Homeownership for the "Rental Generation"

Friday, August 10, 2012

A recent article in BloombergBusinessweek, headline "The Rental Generation Sees No Point In Buying," could just as well have been called "The Time is Ripe for Coöperification." The gist of the piece is that today's 20- and early 30-somethings have good reasons to stay out of home ownership and financing, and they are staying out in droves.

What once was seen as a solid investment, like a house or a car, is now seen as a ball and chain with a lot of risk to it.

Owning a house has always involved some risk. A tree could fall on the roof. The neighborhood could turn sour. It's a big single purchase, so if something goes wrong, you have a lot of eggs in that one toppled basket.

But these days, especially for younger adults, homeownership may be even more risky, and for a particular reason. Simply put, owning a house makes it hard to move, either to a new city or to a different type of housing. It sets your location and a huge chunk of your budget into stone: big disadvantages if there's a good chance you'll need to make quick changes to where or how you live. Globalization and economic instability both make flexibility much more valuable, if not essential -- and the more valuable flexibility is, the harder it is to give it up, even in exchange for long-term savings.

This is exactly the reason why coöperification gives all residents the flexibility of rentership, even when they are also owners. Globalization isn't going away, so we'll keep on wanting that mobility.

A generational change in attitude isn’t the only reason young consumers aren’t buying. Stricter lending practices and higher down payments on houses and cars are crowding out buyers, [...]

The housing market went bananas over the last decade largely due to easy credit. Those days are gone. To qualify for a home mortgage today, you'll need a big cash downpayment; a good, stable income; and a lot of patience. Perhaps this is as it should be -- but it's not how it was for years, and those years of fast and furious home lending drove home prices sky high. Yes, the bubble has burst, but it hasn't deflated near enough to make 1950s-style home financing available at 1950s prices.

In short, the banks are a problem. (Big news!) It seems unlikely that they will transform into a solution any time soon. Meanwhile we're stuck with housing that's too expensive, at least in the places with good jobs, for many households to buy in without some institution's support.

But there is no reason why that institution has to be a bank. Why not a residential cooperative?

First-time home buyers in 2011 accounted for the smallest percentage of the total since 2006. The vacancy rate of U.S. rental properties is at its lowest level since 2002.

These trends are dramatic. Renters are remaining renters, and people who already own housing are buying more of it. This almost certainly means more housing is being purchased in order to be rented out. And even so the rental vacancy rate stays low.

It appears then there is a real investment opportunity out there for landlords. Why not create our own landlord and seize this moment?

By forgoing purchases of assets like homes, young people are giving up on a chance to build wealth [...]

Homeownership isn't the only "chance to build wealth" under the sun, but it is an important way. Land and home are just so fundamental to our lives. Everybody's got to live somewhere! For communities and families perhaps even more than for individuals, owning the place where we live is a critical means to steering our environment, and thereby our destiny.

Coöperification's central mission is to bring ownership back to the local community. Because the ownership model is collective, individuals aren't burdened with the same risks of inflexibility, nor with the same barriers to entry, as in conventional home buying.

Could the "Rental Generation" prove instead to be an ownership generation of a new breed? It's not too late to start coöperifying, to start owning and building that wealth, without giving up the important benefits of renting.

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