Jerusalem Demsas, editor-in-chief of The Argument, has a hot take when it comes to our housing woes: “Homeownership is overrated.”
That’s a particularly bold perspective when you take into account that 70 percent of Americans think owning a home is a key part of achieving the American dream. Demsas argues that our homeownership society is not all it’s cracked up to be, and that there can be a real joy in renting.
“I’m a renter and I love being a renter,” she said. “I love being able to move when I want to move. I love not feeling like it’s my responsibility to make sure the roof is okay and make sure the fridge isn’t going to break. A house is a massive asset. Even if you’re an entry-level home buyer, that’s a lot of money. There are a lot of people who benefit from it, and who enjoy getting to have the freedom of renovating their home and making it exactly how they want it. But I think that we overhype the financial benefits way too much.”
On the latest episode to Explain It to Me, Vox’s weekly call-in podcast, we dig into that hype, why homeownership isn’t for everyone, and why the dream of owning a home is so prominent in the American imagination to begin with. Below is an excerpt of our conversation with Demsas, edited for length and clarity.
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What are the financial benefits that we’re told it has and what are the realities?
There are basically two financial benefits we’re told about. One is the forced savings mechanism. If you’re going to pay for shelter in some way, it’s either going to be rent or a mortgage. You’re going to be forced to save it into a house where that value eventually is yours at the end of the day, versus giving it to a landlord and then you never see that money again, which is obviously true. But the second is that the return on that investment is going to be great, and that’s just not guaranteed at all. There are so many things that have to happen for the return on your investment in a house to be worth it.
First, you have to be able to hold onto that house through bad times, and that’s really difficult. A lot of people — like in the Great Recession for instance, or when you lose a job, you have a medical emergency, or you have to move because your parents are sick — whatever it is, have to sell their house at a time that’s not financially opportune for them. So you’re selling at a time when maybe interest rates are really high, you’re giving up a low interest rate, or selling at a lower price maybe than you bought for it, or you’re not even making that much money on top of what you were able to sell for it.
Secondly, owning a home is often more expensive than renting. So all that extra money that you could use to invest in the stock market, invest in other kinds of large index funds, that kind of investment is almost guaranteed to be higher than what you’re going to get from investing in your house.
How did we get to this point where buying a home is considered the ultimate way to build wealth?
I want to say that I don’t want to disparage people who are excited to own a home. I think a lot of people feel this way. My father is very excited to own a house. I can understand a lot of different cultural and social and psychological reasons why owning your home and not feeling beholden to a landlord feels really important to people. I don’t want to sound like that’s irrelevant. If it gives you psychological value, that’s great. I just don’t want us to lie to ourselves about the financial aspects of it while we’re doing that.
The history of this is quite psychological and it is quite political. The idea that owning a house gives you a bigger stake in your community is a very conservative idea that comes about from the sense that renters are transient, they’re immigrants, they’re young, they have no stake in their community. If you rent, then you’re going to treat your community badly. You’ll put trash on the ground, or you’ll be a bad influence. A very large anti-renter attitude really gets sparked in the United States as we see high levels of immigration coming into this country — in the early 1900s is when we really start seeing that come to fruition. The ownership society becomes something people really, really care about. It becomes psychologically and legally codified in the United States that what it means to be a good upstanding citizen is that you own your house, you have this white picket fence, and you live in a place where the land is yours.
I want to get into that social aspect of it. Like you said, part of the mythos of homeownership is that you have a house and therefore you are rooted in the community.
I don’t even think that that’s true. I’m a renter and because I’m a renter, it means I can live in a nicer area than I could otherwise afford. The house that I’m living in, there’s just absolutely no way that my husband and I could afford it if we had to buy that house. It’s just absurd to even imagine that happening. What that means is I’m much closer to my friends. He is able to bike very easily to his close friends that live nearby. We’re able to visit his parents very easily. I can get to my work really easily. A lot of my friends can easily access my house. A lot of people, when they have to buy a house for the first time, sacrifice on location in order to get closer to a house that they can afford at a size that they want. What that means is often, eventually, maybe later on in life, you’ve become very rooted, but the act of buying a home usually actually moves you out of the community that you’re already living in, because that’s what happens when you have to change price points.
Intellectually, I really get your case, but I think emotionally it’s hard for some people to let go of that dream of owning. I think for most Americans, buying a home is a big part of what it means to be an adult and have “made it.” Beyond that financial investment, what do you think is going on there? Why is homeownership so wrapped up in our identities as Americans?
I think that homeownership was always a proxy for freedom. Similarly to car ownership and being able to drive on the open road, these things are quintessentially American: You want freedom. You want freedom from a boss, you want the ability to move around at will. All these things are really, really great.
People need economic freedom. They need access to good jobs that pay well. They need access to a government that’s going to hold people accountable if they exploit tenants or workers. To me, the American dream is always freedom. We have just always pushed this through homeownership. And my rejoinder to that is that I don’t think homeownership is freedom for everyone. I don’t feel free at the idea of owning an asset that’s that risky. I know people who are underwater on their mortgages right now in DC and don’t know if they’re going to have a job given the layoffs and everything that’s going on. Is that freedom? No. Economic freedom is freedom. How we get there is a matter of policy and a matter of technocratic debate, but I think we should reorient ourselves towards that rather than ownership in particular.
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