I love renting. I love renting so much, I don’t know if you could pay me enough to buy a house to live in (feel free to try though – PayPal details available on request).
For a few years, I lived purely in Airbnbs. That was the total dream: a single payment to cover every possible bill and the ability to make week-to-week decisions about where we wanted to be. Now I need a bit more stability, so I’ve had to sign a 12 month contract and start dealing with utility bills – and that’s quite far enough in the direction of owning, thank you.
Why is renting so great?
If something breaks, it’s someone else’s problem. May as well get “coming across as lazy” out of the way early. Honestly though, homeowners seem to spend half of their weekends doing random house-related chores. I have enough work to do at work: if something breaks I can get someone to handle it, and if the owner wants to do no upkeep and run the place into the ground that’s their problem – I’ll just move.
I have incredible flexibility. AKA “I don’t have to be a grown-up and make a commitment that lasts more than 12 months”. Decide we want an extra bedroom? Decide that actually we’d like to spend less on our housing? Feel like trying out living in a different location? Need to move for schooling? Done! A small amount of hassle and £50 on van hire later, and we’re done.
There’s no pressure to find somewhere “perfect”. The notion of the “forever home” is totally alien to me. How is it possible to anticipate every future desire you might have and buy a property today that meets all of them? I mean, my preferences have changed since I started writing this article five minutes ago – can you really say that in 20 years’ time you’ll still be fine with not having a garage and definitely still want a huge garden with all its attendant upkeep?
I don’t end up with my home dictating my life choices. When you’re tied to a home, you end up in a situation where your choices about the job you take or even the size of your family are constrained by a pile of bricks you bought once – which seems ridiculous. You could sell and buy somewhere else of course, but that’s a months-long process with thousands of pounds of expenses involved (not even mentioning the emotional trauma).
I don’t have to balance financial and emotional factors. What if I really wanted to move, but running the numbers told me it was a bad idea? What if the value of my home went down – would I start resenting it and feel less good about living in it? What if I loved living in my home, but prices in my area seemed “toppy” and it would make sense to sell and take the profit? I don’t want to worry about any of this stuff, and I don’t have to!
Reasons to prefer ownership
Maybe your priorities are different and you actually prefer ownership – OK, that’s fine. But renting and ownership are rarely pitted against each other in a reasoned way: there’s a default view that renting is a second-class status. These are the main reasons that are usually given:
“Renting is throwing money away”
See also: “you’re just paying your landlord’s mortgage”. These phrases are emotively worded and lend themselves well to lecturing impressionable youngsters, but suffer the drawback of not being true.
There’s an assumption that when you own a home, your payments are building your own equity rather than feathering someone else’s nest. Not the case:
- Part of your mortgage payment is interest. This is “thrown away” money that you never see again, just like rent.
- Part of your mortgage payment is repaying the capital. This is just a forced savings plan: if you repay £500 of your mortgage each month, this is exactly the same as not having a mortgage and just moving £500 into a savings account.
- You’ll have upkeep costs that you don’t have as a renter – from small things like unblocking the gutters to big ones like replacing the roof every so-many years. This is all money you never get back.
- A bit more abstract but no less real, there’s an opportunity cost on your capital. In other words, if you’d put your cash into investments rather than a home, they’d be earning you money while your house is earning you nothing.
In other words, there will always – always, even once your mortgage is paid off – be costs associated with keeping a roof over your head. It’s just that the make-up of these costs is different for owners and renters.
When you add up the costs of each option, there will be times and places where owning is cheaper and those where it’s not. If you wanted to make a purely by-the-numbers decision about how to live, you can do – but you need to make it a fair fight by including both the visible and invisible costs.
You’ve got to get on “the property ladder”
This statement tends to be made by people from a generation who experienced (and largely benefited from) a period of history where house price appreciation was unusually high. It’s based on the assumption that prices will continue to increase faster than your earnings so get ever-further away from you unless you’ve managed to grasp that first rung…which isn’t necessarily true.
Even if it is true, remember opportunity cost: as a renter, the money that you would otherwise put into your home can be invested in something else. Including property!
This is what I do: I rent my home, but own other properties that I rent out. I’m “on the property ladder”, yet have all the benefits of renting. If I decided I’d rather take that extra money and invest it in the stock market instead, that would be a perfectly reasonable thing to do too.
There are tax breaks for being a homeowner
It’s true that if you own a primary residence in the UK, you benefit from capital appreciation then don’t have to pay tax on it when you sell. The tax advantages in some other countries are even more attractive.
That’s a nice bonus if you want to be a homeowner anyway, but it should never be a deciding factor. So I’m meant to live a lifestyle I don’t want just so I don’t have to cut the government in on my (unearned) profits? C’mon.
Renting is less secure
OK, you’ve got me – this is completely true. You can’t move into a privately rented property and know for sure that you can stay there for the next 20 years as long as you keep paying. However, “less secure” and “flexible” go hand-in-hand – so it’s a matter of deciding which is the most important to you.
The problems with renting
Renting isn’t perfect. In the UK, you can be asked to vacate your home with only two months’ notice – which isn’t much if you have kids in a nearby school, for example. You’re reliant on your landlord or their agent to maintain standards and deal with repairs – but as owners are often amateurs who just own a single property as an investment and the standards agents are required to meet are low, you can’t have much confidence they’ll do as they’re meant to.
Landlords complain that there are too many rules to follow. Tenants complain that landlords don’t perform their duties properly. They’re both right: there’s heaps of legislation, but it’s poorly enforced and many amateur landlords have no idea most of it exists.
It’s a difficult balance to strike: tenants need protection from unscrupulous landlords, and vice versa. The incentives need to produce the right behaviour on both sides. I don’t pretend to have the answer.
But I do believe that renting will become more popular: not just from necessity, but because the “throwing money away” dogma will fall away and ever more people will realise that renting actually meets their needs better.
And as it gets more popular, standards will have to rise. The new wave of renters won’t settle for a second-class experience, and nor should they have to. I don’t know quite how it’ll happen, but I’m looking forward to finding out.