What do you think about my idea to help renters buy their home?

submitted by KevonLooney edited

I had an idea that would allow people to buy their own homes that they are currently renting:

  1. Every home gets appraised to determine what it would sell for. This is done by the county and is used for property taxes too.
  2. Every renter is allowed to buy a percentage of their primary residence from the owner. The owner has no choice in this. It's a requirement for being able to rent a property. Edit: Since people are confused about this, the renter is not required to buy anything. They have an option to buy.
  3. Renters can pay as little as $100 extra per month and the county puts their percentage ownership on the deed. If the home is sold, the renter can't be kicked out involuntarily. If they do leave, they get the percentage of home value they own.

Pros: * This would avoid the issue of high interest rates hurting primary homeownership. * This would blunt the impact of corporate landlords having a monopoly where they refuse to sell. They are forced to sell at a fair price. * This would create a simple decision between owning their home and spending money on luxuries or eating out.

Cons: * This would hurt small landlords who would have their property bought out from under them. This is actually a good thing because the benefits of rising property values are now shared. * The implementation is hard. This is actually a good thing because bad landlords would sell property they didn't want to manage, lowering prices for renters who want to buy. * It would cost the county money to hire appraisers. But this could be paid for by increased property taxes due to better appraisals. * Property taxes would go up for landlords. But this would be good, as it encourages them to sell the property. This appraisal process and increased property taxes wouldn't affect people who just lived in their home without charging rent.

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59 Comments

RattlerSix

The renter pays extra and receives part ownership. So the owner receives this extra money and... just has to keep the money on hand in case the renter leaves years down the road?

The whole thing is a legal nightmare. Owners would just sell. And who would buy? Corporate landlords who have lawyers who can cut through all this confusion.

FiveMacs

Owners wouldn't sell, at least I wouldn't...but you wouldn't find he house on the market for rent that's for damn sure. It would be an airbnb or some other rented whatever in a heartbeat.

I'm all for cheap renting, last tenant was 1220 when the average here is about 2800 for the same thing. I own outright so it's really not a loss for me. I'd rather people live in the house, then on the lawn.

With that, basically having a tenant automatically go on my deed? Yeah...no. never.

Riven

It would actually be easier to just set massive taxes for anyone that owns more than 2 houses. I don't begrudge anyone who owns a house and a vacation house but fuck anyone who just owns rental properties, and if you can afford to buy a third house then you can afford to pay a ton more in taxes to keep it. The more houses you own the higher the taxes go, just make it untenable for people to own rental properties and the rest sorts itself out.

HappycamperNZ

Id be ok with 3 - live, rent, vacation - because it means you can have a great lifestyle but will them get nailed for being too greedy.

Riven

I could see 3 since your parent could pass away and give you a house but anything more for rentals is a fuck you.

Frokke

Yeah no. Make it illegal for companies to own residential properties. Sure they can build em and sell em within a given time frame after building or renovating them, but within 5 years tops individuals should own the property.

Progressive tax rates the more properties you rent out.

Renting is one of the main causes of permanent poverty. I don't give a flying fuck about your "investment opportunities". You're getting cash while others are losing money.

NABDad

I think it would be more useful to dramatically increase taxes on unoccupied or AirBnB properties. Increase penalties on slumlord behavior. Similar things to gently (or not so gently) discourage people from hoarding residential real estate.

Otherwise, if someone was renting my house and they wanted to buy it at $100/month, it would probably take more than 800 years to buy (if I could afford to get it into shape to maximize the appraisal).

KevonLooney [OP]

That's another benefit: you might improve the home to maximize the appraisal. That would help tenants.

Of course your property tax would be based on a higher appraisal too, so you probably wouldn't go overboard.

RattlerSix

If the owner improves the home and the appraisal goes up, wouldn't rent go up?

KevonLooney [OP]

Rent depends on the rental market, but most likely yes. That's not different from now though. If you improve your rental property, you get more money from it.

Death_Equity

Paying such a small percentage would mean it takes a lifetime to be able to afford the house. If we take the median home value($360,681), $100 a month would take 300 years to own the house. That doesn't even account for inflation and an increase in home value. You would just be pissing away money that could be better used otherwise. If you increased the payments, you would be better off saving or investing to buy a home than trying to buy the one you were renting.

How about we just ban companies from owning rental properties or homes longer than one year and nobody can rent out more than one home.

KevonLooney [OP]

Here's what you're forgetting: as a percent owner in the home you are entitled to a portion of the rent and a portion of the sale price. As you buy more, your rent goes down. You are saving money.

Death_Equity

The more you explain your idea, the worse an idea it becomes. The rent progressively lowering means there will be a point where the mortgage is higher than the rent payments. The only way that system makes any sort of sense is if the government owns the house and rents it to you with payments based on a yearly appraised value. That would be a pretty sweet deal that would have high demand, which would require a lottery or que that would go about as well as section 8 vouchers(horrible).

You want a roundabout system where there is no incentive to rent out property, just ban renting property.

KevonLooney [OP]

You might not know this, but a mortgage being higher than the rent isn't abnormal. In the past, when interest rates were 8% and rents were lower, you lost money on a rental property for the first few years. Property is not a license to print money. It's an investment with costs and payoffs.

The property owner can pay off the mortgage early with the money. Or they can buy another place to rent out. Or diversify into other kinds of investments. No one is banned from anything.

intensely_human

Under your system, people are banned from normal rental agreements though

KevonLooney [OP]

There are already many restrictions on rental agreements. Things that were "normal" before are clearly illegal now.

bluGill

Why not get a loan and buy the house as narmal?

Scrubbles

My only point here would be I'd switch from actual ownership to more of an "option" ownership option. Similar to stock options, every time you pay rent you get more of the "options". When a sale event happens, you can exercise your options and have a chance to buy the property there. Or, if they want to exercise now they can and they'd own shares of the building there. Once it tips to 50% then the shareholders own it.

Every year you receive more options, you are under no obligation to exercise them. However, every year you rent you receive more options. If you leave and you did exercise your options you get the value you put in back, but if you didn't the options go back into the pool.

I think this is similar to co-ops in large cities, where there is a contract that the owners can start owning the building themselves over time.

KevonLooney [OP]

How would that actually work? Co-ops work just like a corporation, you buy shares one apartment at a time. There are no options.

I feel like the record keeping in your idea and mine would be the hardest part. Basically every home that is rented out would have to be a mini corporation with shares available for purchase.

Scrubbles

It was just a thought, I don't have all the details worked out. But essentially yes, just like a co-op except since in a co-op you own, these would be options, where they unlock every year on renewal, giving you the option to own. There would have to be a whole new concept for it, a normalized thing similar to a corporation but specific to land ownership, because yes pretty much any rental property would be one, every building

ValiantDust

What happens to people who rent out an apartment in the house they are living in? This is not uncommon, where I live. Grandma lives in a small separate apartment in the house, she dies, the apartment is rented out. Sometimes a child moves in later or the parents move in and a child takes over the house.
If these people risk losing a part of the house by letting someone else rent it, my guess is that they would just stop renting it in order to be able to leave the whole house to their children. Which would leave even less homes on the renting market and a bigger share to big corporations.

KevonLooney [OP]

Good point. I think this process would only happen when the owner doesn't live primarily in the home. I.e. financial owners.

The real issue is vacation or short-term rentals. There would have to be minimum time limits like 3 or 6 months to avoid having a million tiny owners.

anon6789

Don't take this as a criticism, but do you own a home?

How would changing property values be accounted for, and how often is the appraisal done, and who pays for that? Can a landlord sell his rentals to someone else while they are rentals? If no, why not? What incentive does a landlord have to keep a property nice and safe if x% is no longer theirs? If the rent-to-owner decides they want to move or not buy the house, what happens to the money? Is any given to the landlord? Why can't the landlord increase rent to drive out a tenant? If a new sewer line needs to be run, and it's $10k, how is the cost split? How are property taxes dealt with if the unit is owned by multiple parties? If a homeowner owns 51% of the property and someone is injured on the property, who's insurance pays?

I get there is a lot to dislike about slumlord type landlords, but property and home ownership isn't like buying a toaster. There are a ton of laws and rules and responsibilities that clearly defined parties still have court cases over. There is financial risk in property ownership, and your proposal seems to be having private citizens, even if "rich" by your definition, and it is the government dictating private use of their property.

There are positive aspects to renting, which you don't seem to consider. I tried to sell my house for over a year, but foreclosures had driven down property prices so much for a time, I literally couldn't afford to give my house away for below market value and still have any money left to put on a new house. If I was a renter, I could just say I'm done here and go off and do whatever. If something breaks, there's someone who is supposed to fix it, no cost or effort to you. You don't need to worry about taxes and setting aside money for maintenance or hire contractors.

I want everyone to have a home, and I hate scumbugs and corporate ownership of residential property, but many of these people do serve important purposes, and many people would not have a place to live if property owners didn't rent out access to those properties.

Again, I'm not a landlord because of many of these things, but I do own property and wouldn't like something like this. It is a very complicated issue and this just comes off as someone who's never had to fight the local zoning board, deal with a utility screwing around with you, or having messed up property records having the government trying to make you pay taxes you don't owe say property owners have it made. It took me 8 years, 3 title insurance companies, and a judge to get my property records corrected after my divorce.

Expanding construction of affordable housing people would want to live in and expanding housing subsidies and just in general providing adequate social safety nets will get people in homes. Giving people with no means to maintain a home is not a benefit, it's just another huge thing that brings a pile of never-ending expenses.

KevonLooney [OP]

These are good points, but you say that you don't rent anything out. Anyone who owns property in an LLC with another person deals with issues like this. They are not insurmountable.

Yes, this would make lots of small landlords think twice about renting their property out. That's actually a good thing because they could either sell or let family stay there for free.

The point is to make people who don't want to deal with the hassle sell. People like you wouldn't be affected.

anon6789

Yes, but one typically enters into a business partnership with people they know and trust. One isn't supposed to really dive into the deeper characteristics of someone they rent to so as to avoid potential discrimination. Look at this the same way whoever you work for hires people. HR vets them and says, this person is who they say they are, and probably won't burn the place down or singe-handedly put us out of business. Same for finding a renter for a property basically. Now how thrilled would you be to be forced to co-own a property with monetary and legal liability with your least favorite coworker for the next 20-40 years?

When the time comes to spend $20k to replace the roof on your shared home, you care about the home and want it done right and say, hey so-and-so, you got $10k for your half of the roof? So-and-so says nah, I actually don't have any money, but me and my buddy can replace that roof ourselves for $5k in materials, so give us the $5k and we'll do it and our half will be the labor even though neither of us are roofers. Same with landscaping. Painting. Plumbing. Flooring. All things that just need replacing with time, even if you take care of them. And now So-and-so lives in your home for 10 years, trashing it, never helping fix anything right, and making the place liveable, but not as great as it was before he moved in or as good as you wanted to make it. And now since he's a renter still, he says, you know, this place isn't as good as it was, I'm out. Now you not only get to pick up the full tab to get it up to snuff for the next renter, but you possibly get to do it all over again.

I bought my ex's grandmother's house after she passed that had a rental on it. I lived there for 2 months before we split, and that 2 months was enough landlording for a lifetime to me. That guy took advantage of everything possible, called me the middle of the night when power went out for the whole neighborhood, and after I left he brought home bedbugs. He had an arrangement to fix things around the place with her grandmother. None of that stuff was ever done. We had to threaten legal action for him to finish up what he actually had started. This is what your scenario allows to happen without penalty to the tenant.

Renters don't all want to be property owners. They don't want the responsibility of maintaining a property. I live in a condo because I dont want to mow lawns, worry about siding and shingles and fighting grub infestations and maintaining a parking area. Owning a single family home isn't for me, and I've found a happy medium where I don't rent, but I don't have full responsibility. If you don't want to be a property owner, you're not going to be a good property owner and your neighbors will hate you for having the crappy house on the block. I'm sure you have one of those people in your neighborhood.

Again, we need people thinking about how to resolve the housing situation in many parts of the world, but forced business relationships aren't good. UBI, social security, disability, food stamps, housing subsidies. People need the cash to live a life they can find comfortable. Let them buy, let them rent, whatever they feel comfortable doing. Set ordinances how much housing can be owned by people not using them as primary residence. They're tough fights, but that's what needs to be examined. I'm all for tenants' rights, but they don't have the same skin in the game as the owner. That doesn't make them inferior in any way. But they don't shoulder burden beyond making rent. And that can be a valuable thing. I could never see myself renting, but my brother on the other hand doesn't seem to want to own a house. He does enough work doing construction he doesn't want to deal with all that crap at home. I don't blame him.

Home ownership sucks many times, and for someone to take a reasonable fee to bear that responsibility isn't wrong. I pay a property management company $200/mo to enforce rules on me, but also my neighbors to make sure we don't get that guy trashing things. They make sure the neighbor's dryer lint doesn't burn my house down. They negotiate the rate with the garbage man. They get the sidewalks cleared when it snows. So I pay someone to basically be my landlord even though I own my home. They provide a service, and if you get a crappy one, being a renter you can find a new one. I don't get a choice, but thankfully my HOA is pretty decent all considered. They earn their money. Sometimes they tick me off, but they overall earn their fees. A good landlord is the same. I'm for having strict rules that they provide safe and clean spaces to live if they're going to rent to others, but most are not faceless corporations, they're regular people that have landlord as a day job or side gig. I know the heads of my HOA outside of that role, and they're good people. As I said, sometimes they annoy me with decisions, but they have more people than just me to keep happy. A landlord is just another service provider and there are good ones and bad ones, and a lot of meh ones. If you rent, you get some choice at least in who it is.

deegeese

Unless you have strong rent control, expect proportionate increase in rent for any tenant who exercises that option.

Oh, you have $100/mo extra to spend burdening my equity? Your rent just went up by $200.

KevonLooney [OP]

True, but don't underestimate the value of finding a good tenant. Most landlords would rather have a stable tenant than a few extra $100s. It costs a month or more in rent to find a new person.

deegeese , edited

Someone devaluing the investment is a bad tenant.

KevonLooney [OP]

They are paying you for the property. If you don't want that, why do you rent it out? You can't use it once they lease it from you. You're a financial owner, not a resident anymore.

Why would one more person who's interested in buying the property hurt? When you sell a home are you upset that people want to hand you money? No, because you are moving out and it's now a financial decision.

lucullus

Individuals and corporations both rent out houses/apartments to get more money out of it than by selling it again. Your model would absolutely lower the return on renting property out. So increasing the rent would be a logical decision for them. Or if your rules make renting unprofitable, noone will build more houses/apartments than their own. Sure, the house market might see low prices, but at some point it might be more logical to hold the property than to sell for a very big loss, hoping for better times. So a lower limit would be there. Then you have many non-sellable homes sitting around and still many people, who cannot afford to buy but also cannot rent (since nobody rents out anymore).

One interesting thing in your scenario would also be, how to handle the part ownerships. Lets take a student at the university renting a small room/apartment for the time of their studies. They might make payments towards ownership for a few years, accumulating something like a few percent of ownership. Then their studies are finished, they move and another student comes in. Rinse and repeat. You will get property owned by tens of persons this way, even when not every tenant wants to do the payments. Would be a hell to administer. Nothing would work anymore regarding decisions and work relating the property.

I think nothing can work around the fact, that we need many and good publicly owned properties for renters, where the rent is no driven by the profit motive and in effect is decided in democratic structures (like city government). Maybe in your scenario you would also want public entities buying homes to then rent without profit.

deegeese

You just invented a scheme to transfer equity from landlords to tenants and you don’t see why landlords might not like that?

intensely_human

The socialist’s prayer:

  • We’re not coercing your economic choices
  • And if we are, it’s for your own good
  • And if it’s not for your own good, it’s not much of a burden on you
  • And if it is much of a burden on you, it can’t be avoided
  • And if it can be avoided, it’s better this way
  • And if it’s actually worse this way, you deserve it for being an oppressor
Itrytoblenderrender

Well in Germany there is the "Vorkaufsrecht" for the renter.

If I would sell my flat, the renter would have the option to buy it for the negotiated price. Not any imaginary price. There has to be a notarized sales contract which triggers the "Vorkaufsrecht".

The renter has the option to buy the house / flat at the established market price.

shalafi

OK, then I choose not to rent. You can go buy a house or rent or live on the street.

Now what?

my_hat_stinks

Now what indeed? You're still paying all the maintenance fees but now you're not generating regular income, and you're at the mercy of your government's empty home laws. Where I am I believe that's currently just paying double taxes, but it's also entirely possible for government to pass more regulations if there's a lot of unused housing they need.

Wes4Humanity

I think an easier solution would be to expand section 8. The government should have tons of housing units built, and then families can "pay them off" with section 8 funding. Right now section 8 money just goes to slumlords. Instead that money could go to the people who actually need it. This would increase housing supply, so prices would come back down, plus allow people to build equity and ownership in their home allowing them to start raising themselves out of poverty.

originalucifer , edited

theres a current, common thing called something like buying/selling "on contract" that provides for a lot of the methods youve outlined

KevonLooney [OP]

In case it's not clear, my idea is different because it is not optional. It's a condition of renting property. Basically, the person or persons paying the lease have an undeniable right to buy the property.

originalucifer

so a rentee is forced to purchase and the renter is forced to sell?

no thanks.

KevonLooney [OP] , edited

You sound confused as to the definitions of those words. "Renter" and "rentee" are the same person: one who rents from a landlord. Neither renters are forced to do anything. They have the option to buy.

originalucifer , edited

k. the person who actually owns the thing is forced to sell. got it.

no thanks.

e. just to make this clear. if neither party is 'forced' than this is just 'on contract' with extra steps

intensely_human

By force is by force of course of course
and no one’s a hero by force of course
unless of course that force of course
is merely a non-optional deal!

OwlPaste

This has been tried in UK for council properties where the tenant has the right to buy. It was introduced by conservatives back last century 1980s) and has led to decimation of council housing stock needed for housing homeless and those or low incomes.

Objectively it ended up being a terrible policy for renters now.

A better way forward is to ensure there are no private and corporate landlords and only local councils are allowed to provide homes for rent. This ensuring local rent controls and stock.

my_hat_stinks , edited

To me that seems like a demonstration of why it *would* work. Allowing the people living there to buy the house from the government moved housing from the hands of government into private ownership. Allowing the people living there to buy the home from a corporate landlord will remove housing from corporate landlords, which is exactly what's needed if we want people to be able to afford housing. People buying the home they live in from their landlord won't remove council housing.

It'll probably drive down house prices but that's kind of the point. As a private homeowner I'd lose out on some potential money if I ever moved so that's not ideal, but that's a fair "loss" if it means other people can afford somewhere to live.

intensely_human

I’m a conservative and this sounds like a terrible idea (assuming it’s forced) to me. I wonder why the conservatives of the 1980s UK thought differently.

OwlPaste , edited

It likely was an attempt to get more people out of rent into home ownership (as home owners are more likely to vote conservative here) but what they failed to predict is that people would then resell on open market at higher cost when demand was high.

KevonLooney [OP]

Do you have an article about this?

OwlPaste

No just own musings, no mainstream political party in uk would pick it up

intensely_human

Imagine sex, but unlike regular sex it’s not optional

jordanlund

This is a plan called "Rent to Own". It's been a thing for decades now.

https://www.investopedia.com/updates/rent-to-own-homes/

Rhynoplaz

Right, but I think making it mandatory is the big question here.

Corkyskog

If we are going to start pitching ideas that will never happen in my lifetime, then I also suggest mandatory stock options for all employees of a company and first right to purchase at market value if the company ever sells, in which a union could buy out the company to turn it into a co-op model.

Today

Not everyone who rents a house to live in wants to buy a house. Not everyone who rents a house to other people wants to sell a house.

KevonLooney [OP]

It's an option to buy, not a requirement for the renter.

And the landlord has already made their choice for someone else to live in the home. They are being fairly paid for the property. They can always use that money to buy another one.

Isn't that what landlords tell renters? If you don't like it, just buy another one?

Today

I don't know what you mean by " If you don't like it, just buy another one." I've rented many times and no one has ever said that to me. I don't understand the context.

I think you have a narrow view of people who rent out homes. Not everyone is a corporation looking to make millions of dollars. Many are just trying to cover the cost of the home temporarily while they deal with life. My mom sold her home and bought a smaller house a year before she retired. She rented the new home until she was ready to retire and move in. When she had to move to an assisted living apartment, she rented her home to cover the mortgage so she could pay for care. She didn't sell as she hoped to be able to return to her home. Now that she's passed, I've inherited the home. I'm renting it to cover the mortgage while we make decisions about our own retirement and where we want to live.

intensely_human

If you reduce the ability for owners to make self-optimal choices with their property, then the property will be less valuable to them.

This means that in order for property to be as attractive an investment, they will have to raise rents.

Whenever you coerce people in a market, you make the market less efficient, which hurts everybody.

KevonLooney [OP]

You are assuming that market rent is not already as high as demand allows. That's not true. It is. That's the definition of market rent.

intensely_human

Market rent is as high as the *market* allows. Demand is not the only factor in pricing.

When you make something less valuable for investors to provide to the market, this reduces supply. Reducing supply while keeping demand constant results in higher prices.

KevonLooney [OP] , edited

Supply of homes is not dynamic like a factory, it can't respond quickly to prices. Investors will grumble about whatever they want, but the alternative is a time consuming and expensive sale.

Even then those homes don't disappear . If they are removed from the rental market they will just end up sold to the very group of people who were renting them, thus reducing demand. Rents would not move much, although there will probably be more real estate sales than usual as the rental market sheds the lazier real estate investors.