There was definitely a lot of spurious reasoning in this episode.
First of all, despite what some posters state, he did not clearly state that renting was better for some. All his arguments suggested that renting was the better option, period, and seemed to assume that the reason for homeowning was investment while making no such assumption for renters. And while his points may have otherwise been correct, setting them within that context of investment and competition between the two options actually made many of his arguments invalid.
1) He raises the phantom costs of owning a home, which is a valid point -- home buyers should keep those in mind when determining what they can or cannot afford to buy. However, that is only an argument against foolish buyers, nothing more. The only way this makes renting advantageous is that rent is a known, set amount while homebuyers have to do their research. Renters pay the same "phantom costs" as home owners. Every single one of those costs. When landlords set rates, they calculate rates which will cover their mortgage payments, property taxes, etc, etc, plus some additional profit on top. Therefore renters are sinking their money into the same costs for no return, plus some additional amount to another person's profit. Sure, if renters are willing to rent cheaply enough, they can invest their excess income into other investments. But their rent will still be a sunk cost, they will still be paying more than the property's value to provide their landlord with profit, and homebuyers, like renters, can choose properties that are below their budget so they may invest the excess into other investments -- similarly, renters may choose to rent the most expensive place they can afford and have no excess to invest. Yes, homeowners are paying for their bank's profits, but that profit they are paying to banks decreases over time. In contrast, the amount of profit renters pay to their landlords and/or their landlords' banks will remain the same, and likely increase with their rental rates.
2) He is correct that houses can be risky investments if values crash, but so are all investments. And property, for the prudent researcher, has an advantage in that there will always be high demand for housing as population increases, but the amount of land available doesn't. Investors within a well regulated market can also keep their eye on trends like any other form of investment. But most people buy homes for reasons other than investment, like the stability noted above, their love of a particular location, the sense of local community, etc. In the context of buyers vs renters, the point of risk is therefore largely moot. If buyers make sure they can afford the home, then what is the outcome of a crash in values? Yes, they still have mortgages based upon higher property values, but they still have this asset that has some value, whereas renters continue covering someone else's mortgage and costs (at largley the old values -- unless we want all landlords to go bankrupt) with no property interest at all in the end for all the money they invested in paying rent. And for as long as they rent they will continue to pay rent, perhaps for the rest of their lives, at rates which should always cost enough to cover someone else's mortgage plus costs plus profit margin. In order to make housing look like a bad investment, then Adam NEEDS something truly catastrophic like the GFC to point towards...
3)...however, his entire reliance upon the GFC is unfounded. That resulted from banks taking ridiculous risks upon providing mortgages to people buying homes they could not afford. This is totally inapplicable to countries where banking regulations curtailed such foolish risk-taking. If he wants to validly compare buying and renting, and chooses to invalidly treat foolish risks as an inherent part of home ownership, then he has to consider what happens if renters and landlords take foolish risks for his analysis to be fair. He did not. He instead assumed that landlords and renters would always act in rational self-interest while assuming the opposite for banks and homeowners. So what's the worst that could happen to homeowners? Defaulting on their home loans and winding up in the same position as renters in a market where landlords care more about your current income than any other measure of credit rating. His arguments are more validly part of an examination of regulated vs unregulated markets, NOT renting vs buying.
4) As for being tied down by home ownership: Wrong. First of all, he is making false assumptions about where people find value. Homeowners generally like stability, therefore job prospects in another city are not necessarily a consideration for them. And renters who enjoy their freedom do not always necessarily move upwards economically when they move around as part of their exercise of freedom -- they may be after new experiences. Homeowners who see a value in stability can invest in making their home to their taste, build a sense of community, etc. Renters have no such freedom to alter their property, and lack the stability to build a similar sense of community. And a lack of sense of community has costs for everyone. That aside: If there is no housing market crash, there is no economic disincentive for selling or renting one's home (I know many who do that temporarily while working elsewhere temporarily), and if there is a crash in market value, per above, defaulting is an option. And market crashes have more to do with regulation than renting vs buyign. And if renters seek to move to places where there are good jobs, there will also be high demand for housing in that region, and they will therefore be looking at moving to a place with greater competition for rentals, paying higher profit margins for their landlords, and therefore sinking some of their higher income into higher rents with no return on that investment. Renters also cannot just pick up and run if they have leases, so they too have limits on their freedoms, and if they don't have leases, so much for any sense of security or decent rent protection.
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