> The Flexibility of Renting Is Undervalued

And the stability of buying is undervalued. It's telling that this article frames housing as an investment vehicle rather than as a basic necessity. And it's not just a necessity because it shelters you from the elements and gives you storage for your stuff; it anchors you in a neighborhood and allows you to begin forming a local community. The flexibility of renting that this article glorifies is itself anathema to knowing and befriending your neighbors on anything but the shortest of terms; even if you don't intend to move, you have no guarantee that they won't up and exercise that flexibility. This is a major contributor to the modern loneliness epidemic.

I've seen these critiques for years.

and while its not necessarily wrong, I believe it under weights a few points:

- Fixing your housing costs against inflation: You can't count on housing price increases, but you can count on inflation. If you buy a house and your mortgage payment is > rent. Overtime it will naturally flip. $1 no longer buys me a chocolate bar, and $800/month no longer gets me a 2 bed apartment.

- Leverage: I can't get a $700k loan to put into equities but I can for a home.

- Capital Battery: As I build equity in my home it can become an asset I take loans against to pursue other opportunities.

- Flexibility: Should I need to fiscally downsize I can still move out and rent out. Or rent a portion either via a suite or secondary unit

- Stability: No one can evict me into a hot rental market to suit their needs.

I wish more people talked about these points, selfishly so I didnt take so many of these articles at face value because in hindsight I wouldve bought earlier.

The home buying process seems to have been thoroughly corrupted, at least in the US. The transaction costs are high, parasitic HOAs and paying over ask have been normalized, new homes are built as cheaply as possible, investors are driving up costs, etc. etc. The investment aspect is a bit overrated. You can't get that money 'back' because you still need a place to live. Most folks just flip their equity into the next place, so it never really comes back to them until they downsize or die.

I've been a homeowner for 30 years and am now renting a temporary apartment in a new location. There's a lot of upside of renting. I don't like apartment living at all, but I don't feel anchored to the location at all and have the freedom to live wherever without a bunch of overhead. I'm definitely spending more money per square foot renting, and obviously none of this is coming back to myself or my family, but that's ok for me right now.

I think my main takeaway is that there is no rule about what is best. It's what's right for you at that time of your life. A house is nice when you have kids and want some stability. Renting is nice when you want freedom and flexibility.

It's interesting to paint the homeowner as an emotional person and the renter as the pragmatic, however both are roughly equally emotional.

As the rent prices keep rising, the renter in the end will end up spending much more money in the same duration as a mortgage, won't they? After a few years, when they end up owning more of the property, they can secure a good deal with better monthly mortgage payments.

They can also quite easily set up an AirBnB or get proper renters, if they want to have some flexibility, and in most cases the rent money will be more than the mortgage payments, so if they want to rent another place of their liking, the additional income will offset the monthly costs.

First of all, I fundamentally disagree on the notion that buying a home should be considered an investment (I would go as far as to argue that this attitude is part of the reason the real estate markets are so broken in many places of the world). I don't want to be rich and I don't need to be - I just want a place where my kids some day can grow up, where I can enjoy the sun in the garden and invite family and friends over to spend a nice evening. I do not care about the financial aspect of it beyond "can I afford this without overstretching and putting my family into financial danger".

From a purely financial perspective, I think you could say: the more protections you as a renter receive, the more renting makes sense.

Living in Germany, I do have quite a few protections as a renter. My landlord can't arbitrarily hike prices, etc. In my current city, it would be absolutely impossible to get a mortgage anywhere close to my current monthly rent (even with substantial equity)

Counterpoint: buying is always better, people just can't afford it.

Here where I live the minimum price for rent is monthly mortgage installement, meaning that you'll pay for rent at least as much as you'd pay for mortgage.

But after you pay your mortgage you still have an asset in your hand. You can pass it on to your children or you can sell it when you're old, downsize (or even rent) and get some cash for your retirement. If you rent you're left with nothing.

Then why is not everyone buying? Because few people can afford the 20% downpayement needed for mortgage. In reality it's even more because you have to furnish and/or renovate the place.

Renting has it's charm for youngsters, but once you get older and you start acummulating things the lack of stability and the danger of your landlord having a change of heart and breaking the contract (either because he decided to sell it or give it to a child) becomes a pain in the ass. Even having a pet is troublesome and many property owners will refuse to rent if you have a dog or a cat.

> People obsess over granite countertops, open floor plans, stainless steel appliances, and walk in closets. These might make you happy but they don’t make you rich.

Money is a means to an end, and being happy is a fine end. I only live once and if I can be happy, well then I've pretty much won. Also you're not going to "get rich" by renting, if (and it's a huge if) you can somehow make renting work in your financial favor compared to buying, it's going to be a tiny bit better. You're not going to 10X your income renting.

He also completely discounts the cost of moving constantly (aka "flexibility"), movers, deposits, furnishings... it's not cheap. Yeah you can move yourself (add in the cost of vehicle to make that happen) but it's going to take time, and time is money.

This is not a well thought out article.

This is one persons opinions on their own situation. It’s written too broadly, but does a reasonable job representing one side of the tradeoffs that people should consider. It is not particularly balanced or overly insightful for anyone who has spent much time thinking this stuff through, and a lot of statements that could be backed by data are not and are simply asserted as fact. (For example, the idea that renters are more likely to pursue promotions is a very non-serious argument unless backed with some actual data)

If this had been framed differently, it would be more interesting. Instead it comes across as universal (“most people won’t saved unless forced to”) and ignores the many many benefits of buying. (Not mentioning 5x leverage on a historically good asset is willful ignorance)

As a former renter of 20 years, these are great points that everyone should evaluate. As someone for whom home ownership made sense now, I wish I had been able to prioritize those factors earlier as it would have been nice to have my mortgage locked in at 2010 prices.

All I know is my mortgage is $1,800 a month and to rent my place now is at least $6K/month. I love knowing that my monthly payment can't go up.

This is written from the perspective of someone who doesnt have kids or other ties that reduce flexibility (and from that perspective I agree a house is a huge liability in term of being able to make big life changes). It also sucks if you have neighbors you can't stand.

The main advantage of a house imo is that you can't typically rent something comparable, at least where I've lived. The rental market for 4 bedroom houses is tiny compared to the number for sale.

The prevalence of luxury apartments flies in the face of the overbuying section. People overbuy on apartments as well.

Every time I see someone arguing about minimum wage, their benchmark seems to be having a 2 bedroom apartment, not a studio or even a 1 bedroom. I find this wildly unrealistic.

Apartments also sell people on amenities that almost no one uses, but justify higher rent prices.

These luxury apartments are used in the same way people use their over-bought homes. It’s a way to buy into a different class of neighbors, feel like you’re not sacrificing with a rental, signal to others that you’re doing well, ideally have better management/maintenance, and live in a place that out-classes the home they may otherwise buy… all with no maintenance or investment.

I’ve seen some crazy rent prices. I’m not sure who is renting these places, but someone must be, because they keep building them.

I prefer renting, but I ended up buying a house because rent prices starting going up beyond what I felt with reasonable.

When my computer was getting too loud, I took a drill, made a hole to the closet, and moved it in there and ran the cables through the hole.

When I didn't like mowing the hill behind my house, I had a retaining wall put in. Also preserving the elevated deck.

When I found i didn't like the elevated deck, I build a new ground level one with my father in law.

I'm not sure I like entering into the kitchen so I'll probably put a door into the porch instead.

I'm not saying I couldn't just rent a new place to find better digs. But I hate moving, hate shopping for new houses, love this yard and house in general, and am not paying more month to month than I was when renting (and get much more space for the dollar).

I don't want this place to make me rich, in the above you might get a sense that I already feel content. That's my decision criteria and I don't know why that's incorrect. You don't have to run a household like an investment company.

The framing makes it seem as if valuing stability is somehow inferior while elevating financial growth. This makes me think our financial and housing systems have become so distorted that it has infected our thinking. Adult humans are often super resilient, but kids aren't. Moreover, even adults have limits. I don't want to live in a system filled with chaos just because it makes some intangible number go up. We're all going to die one day. What will we leave behind, material or otherwise? Stability seems very underrated.

The author disclaims that he's not a homeowner at the very end of the article, but these types of pieces steelmanning renting always read to me as thinly veiled pleas of "please exit the market so I can have more".

Unfortunately, a bit of a one-sided article.

The most convincing argument for buying housing is that it hedges you from potential large future cost of living increases. If you can’t afford repeated rent increases then the consequences will ripple through your life.

I’ve heard this pithily stated as “you are naturally short housing”.

https://thezikomoletter.wordpress.com/2012/12/10/you-are-nat...

Another newer argument is that if you think inflation could be much higher in the future, then a 30-year fixed-rate mortgage is a very attractive instrument; it’s a government-financed option. May as well benefit from it while it lasts. (If rates go down you can just re-fi.)

If renting doesn’t make sense economically, how is it profitable for the landlord? Because it’s almost always profitable for the landlord.

> People rarely buy with a purely rational investment mindset; they buy based on lifestyle and emotion.

> If you bought a home equivalent to the apartment you’d rent, or a slight downgrade, you might come out ahead financially over five years.

This is really the key point. Everyone I've known personally who buys a home does so with the intent to "upgrade" their lifestyle. Even if they were perfectly content before in their 1000 sq ft 2 bedroom apartment, they aren't content purchasing the same size home. Instead they upgrade to a 1700 sq ft 3 bedroom home, or larger, because after all owning a home is supposed to feel better than just renting an apartment. In financial terms, they are worse off, but maybe they are happier with their spending (I'd hope).

I have owned a few homes over the years and have also had many landlords. The house we rented in Lafayette, Ca in 2010 was in a nice hood. At the time it was 2 years past the financial crisis and homeownership was not something I wanted to do for a while. The land lady we rented from wanted to sell the house for 650k. That house is now 4.3 million on zillow. Granted it has since had a renovation and an addition, but still. We also rented a townhouse in Encinitas, Ca. The rent was 3k a month in 2017 and now a similar townhouse in the same complex is renting out for 6500. The problem with renting is that eventually you get priced out of the nicer hoods. The problem with not buying a house when a deal shows up in a decent hood is that eventually that hood will never be affordable to mere mortals again. Maybe these rules only apply to California.

The argument the author makes about the returns in stocks being higher than returns in real estate does not really hold when taking leverage into account.

In my country, buying a home is the only way to get cheap debt for the vast majority of people.

I feel like real estate markets have way to much variance country to country, city to city, or even neighborhood to neighborhood, to make generalizations like this.

Well. Lots of ideas there. But I just bought into a Coop because my rent went up 40% in one year. Since 2015 rents have gone up something like 50%. My experience says it’s true.

Now as an owner (of shares) I’m pegged to my mortgage (fixed) + HOA (and their scheduled increases) for the next 30y (if I choose). That’s something.

The thing about renting is, unless you’re in rent-controlled district, it can go up any amount. And in my experience, what’s advertised is always more than what you’re paying.

In current market, owning dozens of properties is not a good investment. Owning thousands is. And, in my opinion, which does not mean much, is one of the problems. I have a friend living somewhere in the UK. He wants to buy an apartment. He has the conditions for it, but he cannot because every single building in his city belongs to the same company who keeps them to inflate the prices.

Why there is no exponential taxes for owning that many properties after they are finished?

I think a better take away from this article is that if you aren’t buying your home like an investment (looking at cash flow and prioritizing financial outcome over all other factors such as distance to work or functionality), then you shouldn’t consider your home one. You’re paying for a place to live and if it happens to be financially sound, great. Otherwise you need to accept that you might lose money on it. Somehow this has been normalized for cars but not homes.

Median first time home buyer is 35. Median first child birth age is 27. Most people buying their first home aren't looking for the flexibility to move every year.

The fact that the author writes about his buying decision in first person singular is telling. Home "as a product" (vs investment) is contingent on your situation in life.

If you are a single person who is likely to get married and/or move for work, why would you buy? The transaction costs of buying and then selling are non trivial.

On the other hand if you are with your wife and kids, the potential ability to move for a job is less important (objectively) than community you are establishing for your kids and family. So it's not just those who value stability vs flexibility as a behavioral trait but as a realistic reflection of a situation.

It's like a bike guy becomes a minivan guy when he has 3 kids.

My current assumption is that other classes of assets, assuming technological progress continues at its current rate, will grow significantly faster than demand for land. So the economics that once made homeownership favorable, no longer exist.

Holding the assumption that your landlord operates on favorable conditions (mine is pretty responsive and rent increases are controlled), I’m not sure I have a good reason to opt to purchase a house unless I’m planning on occupying it for the next 2 decades at minimum.

I can’t help but think purchasing is an emotional decision, unless the location you live in allows you to buy for a similar rate to the mortgage pricing, but I’ve only observed this in LCOL areas.

> People Tend to Overbuy

Any "house" would be too big for me by myself. And buying a condo apartment seems like a strange proposition to me; compared to renting the same space, it seems like just paying extra in order to accumulate some nebulous equity at the end of the term. I'd rather do that with more liquid asset classes.

This article seems to present surface level arguments that aren't entirely fleshed out very well. Ex: what is the actual emotional impact of renting vs buying as that seems like it is the core underlying argument being made. I think the argument presented is dubious specifically because rents are a non fixed cost and provide no direct guaranteed long term benefit. Even as someone that purchased in 2021 with a price locked in from 2020, rents in my area are now equivalent or higher and it only took 2 years for the rent to catch up!. The graph tells the story that others are pointing out:

https://www.realpage.com/storage/files/blog/posts/images/202...

I took the middle way. I bought an RV and I rent the space I keep it in. I can move to a new park if I want and there are several counties where you can live in an RV while building a home or you can just permanently live in an RV.

I get good flexibility and value for my dollar. The savings over renting is insane.

Home prices have dramatically exceeded inflation for a long time, so you're getting advice from people who reaped huge appreciation gains. Now housing prices are hitting affordability limits, interest rates are less appealing, so it's unclear if the future will look like the past.

NYT has a nice calculator to help you decide renting v buying. US only. It is updated until July 2025.

https://www.nytimes.com/interactive/2024/upshot/buy-rent-cal...

You forgot the tax advantage and the protection against inflation (if you have to fix rate mortatge).

As someone who's both renting and has bought (renting my main flat and bought a summer flat), I think I prefer buying. I'm always living in fear of being told I have to leave, and the flexibility is overrated because everyone I've talked to tends to just like where they happened to live. Everyone generally finds the positives of their current area to be the positives they really like, and the negatives manageable.

This means that, generally, no matter where you buy, you won't want to have bought anywhere else after a few years. There are cases where you might hate it, of course, but you could still sell/rent to someone else and buy/rent elsewhere.

My spouse and I quite like where I am now, but I don't want to buy something here due to rates, insurance and future potential of the city. So, I've pretty much settled on buying something small in another city and renting it out while we rent here.

I think this might be a good balance to get us some type of flexibility while also diversifying our assets. But now the problem is trying to find a decent rental property in another city :p

Pretty lacking in math for an article that mentions math a few times.

I looked into this a few years ago when I was trying to see if we were really in the worst housing market ever, and came to the opposite conclusion. https://arriens.us/articles/housing.html

The TL;DR is that the value of renting vs. buying has a lot to do with being realistic and understanding real estate and investments in general.

Buying a house is often an emotionally motivated decision with many important risk factors... Were inspections comprehensive and thorough or did they overlook an issue with the foundation, wiring, plumbing, etc.? Did the buyer understand the required disclosures, and specifically understand what the seller is not obligated to disclose in their jurisdiction? (e.g., in many areas the seller is not obligated to disclose if a child sex offender lives next door). Is the neighborhood up and coming or struggling?

Getting these wrong can easily negate the potential upsides of ownership.

Renting can also be great, but as the article points out, if it mostly just results in more disposable cash, then you may be better off owning (forced savings). Rental properties often cannot be sublet and also cannot be used as collateral or passed on to family members with a step-up in basis. Rental leases also fluctuate with the market, so it's not uncommon in big cities for renters to be paying close or equal prices of their homeowners next door.

Anecdotally I know many folks who have rented their way through, invested wisely, and done well. I also know folks who have moved around the US and always purchased, did their homework, capitalized on tax incentives, and now have a stable of rental properties that helped them become FIRE.

There used to be a world where you could get INTO the investment with almost free money. You can't get a 2% loan and dump it into the stock market. Well you can't do either anymore but you used to be able to :)

In my experience there is a real difference between the places available to rent and to buy. It is not an idealized single good with a spectrum of prices that line up cleanly with quality.

Being 47 and still renting I think the piece missed a big issue, which is most prevalent these days: we cannot afford to buy. Anything. Anywhere. I reckon I’m fatally doomed to renting.

Reminds me of https://jlcollinsnh.com/2023/03/02/why-your-house-is-a-terri...

“Hey I’ve got an idea. We’re always talking about good investments. What if we came up with the worst possible investment we can construct? What might that look like?”

Well, let’s see now (pulling out our lined yellow pad), let’s make a list. To be really terrible:

- It should be not just an initial, but if we do it right, a relentlessly ongoing drain on the cash reserves of the owner.

- It should be illiquid. We’ll make it something that takes weeks, no – wait – even better, months of time and effort to buy or sell.

- It should be expensive to buy and sell. We’ll add very high transaction costs. Let’s say 5% commissions on the deal, coming and going.

- It should be complex to buy or sell. That way we can ladle on lots of extra fees and reports and documents we can charge for.

- It should generate low returns. Certainly no more than the inflation rate. Maybe a bit less.

- It should be leveraged! Oh, oh this one is great! This is how we’ll get people to swallow those low returns! If the price goes up a little bit, leverage will magnify this and people will convince themselves it’s actually a good investment! Nah, don’t worry about it. Most will never even consider that leverage is also very high risk and could just as easily wipe them out."

The comments here are making some odd assumptions:

1) That buying implies owning your own top-to-bottom house, with no adjacent neighbors.

2) That renting necessarily comes with arbitrary rent increases and risks of eviction.

3) That mixed communities of buyers and renters are uncommon.

None of these is necessarily true if you live in a city, depending on the city. It sounds like a lot of people are actually comparing “living in an apartment/condo” to “moving out to the suburbs,” not renting vs. owning.

There is one unmentioned far future benefit: if you pay your mortgage off before retirement you'll probably enjoy more shelter security than your peers. Rent is a monthly cost (eating into your retirement) that could skyrocket (which your retirement plans may not have accounted for).

Of course, a solid investment plan may offset these - but only a domicile (doesn't need to be a house) would survive everything related to the economy going to utter hell.

I agree about houses, though. A saner plan may be to purchase a modest apartment or the like, that you keep in the wings until you reach retirement.

I'm currently in the bay area in a 1950s home with no AC, no insulation, and single pane windows. Do you think that's what I want? No but I can't change it because that's what is mostly available on the rental market in the peninsula. If you go into buying, you can find all kinds of well appointed homes (even brand new homes). No one updates rentals here. So, at a certain point, if you want to live like you're not in the 1950s anymore (and lord knows - we are not living in the 1950s climate, holy shit it's way hotter) then you have to buy.

> Buying a Home Isn’t Really an Investment

That's... really not correct. And the section that follows the heading doesn't talk about (or even try to define) "investments" at all.

A home mortgage is a heavily (!) subsidized, very safe, easily-acquired and extremely leveraged investment in an asset class that tends over long terms to grow as well as anything else.

A young professional looking at a putting $100k into stocks or as downpayment on a $500k (!) mortgage is just a no brainer. Fast forward 20 years and the 5x is applied to all the appreciation.

Buy homes, folks. Worry about renting only when you're old and are making the decision as to whether to by your fifth home for cash or to finance and put the money into another asset class. The only time you decide not to is when you know a priori you can't hold the property long enough to cover the purchase overhead.

(That said: there are lots of macroeconomic and environmental reasons to think a culture where everyone should buy a home is a bad thing. But in our culture, everyone should buy a home.)

Counter thought:

Rent is going up A LOT every year. My parent's house in a similar area is not, even with extra taxes, it is far lower than what I pay.

They fix up something, its fixed. We have a problem -- it will be fixed in the cheapest possible terribly looking way.

And rent keeps going up. All the time. By so much.

There's flexibility in it when you're in your 20s. But in 30s and 40s its terrible.

I don't disagree with the his points, however:

"The flexibility of renting has major financial advantages"

Like 80% of my motivation to make money in past was: to buy a house. I have no interest in FIRE and be a couch surfing digital nomad around the world or whatever.

So it's hard for me to be motivated by the financial aspect if the end result was no house for now basically.

One size doesn’t fit all

Have you ever seen a realestate agent renting? So, does that make you think - maybe ownership has more benefits!

All else being equal, a house is too personal a thing for me to rent. It would be like renting a complete set of clothes.

I don’t want to be a real estate developer writ large, but I do want to develop my own space and optimize it for my family as it grows and changes over time.

My mortgage is $1900 a month and I am extremely grateful for that, because it's been that for three years. I chose to buy so that I could have more predictability in my housing costs, and maybe someday I'll move, but then I'll rent it out. All that to say, if you can buying is infinitely better.

This is just propaganda to push people to cope and be part of a renter class that gets screwed over by a homeowner class.

No, don't be emotional, don't buy your own place and have stability. Own nothing and be happy! Let the corporations own everything and have "flexibility (TM)"

I like the general idea of this post but in the end I think it suffers from being too generalized and a little bit too renting biased.

> The math can always be made to “work” if you’re willing to adjust what or where you buy.

This is essentially a useless statement, the result of the math is either that either renting or buying makes you end up more wealthy. Whether it "works" or not isn't even the question, the question is which choice makes you more wealthy over time (more on that later).

For that, it's more helpful to use a rent vs. buy calculator [1] with the details of your market plugged in. Whether renting or buying makes more sense for you has a lot to do with where you live.

Let's continue on to the next section, "Buying a Home Isn’t Really an Investment."

The obvious rebuttal to this is "of course it is!"

> The decision is usually driven by lifestyle factors such as proximity to work, school districts, family, and the neighborhood.

All of these factors play in to whether or not the property is a good investment. Places that are in good school districts and have close proximity to job centers are good investments. The real estate investors that this section mentions think about these exact same things before starting projects.

Next section: "People Tend to Overbuy." Is there any data or evidence behind this whole paragraph? Are we just saying that people who own homes buy more furniture and stuff than renters? Maybe they do, but even if that's true could that be because they're more wealthy in the first place? Who knows, this entire paragraph is all assumptions and nothing backing it up.

Next section: "The Flexibility of Renting Is Undervalued"

6/10 Americans live within 10 miles of where they grew up, and 8/10 Americans live within 100 miles of where they grew up. [2] Is the flexibility of renting actually needed for most Americans? Are Americans missing out on job promotions because they own homes? (It's not like you can't sell a home quickly)

I would counter the premise of this section with "The stability of home ownership is undervalued" and "the 30-year fixed mortgage is a gigantic subsidy to homebuyers." By taking out a mortgage, homeowners are locking in the majority of their monthly cost with the exception of maintenance, utilities, and property taxes. They sit in their house for a few years and they end up paying below market on monthly payment compared to renters. So maybe they "overbought" a home with too many bedrooms to fit all phases of life, but it doesn't really matter because after the first ~5-10 years of home ownership they are going to be paying less than market-rate rentals.

The 30-year fixed mortgage allows homeowners to refinance and minimize their rate pretty much any time the rate drops, so basically every renter is always getting the lowest rate possible since from their purchase date forward, and it never goes up.

The last section: Why the Home Investment Myth Persists

Sure, this section is technically correct, someone investing money elsewhere is going to beat real estate on returns. But you can't live in an index fund, an index fund may not have the same protections [a] and tax incentives as a home, and it is a fact that most people are not disciplined with investments which means the forced investment of a mortgage's end result is that homeowners are far more wealthier than renters on average. [3]

[a] For example, your home equity doesn't count toward the ability to pay calculation for FAFSA, and you are generally protected from having your home taken away from you if you get into most debt situations. Check out how OJ Simpson avoided paying his civil judgment: https://www.kiplinger.com/retirement/how-did-oj-simpson-avoi...

[1] https://www.nytimes.com/interactive/2024/upshot/buy-rent-cal...

[2] https://www.census.gov/library/stories/2022/07/theres-no-pla...

[3] https://www.nar.realtor/magazine/real-estate-news/study-home...

Imagine two things being able to be true at the same time

That sometimes under the right circumstances a home is both a great place to live, the best deal you can get in your area, and also an investment

You sort of alluded to it in your post, but it’s different for everyone, but then you go on ahead and speak as if there were one answer

Good for you you chose to rent - you don’t have to deny homes potentially being good investments to validate your decision

[dead]

I am a home owner since 1998 I think that none of you arguments against owning make sense to me. To me your writing reads like following: due to the world gone crazy I can no longer afford to buy house so let's concoct some soul soothing reason and pretend that all is fine.

Renting is more expensive and you are just burning money vs building equity. This article is ridiculous.