Renting in a free market housing sector

[Frohicky1]

Hi all,

 

I've converted to libertarianism fairly recently, and have a question I haven't answered for myself yet.  Will a free market housing sector always tend towards renting over home ownership? My thinking is this.

 

1. Most people don't have enough capital to buy a home outright, so they look for a mortgage provider. 

 

2. The mortgage provider wants to maximise return, and implicit in that, minimise risk. 

 

3. A larger, buy-to-let company has more capital to move around in times of financial stress, and more for the bank to reposses, so provides a safer investment. 

 

I think I'm wrong somewhere, but can't work out where.

 

 

[J. D. Stembal]

There was a point in time where housing was cheap, meaning a single income family could save up the money for a home in a matter of a couple years. Now we have thirty year mortgages.

Houses depreciate in value over time, so the older they are the cheaper they are. Now, housing values only go down in areas where the local economy and municipal services are disrupted. See Detroit, and soon Chicago.

 

Renting should be cheaper than owning in any rational economic environment, but because of the magic of fiat currency and debt as money, renting is almost never cheaper than owning.

[dsayers]

I've converted to libertarianism fairly recently

Sorry if this seems off-topic, but could you elaborate on what this means?

 

My dad owns some rental properties and I do maintenance and security for them. He has one tenant who is an older woman. She's in good health, but she prefers to rent for the sake of not having to take care of maintenance beyond lawn and sidewalks (grass and snow). I used to identify with that mindset too. Of course, getting into the home improvement work made me more prepared to own.

 

It's not as lucrative as some might think. The turnover is high enough that what little profit is made is mostly soaked up with property taxes, upkeep, and cleaning/repairing after a tenant leaves. That and having to manage X additional people, their payments, late fees, addressing rule breaking... I don't think it's worth the money. At least not in his hands. He's not very efficient with the work aspect of it (scatterbrained, doesn't formulate a plan of attack). And he's a manipulative narcissist, so he invests extra time to be friendly with them. Which can be a good thing, but he'll actually let them get away with too much because he's busy trying to be liked by them ahead of the business relationship. Once I take it over, I imagine the bottom line will look a little better as I'll be investing less time while accomplishing the same amount of work and rapport development.

 

The other thing to keep in mind is that without a State, people will just have more wealth to begin with. Even with the State, it used to be you could get a job while living at home, then afford to either go to college or put a down payment on a house. It doesn't take long to go from poor to middle class if you're willing to work and there's not a State leeching off your productivity at every level. Of course, this could also mean that we have a more peaceful society, which would lead to kinder, lower maintenance tenants. So I guess what I'm getting at is I don't know what the distribution will look like. It probably won't be too different than it is now. If anything, I think there'd likely be more of a push to own. There's a LOT of potential tenants that are receiving tons of gov't handouts. Such that if they owned a house, they'd be less qualified. So there's a perverse incentive in place to rent rather than own.

[AncapFTW]

Houses can actually be quite cheap, just look up "tiny house" or "shipping container house" on youtube.  A few thousand for a completely functional house.

 

Houses are much more expensive than they should be because everyone wants more than they really need, and the governments are keeping interest rates artificially low so that houses appear cheaper.  The ease of financing a house has made the price increase to huge levels.  Housing, like everything else in a free society, should go down in cost assuming that houses are equal, but people want so much and want them is such a good location that it drives up the cost.

 

I don't see how renting could be cheaper.  After all, the owner has to earn a profit on the house or it isn't worth it for them to keep the house.  That profit is extra cost that the renter must pay.

[dsayers]

Houses are much more expensive than they should be because everyone wants more than they really need

Which ends up being a self-fulfilling prophecy. People who buy/rent places larger than they need end up filling it with stuff. Larger area means more stuff, which is more excess consumption. So it's not only problematic, but it precipitates more problematic behaviors.

[Frohicky1]

Thanks for the responses.  My grandparents saved for their house easily, with a small mortgage, and so soon had money to buy further properties and rent them out.  My father also rents out a house, although in his case it's barely worth it with the upkeep (as dsayers mentions). 

There might be no problem in a stateless or minarchist society tending to a larger percentage of renting over ownership, but I'm still unsure if that in fact would be the case.  My grandparents and parents generations almost always owned homes, and indeed multiple homes, whereas my generation largely rent, and if they do buy it is through some ind of deus ex machina such as inheritance, state subsidy for deposits, or joint ownership with the bank or builders. 

 

I guess the gist of my question is, is the natural state of lowest energy in a free society one where most people rent from a small number of landlords who own very large numbers of houses. 

[Frohicky1]

I forgot to add, by 'recently converted' I mean I was a libertarian socialist of the Noam Chomsky type for a number of years, but have recently moved to free market libertarianism.  This was largely due to the work of Milton Friedman and Thomas Sowell, along with some long thinking in the bath. 

[shirgall]

Watch the movie Meet Me in St. Louis (made in 1944 about events around the St. Louis Fair in 1904) and contemplate that a poor family was living in that glorious house...

 

[Carl Green]

I guess the gist of my question is, is the natural state of lowest energy in a free society one where most people rent from a small number of landlords who own very large numbers of houses. 

 

Let's create a free society and find out.