Friday, June 18, 2021

In-your-face pro-landlord, pro-big-business propaganda

 

Earlier this week we discussed why companies were buying up America's houses, and in the process making it much more difficult for families to buy their own homes.  More and more sources are criticizing this development, and pointing out its inherent dangers.

Now Big Business and Big Landlords are counter-attacking.  A primary example of their propaganda is an article at Bloomberg titled "America Should Become a Nation of Renters".


Rising real-estate prices are stoking fears that homeownership, long considered a core component of the American dream, is slipping out of reach for low- and moderate-income Americans. That may be so — but a nation of renters is not something to fear. In fact, it’s the opposite.

. . .

In coastal markets with strong demand for housing, market forces would normally have led to the replacement of single-family homes with duplexes and apartments. But existing homeowners are reluctant to agree to development with unknowable effects on the value of their most precious investments. The result is less development — and sky-high rents for any residents not lucky enough to own their own home.

As institutional investors increasingly enter the housing market, however, the incentives begin to shift. Large investors can expand or redevelop their properties themselves, because they benefit from a greater number of overall tenants, even if rents themselves dip.

Meanwhile, the increased availability of rental properties could benefit homeowners in declining areas of the country. They frequently cannot move to more prosperous areas because they can’t sell their homes for nearly enough to buy a new place somewhere else. In an economy with more rentals, however, they could afford to try a new place for a few years without the commitment of a mortgage or down payment.

A nation of renters could lead to a world where location decisions are driven far more by personal preferences and life-cycle demands. Younger workers might prefer the excitement of the city. A couple just starting a family could reunite with their parents or siblings in a small town.

The U.S. is not quite there yet, and not just because too many people are chasing too few apartments. To see the U.S. as a nation of renters requires a revision of the American dream of homeownership. This country was always more about new frontiers than comfortable settlements, anyway.


There's more at the link.

Let's tackle some of the article's points.

  • "market forces would normally have led to the replacement of single-family homes with duplexes and apartments":  In reality, market forces have not led to that, because most people don't want to live in a duplex or apartment if they have a choice.  That may work for singles or young couples, before the kids arrive.  However, when it comes to families, their overwhelming preference is for more space, and greater privacy and peace and quiet, than they can find in more cramped dwellings.  That's why houses remain the preferred choice for so many of them.
  • "As institutional investors increasingly enter the housing market, however, the incentives begin to shift":  Yes, they do, because the desires of families are not the primary concern of those investors.  They want to maximize their return on investment.  If they can cram more dwelling units into the same space that a single house requires, they can make more money - so it's in their interest to do so.  Our interest?  Not so much.
  • "the increased availability of rental properties could benefit homeowners in declining areas of the country":  Note the careful "could" instead of "will".  That's because the corporate investors who will "increase the availability" of rental properties will ensure that they make every cent of rent they can squeeze out of their tenants.  Rents are now so high in many cities that they equal (and in some cases exceed) the mortgage payment and associated costs that it would take to buy that dwelling outright.  So much for "benefit"!  What's more, if you pay into a mortgage, you have the prospect of getting some or all of your money back (and perhaps even more) when you sell your home.  When you pay that money in rent, it's gone forever, with no return on your "investment" at all.  (Why do you think many military families have for decades bought houses when they changed station, only to sell them [or keep them as an investment] and buy another when they're posted somewhere else?  They did so because they made money that way.  If they'd lost money by doing so, they'd very quickly have stopped doing it!)
  • "To see the U.S. as a nation of renters requires a revision of the American dream of homeownership. This country was always more about new frontiers than comfortable settlements, anyway."  Nice little touch of propaganda, there.  What's the first thing that our settlers did when they reached their "new frontiers"?  They settled on their own land and built their own homes.  I don't recall reading about any apartment complexes in the Old West, or the settlers' desperate desire to rent from someone else - do you?
Always, always, ALWAYS ask:  Cui bono?  Who benefits?  To answer that question, always, always, ALWAYS "Follow the money".  The beneficiary is the one with the money at the end of the day.  If we're renting, that's not us - it's our landlord.

Remember this scene from the 1939 movie "Stagecoach"?



We all remember how that turned out.  The banker was arrested for stealing his depositors' money.

One wonders how much of that attitude has permeated the modern business world, because what's good for them - big business, Big Tech, Big Brother in general - is seldom good for us.  It's like advertisements urging us to "save $XXX on this product!"  Tell you what.  Go to the store with money in your pocket.  Buy that product.  Now, count out for me, in cash, the money in your pocket.  If it isn't greater than the amount with which you started out, you haven't "saved" anything at all - instead, you've spent money. You've got less than when you began.  So much for "save $XXX"!

Be deeply suspicious of any propaganda telling you that to give up or change your desires is actually good for you.  That may work from a religious perspective, but it's far from guaranteed in commercial, economic terms.

Peter


24 comments:

Unknown said...

For the majority of Americans, home ownership is the only way to accumulate significant wealth and leave it to their children.

A "nation of renters" means a generation that will not accumulate wealth, and will not create multi-generational wealth.

- Don in Oregon

Aesop said...

Rent control, and Jewish Lightning. In 3,2,...

They may steal the ballot box, but they're still at the mercy of Vyacheslav Molotov's favorite beverage.

Gives "Drinks on the house!" a whole new meaning.

Old NFO said...

Yep, follow the money, as always...

Steve Sky said...

Hi Peter,
I can name another part the propaganda carefully didn't mention. My mortgage payment interest was deductible on my income tax, but the rent I paid prior to getting a home, which (as you noted) was almost as much as a mortgage payment, wasn't. It was simply gone into the Big landlord's pocket.

Jester said...

The plain and simple common sense that's missing from this propagana article is breath taking. It took me a long time to get to the point I could buy a house. (Divorced, which wrecked my credit and other assorted factors) I was able to use my VA loan to buy this house at 36, and just refinanced it to a conventional due to the house having appreciated in value (50K!) What I pay now for the house payment is hundreds of dollars cheaper for anything close in a rental here in Wyoming. If I were to take a Job down in the Denver area? This house would rent for 2400 dollars it it was there. You can't rent cheaper anywhere than you would pay for a home loan. Assuming you needed something more than one bedroom.

boron said...

You may be missing one very important factor:
in many other cultures, it's not uncommon for three/four generations to share one bedroom, in fact, they become very uncomfortable if this isn't the case.
Are the "powers-that-be" attempting to change our American middle-class values in advance of the onslaught/importation of many people from these third-world cultures?

Tschifty Mccoy said...

Moreover it's doubly dishonest as we've seen what happens in cities where developers have gone to blighted areas and transformed them into trendy areas people want to live (at least pre Plandemic Race War era). This is now denounced as gentrification and racist and a hostile takeover. There is plenty of space and need in our cities for apartments and development but the Wokenistas hate that too.

Tschifty Mccoy said...

Yes much of what we're seeing all around us is a wholesale rejection of the values and ideals that make us Americans. The oligarchs want to fundamentally transform us. Now where have I heard that before?

Chris Nelson said...

@Aesop

Anyone advocating violence in public is the prime suspect for being an FBI CI or asset. See Jan 6 and other examples...

Just saying...

SiGraybeard said...

Remember the Great Reset propaganda? "You'll own nothing and you'll be happy." Sound anything like what we're seeing?

Maybe, but not as happy as the people I pay rent to for every last thing I touch. Personally, I'm happy I paid off my house early and don't have any mortgage or any rent whatsoever. Sure I have taxes, but I live in a state where their increases are capped. Plus I had taxes when I was paying my mortgage.

The fund managers and financial companies buying up property can be easily explained that they just are trying to do their fiduciary duty and earn return on their clients' investments. The financial advisors see the inflation, see worse inflation coming, the devaluation or collapse of the dollar, and they're trying to find safe havens for that money. As always, tangible things are better than bonds and other paper assets that are really fiat instruments.

If you were invested in that fund, you might want them investing in some real estate to protect your wealth, too.

The people at the top talking "great reset" propaganda are another thing entirely.


squeeky's mom said...

Was an mortgage underwriter for years. Consistently across the country we would see late 20's early 30's buying their first homes with parents paying the 5% down payment. Kids would have a rent that was 15% of gross income and yet had hardly any savings and trying to buy the max they were approved for with new housing being 40% of gross income. Down the road 2/5 years later I was selling those same loans to the bankers who bought up pools of foreclosed loans.

First time buyers want to leap frog from renter over the process of "starter" homes. Combine that with real estate agents who find that Johnny has been approved for $100K and the first home they show them is the $120K house. Cause you know, stretch that upper percentage to 42%. And next comes the collapse of that housing bubble and WSF has a job for life.

Technomad said...

One advantage to renting is that if the economy in your area goes to h3ll, you aren't stuck with a house you can't sell for anything like what you've got in it. Here in the Midwest, between the "farm crisis" and other things, our economy was in a bad way for a long time in the 1980s. I knew quite a few people who dearly wanted to go where the jobs were, but were anchored to their houses and couldn't get free.

And if you own, you're still paying "rent"---they just call it property taxes.

Rick said...

Ownership of property is the bedrock of wealth creation. It is exactly one of the few core tenets of what made the United States of America and ancient Israel so wealthy and powerful.

In recognition of our host, I reckon the same was true in South Africa. Remove ownership, remove wealth, become serfs in a feudal state.

Rick said...

Technomad, you are overlooking the significant advantages which ownership enjoys vis a vis the rules and regs set by the Congress.

Bubbles, which may induce an owner to move for a better job, are temporary. Moving itself is not an either/or. One can take multiple lower paying jobs in order to allow them to stay in place and come through an economic downturn. Besides, of those hypothetical owners who wanted to move but that they were 'anchored' by ownership, how many experienced 'downsizing' when that plum job for which they relocated went belly up or involved demotion or simply remained flat for the duration?

That very thing happened to my sister in the early 1990s. Too bad she did not heed the advice to 'stick and stay'. Now she was without home ownership nor good paying job.

Rick said...

A renter, when making application for a loan from most financial institutions, have seen the question; Do you own your home? Why would banks and such ask that if it were not important? The most obvious reason is ownership indicates stability of the borrower because the owner has their own money in the game thereby risking their own investment. A renter is an economic Bedouin, a greater risk to the money changers.

But the fact of the matter is ownership Vs renting is a personal decision. To have it foisted upon us by some larger institution is antithetical to the American Way. This is especially so when the compulsion is ideological.

5stonegames said...

If we don't end up with rent control or a lot of accidents , forced divestiture is also on the plate.

Ultimately a society with a low birth rate and limited prospects for immigration (economics issues keep them out and low fertility is striking former emigrant nations) is going to have to move past growth and interest based economies.

This won't happen until the economy implodes and the current elite end out of power though.

At that point inflation will be near zero and living on principle will just have to do.

And note normally you could invest in a business or the like but low wages, high efficiency and low birth rates create a death spiral for normal economics.

BillB said...

Just an aside to comments about renting, the people recruited to be money managers and senior executives at these investment funds that are buying up the homes are often filtered through requirements that essentially hire sociopaths. A trusted friend once had the opportunity to review the job requirements for a major Wall Street investment company. His comments on those requirements were that they wanted sociopaths who would do anything to make more money even approaching illegalities.

The Freeholder said...

Ownership of real property is "skin in the game".

Saying that private property owners don't want to redevelop their little piece of heaven into an apartment complex is disingenuous at best. While it's true, it has somewhere between little and nothing to do with the problem. High housing prices are caused as much by antiquated building codes and zoning codes that mandate "so much of this and so little of that", along with mandatory foolishness such as trees that can't be cut, impermeable surface limits and mandatory solar that they run prices to the moon.

I'm beginning to wonder if the folks who go nomad and live in a van or whatever aren't the smart ones.

pdbuttons said...

I've rented my whole life, never had a problem , electricity screws up, call the landlord, plumbing also -' hey ,come fix this' on their dime, they give u the run around, just say, 'my lawyer will be in touch' boom, they fix it pronto- also, when I look to rent and haggle, I say, 'if I don't rent this, it's empty, correct? no income for you?' I have sliced many $ from their asking price, just wave cash in their face.

Toirdhealbheach Beucail said...

I read the comments. They are delightful, most commenters recognizing this article for the rather effective piece of propaganda it is.

Renting can work for some people. But I sincerely doubt most people want to be paying rent in their post working years (honestly, never understood the concept of taking on a 30 year mortgage in one's 50's).

Aesop said...

@Chris Nelson,

You should look up the definition of "advocating' if you're going to throw that term around.

I'm predicting.

Communities will also enact rental bans, and make fines for corporations illegally renting property confiscatory, and their court costs for fighting that will exceed the value of the houses in question.

People have seen "It's A wonderful Life", and they want to live in Bedford Falls, not Potterville.

What Frank Capra left out of that cinematic feel-good fairytale, because truth is inconvenient for such storytelling, is that long before Clarence came along, without a George Bailey to hinder things, someone would have shot that sonofab*tch Potter in the face long before Potterville became a reality. Probably emptied the gun into it, in fact, and when they impanelled a jury, no one woulda seen nothing.

Even a dog knows the difference between someone accidentally stepping on its tail, and getting kicked, and humans are far more vindictive once they perceive they've been egregiously wronged.

In a pinning-your-liver-to-the-wall-with-a-steak-knife-and-sticking-your-severed-genitals-in-your-mouth-after-you're-dead sort of way.

Just saying.

Pointing&Laughing said...

Our combined mortgage, tax, and utilities on a three-bedroom two bath double-garage ranch on a quarter-acre in a small (~1k) town would not get us a sparse two-bedroom apartment in any of the surrounding areas.

Ray - SoCal said...

I am very familiar with the So Ca Market.

A big issue is the rules were relaxed to allow companies to buy up multiple single family residences. This was after the last housing bubble.

And my guess is with all the money available for campaign contributions, there is zero interest in changing the rules back. Plus that might deflate the housing bubble.

Adu’s are happening in Ca, it’s a state law so cities can’t do much.

There is a huge shortage of non luxury / subsidized apartments due to zoning, added code requirements, etc that makes them uneconomic to build.

Xoph said...

Land is always the source of wealth. He who controls the land, controls the wealth. In a great reset where our money becomes meaningless, only hard assets will retain value. Gold is nice but you can neither eat it or live on it.

Patterns are important. Propaganda makes a virtue of necessity. You have to rent when you can't afford to buy. Then you become a serf and a steady income stream.