Residential Rental Contracts Are Bad For The Economy

Discussion in 'Business & Economics' started by steampunk, May 1, 2012.

  1. steampunk Registered Senior Member

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    278
    I will argue:

    The Housing Rental Contract is bad for the American Economy. I will debate that the rental contract hurts the American economy, because the renter recieves no equity for their housing investments. I will prove it hurts the economy and show how giving renters equity for each dollar they invest would help the economy.

    I'm open to the standard set of rules, but I demand the arguments be structrured with discipline or I will not waste my time arguing. If you don't have the energy or the discipline it takes to be formal with me, don't bother even trying to challenge me. I propose that written arguments must follow these rules:

    1. Each person must make an argument that declares the writer's position on the argument at hand.

    2. Each argument must have a set of clearly defined premises that illustrate the argument's line of reasoning.

    3. Each premise must be supported with evidence that validates the argument's premise.

    4. Each argument must end in a conclusion that can be deductivly drawn from the premises or end in an inductively strong conclusion that can be drawn from the premises.
     
    Last edited: May 1, 2012
  2. NMSquirrel OCD ADHD THC IMO UR12 Valued Senior Member

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    5,411
    i think you are saying renting sucks..

    and as a renter i agree 100 %...

    spend years paying for rent and in the end you have nothing to show for it..
     
  3. Chipz Banned Banned

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    838
    And somebody else will argue that the loss in equity is overcome by liquidity and a lack of mental stress in relocation.
     
  4. Billy T Please use Sugar Cane Alcohol Fuel Staff Member

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    20,607
    Certainly true but that is like say a diner receives no equity for funds paid in restaurants. Some needed items have more than one way to be meet. If renting cost less out of pocket, than home ownership does, it may be better choice for both the renter and the nation as that leaves renter with more funds to invest and investments create jobs, etc.

    IMHO, what is bad for the people and the economy, is the government trying to decide what is best - distorting rational economic choices, either by special grants (like $7,500 if you buy an electric car) or by tax relief not given to both renter and home owner.

    Big Brother does NOT know what is best for you. Let´s keep a level playing field with only rational economical choices by the buyers, not their decisions biased one way or the other by "all wise":rolleyes: big brother.
     
  5. NMSquirrel OCD ADHD THC IMO UR12 Valued Senior Member

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    5,411
    that is a big 'IF'..
    rents in my neighbor hood are $1000 or better for a small three bed one and half bath..that doesn't include a garage..
    last i looked, rents in California are worse..$1000 for a one bedroom,one bath..
     
  6. Billy T Please use Sugar Cane Alcohol Fuel Staff Member

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    20,607
    I don´t doubt it. So many have lost "their" homes to the bank or have "walked away" from under water mortgages, that many have switched to become renters, but these are atypical times. Good old "supply and demand" is at work, making renting atypically expensive.

    Normally it is cheaper to rent than to buy. Buying has gotten a bad name as an investment so sales of homes (new or used) and new construction are way below normal. In quite a few areas if you can get a mortgage (also at all time lows) buying is cheaper than renting now as you said.

    That / this is all the more reason why the choice should not be biased one way or the other by Big Brother - he can not adjust to market conditions as quickly a person can, so is often promoting exactly the wrong economic choice.
     
  7. phlogistician Banned Banned

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    10,343
    This is your problem, renting is not an investment.

    There are however schemes where people can buy a stake in the property they rent, to allow people who cannot afford to purchase a whole house to get onto the property ladder.

    So it seems this is covered.
     
  8. NMSquirrel OCD ADHD THC IMO UR12 Valued Senior Member

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    5,411
    Where??
    i have been looking for this for years..still haven't found any Rent to Buy properties..
     
  9. Billy T Please use Sugar Cane Alcohol Fuel Staff Member

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    20,607
    In some sense, most buying with a mortgage is that. You pay for years and if no default, you, instead of the bank, become the owner.

    Unfortunately in the conventional "rent to buy" you don´t get the tax break of deduction of the mortgage interest but neither do many current buyers of depressed properties. I.e. many sales to rich buyers are by full payment in cash, even quite a few wealthy foreigners are snapping up foreclosed condos etc. in Florida etc. and renting them.

    Given the state of the Euro, not a bad move. People with money in the PIIGS are buying German bonds too - so much so that the interest on them is zero or slightly negative now!
     
  10. quadraphonics Bloodthirsty Barbarian Valued Senior Member

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    9,391
    If you are accruing equity, then you are, by definition, not a "renter."

    Also, there are a bunch of really basic questions about how such a scheme could even work that you'd need to address, before we even get to the issue of whether this would be good for "the economy." For example, what sort of contracts are you going to have to enter into when you rent, to cover how the multiple equity partners in the rental property are going to relate to one another, make decisions about the property, etc.? How do you go about evicting someone who has equity in the house in question? What would such a scheme do to rental prices (seems like they'd explode - and then where are poor people going to live)?
     
  11. quadraphonics Bloodthirsty Barbarian Valued Senior Member

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    9,391
    No, you become the owner as soon as you close the deal with the seller and receive the title. The fact that you might subsequently have to give the bank your house as collateral if you can't repay the loan is just that. The bank is in no meaningful sense the "owner" of the house you bought with the money you borrowed from them - they don't have the title, don't have any responsibilities with respect to the house, don't pay the property taxes, don't get to decide anything about how to maintain it or rent it out or anything else.

    Likewise, the fact that you can be the owner of something that you have little - or even, negative - equity in, is just that. Ownership means nothing more or less than that you get to decide how to dispose of the property in question. It has nothing to do with exactly how much money you do or do not owe to some lender for having financed your purchase.

    Any subsidy paid to homeowners - mortgage interest deduction or otherwise - will also necessarily show up in rental prices. The rental income has to cover the mortgage costs, so if you subsidize those landlords can compete for tennants by passing on the savings, while still maintaining their margins.
     
  12. Tiassa Let us not launch the boat ... Staff Member

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    30,954
    The Obvious

    Of the topic question specifically, I would ask the following:

    Is "economy" a tool that helps the human endeavor by identifying and advising a specific and vital aspect of human interaction, or is "Economy" a larger cause that one exists specifically to serve?"​

    If the latter, the proposition has specific value. If the former, I would inquire as to the alternatives to rental contracts that provide no equity for the renter that would provide a solution according to the need.
     
  13. Billy T Please use Sugar Cane Alcohol Fuel Staff Member

    Messages:
    20,607
    I did not realize that nearly half of home & condos, etc. sold are being sold to investors who will rent them (at increasing rents, with the growing rental demand):

    "... More folks may indeed be choosing renting over buying, but unless they're willing to accept the label "squatter" -- and the legal ramifications associated with that -- they'll be moving into a property that somebody else owns. And if rental demand continues to increase, rental rates will rise, and that will encourage investors to buy properties to rent out. And that has already been playing out as the share of housing purchases by investors jumped to 44% last year. ..."

    From: http://www.fool.com/investing/general/2012/05/31/is-housing-headed-for-another-cliff.aspx

    I.e. Any recovery in the housing market is due to houses being switched to rental property.
     
  14. Chipz Banned Banned

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    838
    In 50 years they will call it the great money grubber shift. But grubbers grubbed up all the grub (which was undervalued real estate {not fake estate})
     
  15. Billy T Please use Sugar Cane Alcohol Fuel Staff Member

    Messages:
    20,607
    I think you are right. Recently I read that high percentage of sales (I think it was >1/4) are without any mortgage - cash paid at settlement. The very rich have discovered a new way to take from the unfortunate poor, who lost their home to the bank, etc.

    Although in normal times renting is cheaper than buying, now it is not and the difference is rapidly rising as rents go up and home prices decline.
     
  16. quadraphonics Bloodthirsty Barbarian Valued Senior Member

    Messages:
    9,391

    That article is misquoting its own source:

    For every 100 homebuyers who intended to live in their homes, 44 bought purely for investment.​

    I.e., only about 30 percent of home purchases are for "investment." I have no idea how this compares to a "normal" year - the source article doesn't give that info. For all we know, it's totally normal. No evidence of any "jump" is given.

    I don't see how that follows.
     
  17. Billy T Please use Sugar Cane Alcohol Fuel Staff Member

    Messages:
    20,607
    Yes it seems Fools.com has not been accurate. Here is what their source said:

    " ... investors' share of home sales surged to 64.5% last year to the highest level in seven years. For every 100 home buyers who intended to live in their homes, 44 bought purely for investment. ..."

    As 44% + 64.5% is greater than 100%, What the source must be saying is that:

    20.5% of sales were to investors with no intention of living in the property and 44% were to investors who did intend to live in the property.

    Presumably these 44 out of every 100 were buying because as they both knew it was cheaper than comparable rental unit and they had expectations of its value increasing. This 2nd belief making them "investors" (and the 1st making them "frugal" but source did not note that.)
     
  18. steampunk Registered Senior Member

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    278
    I'll try to address some of the concerns people have made. I didn't know people were posting here. I thought I would get a challenge. Not a discussion. A discussion is fine I guess.

    I've got a laundry list of points that I will to help create the context of my argument. At this point I will not provide links. Consider it a rough draft, because no one is really seriously challenging me. Maybe the real debate can be better if things are roughed out. Ok, here we go with laundry list.

    • American's biggest bill in their budget is housing. More money is spent per year on housing than any other single item on the budget.
    • Americans obtain housing through one of two contracts: buying or renting. One contract allows an Amerian equity, the other never allows equity and demand payment until death, which equates in many cases in purchasing property 5 or more times over.
    • Rent creates entropy in the market, which is an unjustified loss of money in a civil contract between two people. Entropy occurs in the rental contract when one person or several people as a group pay for a property over and over.
    • Rentership society is being increased in American through manipulation of the housing market, loan policies, and tax codes.The media is also socially conditioning the middle class to bow to the usury rental contract. Brand new books bolstering psuedo-scientic economy claims are promoting rentership society as a way to fix America's budget.
    • Approx 40% of Americans are now renting.


    • Some argue that rent monies are justified because after the home is paid upper-class welfare royalties can be used for investments to help the economy. There is no regulation on how those investments are used. These welfare royalties can go to practical investments, completely wasteful luxury investments, and they can be taken out of the country which increases our trade deficit. It is unfair to target the poor for this welfare for the rich. Investments that are justified and necessary should be taxed by the population as a whole, not just the poor through housing rental schemes.
    • When an unemployment slump occurs in a high degree rentership society, a rational society will help pay the housing costs. When the housing costs are rentals, taxes become welfare checks to the rich. If renters always gained equity, this housing payment wouldn't exist in an economic down turn saving the working citizens this rich welfare payment.
    • Americans debt is 16 Trillion, which represents $50,000 owed per America. This will increase the international investment in banking and real estate, both which have controls over increasing rentership society. To give you an idea on what 50,000 dollars means in home dollars, 50,000 dollars will easily pay for the supplies and labor to build a single dwelling for one person. When foreigners want their money, banks and homes will serve as the best returns because of the predatory principles allowed in these institutions.
    • In a rentership society, this exploitation can attract other countries which hurts the economy. If we bought the home from an international investor, we would be trading a 1000 dollar payment for thousand dollars in home equity. That's economic balance. But rent produces an infinite imbalance, because royalties are eternal on housing properties. Once the international investor makes the tenants pay for the price of the property, these foreigners, every thirty days, can take 1000 dollars in exports, minus expenses, forever from our economy. That's slavery.

    The Solution
    If tenants always gained a mobile equity they could apply to any unit they needed to move into, where this mobile equity could not be gambled, loaned against, or lost, the royalty entropy. would stop and our economy would have the biggest fundamental repair possible, because it's the biggest bill and biggest opportunity for these scams artists.

    How do we evict? Well, if it is for non-payment, we downsize them to a unit that is affordable. If it's for taxes, we need to connect them with work like a real leader would. If they refuse the work, we offer the federal land to camp on. The don't have to live in a developed society if they don't want. Or, they can choose a responsibility tent boot-camp meant to get them caught up on their taxes through compulsory work assignments offered through employment service. Once they pay up the taxes and pass their responsibility counselling, they can move back home.

    How do we handle land ownership? Alot every citizen free homeland, but the value of the land will increase it's tax, helping to keep an incentive based class system. Land should be owned by government, the people, not self-interested capitalistic psychos. Government should be open to innovative use of land through application process of it's people.

    Development should be run by the government and handled in a Technocratic way vs. a free market way. Serious by the book planning based upon needs to each city. The free market won't work because it's too psychotic and selfish. It's impossible to have national interest in cooperate world. That is how America is failing as a whole with such an unacceptable debt, while some individual business can do so well.

    I say this sarcastically, but why don't we pay off a huge portion of our National Debt with American housing meant for rental. Entice them will eternal royalties. As soon as they buy it all up, we Nationalise it, which means once the place is paid, deals off, no royalties.
     
    Last edited: Jun 8, 2012
  19. James R Just this guy, you know? Staff Member

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    27,073
    Members are advised to read the rules of the Formal Debates forum before posting here.

    Proposal threads are not for discussion of the Debate topic.

    steampunk:

    You have two options:

    1. I can move this thread to another subforum and you can forget the formal debate.
    2. I can delete all posts from this thread that attempt to debate the issue.

    Please select option 1 or 2. If you want option 1, please advise where you would like the thread moved to.
     
  20. steampunk Registered Senior Member

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    278
    I really want 2, but I think some interesting discussion has started and I wouldn't want people to have stuff deleted before their discussion ended. So number 1. I guess move it to business.
     

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