any more than grocery shoppers pay property tax or insurance when they buy groceries.
Who cares about income of homeowners versus renters? It's not caused by the fact that one rents and the other doesn't.
Renting is almost always cheaper than owning, at least in the early years. When we bought our house 25 years ago, the monthly payment was much higher than the average rent in Denver/Boulder. Rents have just recently caught up to our house payment. I can't find a stat back that far, but even in 1996, the average rent was about 60% of our house payment. Then you have all the upkeep costs, usually covered in rent, and the "home improvement" costs, such as "wouldn't it be nice to have a new kitchen?" Because a house is usually bigger than an apartment, utilities are higher.
Hmm. I'm curious on how true that is. I suspect part of the difference is you're comparing an apartment with a detached house (usually larger sq ft and with land). If you compared owning a similar sized condo with a rental, the difference may be smaller or non-existant. In some cities with depressed housing prices (rust belt cities such as Pittsburgh), the rent-buy difference may be low or actually cheaper to own if more than a couple years. It's often not worth it to buy unless you're planning on staying long-term. Buying a house has upfront costs, and is also more of a time commitment. The opposite extreme is markets where by zoning or historical circumstance rentals aren't built large quanities but lots of detached houses are. For example, the median rent in Nassau County, Long Island* is higher than Manhattan. [The market rent is higher in Manhattan but that's a very different comparison]
*It's still cheaper to rent than own in Nassau County. Median monthly housing costs for those with mortgage is $3,157 while rent is $1,479. But the rentals are almost certainly smaller than the homes with mortgage. Equivalent Manhattan numbers are $3,145 for a mortgaged home and $1,384 for a rental but the housing stock is completely different.
In my area the up front costs are the barrier to many...
With rates around 4%... a lot of people can qualify for more mortgage than they may think...
High School friends owned a home in Maxwell Park... it was clean and tidy and very comfortable.
They wanted their kids to go to a better Oakland public school in Montclair and just couldn't afford the buy in... so the rented their home and became renters themselves just to get into a better school for their daughters.
Anyone who tries to make a blanket statement of "renting is cheaper than buying" or "buying is cheaper than renting" is a fool. There are so many variables that go into owning vs. renting - How long are you going to hold onto the property? Where is the property located? What condition is the property in? Do you have condo fees? How much is rent in your area? What interest rate can you get? The basic costs of home ownership can vary wildly even in the same town, and costs like insurance and property taxes are all over the place when you look at it nationwide. There are calculators that can give you a general comparison of rent vs. own in your area, but they're just a baseline comparison that miss loads of variables that will impact anyone's personal choices.
The only thing you can be sure of is that your landlord is passing all of the costs of keeping the property along to you (and probably making a profit too) so you'll always be paying for the ongoing costs of a property even if you rent. The only way a landlord can offer you a cheaper rental rate is if they have owned the property for a long time in an area that has appreciated.
All Real Estate is local... your mileage may vary.
I've got to homes in holding patterns right now... the owners were transferred overseas and plan on coming back in 3 to 5 years.
The tenants are getting a great deal with rents only covering about half the cost to own...
All situations are different so no one size fits all.
Another family bought a small home near UC Berkeley campus because they plan for their kids to attend college in the Bay Area later... they live in Hong Kong and more than willing to put up with negative cash flow to do so...
Hmm. I'm curious on how true that is. I suspect part of the difference is you're comparing an apartment with a detached house (usually larger sq ft and with land). If you compared owning a similar sized condo with a rental, the difference may be smaller or non-existant. In some cities with depressed housing prices (rust belt cities such as Pittsburgh), the rent-buy difference may be low or actually cheaper to own if more than a couple years. It's often not worth it to buy unless you're planning on staying long-term. Buying a house has upfront costs, and is also more of a time commitment. The opposite extreme is markets where by zoning or historical circumstance rentals aren't built large quanities but lots of detached houses are. For example, the median rent in Nassau County, Long Island* is higher than Manhattan. [The market rent is higher in Manhattan but that's a very different comparison]
*It's still cheaper to rent than own in Nassau County. Median monthly housing costs for those with mortgage is $3,157 while rent is $1,479. But the rentals are almost certainly smaller than the homes with mortgage. Equivalent Manhattan numbers are $3,145 for a mortgaged home and $1,384 for a rental but the housing stock is completely different.
$1,384 for a Manhattan rental? Yeah right...if you're well north of 96th Street....like perhaps in Inwood. I've heard even Washington Heights (gag) has gotten pricey. I'm also surprised at the Nassau figure. Those numbers suggest major income inequality in the NYC metro is restraining rents.
There are some models that are immune to displacement due to gentrification...
Last summer I was in Detroit and can say from personal observation there is little fear gentrification will raise it's ugly head.
Cities like Detroit actually pray for Urban Renewal and Gentrification...
All a matter of prospective I guess.
I have a friend who went to law school at Wayne State in the early 80s...he said that the Wayne State students were highly desirable to landlords in the neighborhood and preferred to the local non-students.
Anyone who tries to make a blanket statement of "renting is cheaper than buying" or "buying is cheaper than renting" is a fool. There are so many variables that go into owning vs. renting - How long are you going to hold onto the property? Where is the property located? What condition is the property in? Do you have condo fees? How much is rent in your area? What interest rate can you get? The basic costs of home ownership can vary wildly even in the same town, and costs like insurance and property taxes are all over the place when you look at it nationwide. There are calculators that can give you a general comparison of rent vs. own in your area, but they're just a baseline comparison that miss loads of variables that will impact anyone's personal choices.
The only thing you can be sure of is that your landlord is passing all of the costs of keeping the property along to you (and probably making a profit too) so you'll always be paying for the ongoing costs of a property even if you rent. The only way a landlord can offer you a cheaper rental rate is if they have owned the property for a long time in an area that has appreciated.
DING DING DING
I think long-term; owning usually is cheaper in the long run as owners immunize themselves from the ongoing rent increases renters face.
And a landlord CAN offer you a cheaper rental rate by reducing their cost structure, e.g. by refinancing a mortgage at a lower rate or through major property tax cuts like Prop 13. But the savings are rarely passed to renters, which is why a number of local rent controls were adopted after Prop 13 failed to reduce rents.
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