MasterPlanning!: The Trouble With Renting
by Tony Chavira
If you wanted to buy a home right now, you could probably find an incentive program to help you. Especially in California. There are programs for families, couples, singles, the elderly, the middle-aged, the young, rural buyers, suburban buyers, and urban buyers. There are programs for down-payment assistance and for closing costs assistance, programs for affordable housing purchases, voucher programs to help you with mortgage payments, and programs to cover the cost of rehabilitating the home once you purchase it. Don’t believe me? Head to the HUD website or the California Clearinghouse and start digging.
On top of that, homeownership comes with a ton of tax deductions for upkeep, utilities, renovations, refinancing ... you name it. More than enough to make up for the property tax you’ll have to cover each year.
Further, the Federal Government is going to begin helping homeowners refinance their bad loans. The Homeowner Affordability and Stability Plan will actively work to adjust both the interest and principal of your loan to make your payments affordable. To top things off, the government will work to cover part of your home’s drop in value.
Yes, the sky is the limit if you have the ability to buy a home. There’s a program for everyone, as long as you’re willing to do the paperwork.
But include all of these incentives, and you’ll probably still need a minimum of $20,000 before you can actually buy a home. Some of this money needs to come out-of-pocket, or how will these financial institutes know that you’re good to pay back the loans you take out? This might make you wonder: the 2005-2007 median income for a household was $36,687, and in 2008 the average median price for a single-family home in the city of Los Angeles was $551,500. Twenty thousand dollars would have been 3.6% down, and 5% would have been $22,500. Let’s ignore for a moment that this sum is 2/3 of the average annual income. (Did it shock you to see that the median was so low? Half of the population of Los Angeles is making less than $36,687!) When more than 40% of the city spends 30% or more of their income on housing, how can we expect anyone to spend 60% of their annual income to “take a risk” and buy a home? Let’s not ignore the fact that the down payment on a home would bankrupt a huge population the city of Los Angeles. When subprime loans are being offered at 0%, it almost seems like a no-brainer to try (for once) to live out your American dream. You may never get another chance.
Besides, what’s the alternative? Continue renting and throwing away money you could spend on your mortgage while building your equity? This seems like a terrible alternative, even if paying off your subprime loan effectively bankrupts you. But why does renting seem like such a crappy option to homebuying? Why is there such a stigma to renting, and why does it always look like people are throwing their money away when they decide to rent? Why is renting seen as such a transitory option, something to do for a few years so you can build up the cash to plant yourself permanently into the Southern Californian housing landscape?
There are two likely reasons for this mindset, one our fault and the other the government’s. The first is tradition. We were indoctrinated by our parents to believe that we should spend our lives building good credit to afford pretty houses in suburbia. We’re all suckers who fell for the picturesque vision of a white picket fence, tire swing, and green, trimmed front lawn. We’re even led to believe that an ungodly amount of debt is natural as long as we take baby steps to build it up. How many people have stories about maxing out their first credit cards? Or about paying back their college loans? Or buying or leasing their first cars? We’ve become accustomed to credit checks, monthly payments, and gratuitous debt. When you’re $100,000 in debt, what’s $500,000? As long as you are one of the elite, with the coveted title of HOMEOWNER. Then, someday, you’ll pay off your loan, and can pull out another for a bigger property. Or maybe buy something for your kids, because God knows if they’ll be able to afford a home by then.
The second reason is something that can be fixed with a little financial coordination and government lobbying. Los Angeles has got to find a way to compensate renters, similar to the copious homebuying incentives. When we think of rental assistance, our minds almost always jump to Section 8 Housing, or “housing for the poor,” but those aren’t the people I’m talking about here. There are hard-working family people out there who don’t get credits or viable tax incentives to rent. When we have home-buying and home-owning programs coming out of our ears, why can’t we allocate any assistance to your average renter, who lives paycheck-to-paycheck and somehow makes ends meet? We applaud when the John D. and Catherine T. MacArthur Foundation devotes cash to preserving 70,000 affordable rental units, while our local government places those units on the lowest rung of importance and the needs of struggling renters at the lowest priority.
What is it that makes us believe that people who rent are somehow undeserving of assistance? Not being able to afford to take the risk to buy a home doesn’t make you unworthy of housing. If this housing crisis has shown us anything, it’s that people who rent can be more financially-responsible than homeowners. Aren’t they deserving of some kind of assistance for that kind of responsibility and foresight? Don’t they deserve a better quality of life too, even if they continue to rent?
Here’s the bottom line: prioritizing homeowners over renters is a clear cut case of classism, and we should’t stand for it anymore.
www.racaia.com | tony@fourstory.org
Comments
Homeownership is valued because it helps create stable communities and that is a good thing.
We need to broaden out the definition of “ownership” so that residential tenure (renting or owning) is valued and rewarded by our tax system and other incentives. Tenured renters would then be view by others, and more importantly, by themselves as stakeholders.
2009-04-06 by Glenn Hayes