Renting vs Owning (housing)

[dcoles11]

I couldn't sleep last night and as I was flipping through the channels I came across Bill Marhar's show on HBO.

They brough up briefly the fact that there are tax breaks for owning a home but not for renters and they said that 32% rents, 32% pays a mortage each month, and the rest just own their homes without having to make any sort of payment.

Even the conservative on the pannel agreed that this was out of whack so I don't think this is a political issue.

I'm the type of person that really has no desire to own a home, i'm a single guy, not really sure what I want to do with the rest of my life, and I like the freedom of being able to move easily.

But because i'm not going after that "American Dream" of owning a home, I don't get the tax breaks that a home owner gets.

Now i'm not belly aching here, i'm just giving an example, a personal one, of people that really don't want to own a home.

I'm not really trying to make any sort of point here, just seeing how others feel about it.

[Bubble Screen]

I don't think renters should ever get a tax break. And im sure that's mostly the answer you're gonna get. I can't think of one good reason of why they should.

[panel]

HOme owners also have to pay property taxes, the tax break is mostly from interest, so you could take a 200,000 loan andspend it on what ever, and still get that same tax break.

I wouldn say that renters are getting screwed over any more than anyone else is, and on top of that, they do not have to worry about the risk of the house getting destroyed, or loosing its value.

[ChocolateCitySkin]

yeah whoever owns the place already got the break.

[fullnelson9999]

I dont think renting helps the housing market all that much, so...

[Fergasun]

The interest deductions helped fuel the housing bubble. If you didn't buy in the past 5 years you made a wise choice. It's better for your career to be mobile than tied to a mortgage. We are seeing now there is no such thing as "good debt"... or at least housing debt should not fall under the "good debt" category, as housing doesn't really "stimulate the economy" anymore than ditch digging does. (Or one could say housing stimulated our economy for the past 7 years).

I rent and would love to rent in a home. Don't have to worry about being underwater. Don't have to worry about a home keeping value. Can tie up the money in ways other than the housing market.

[RocketCitySkins]

I recently considered selling my house because of the upkeep. I had water pipes to freeze and burst. The insurance isn't covering all the repair so I'm out around $750 there. Since I was having to have carpet replaced I decided to do the entire house. And, of course, new carpet makes the walls look blah so I had the inside painted. Another $2500 between the two things, but I've lived here 10 years so it was due.

To rent a 2 bedroom apartment in a livable part of town here is more than my house payment. And for the apartments I was looking at, I found out my neighbor had lived there and the rent on the same size apartment had gone up $200 in two years. That's something I don't have to worry about with my fixed house payment. Also, if your apartment neighbor has bugs so do you or if they set the place on fire, you and what you own are in jeopardy.

I've decided to stay a home owner.

[hkHog]

I definitely think that the tax write off on mortgage interest and other tax breaks for homeowners have been a major factor in the housing bubble and ensuing credit crisis and general economic difficulties we find ourself in right now. This was stated well in a letter to the editor in the Wall Street Journal this week:

I agree with Mr. Gramm's analysis but would add what I believe was the spark that ignited the housing inferno.

When Congress amended the tax code to allow tax free profits up to $500,000 on the sale of a primary residence (every two years), the home market was transformed into a municipal bond-type investment vehicle. The elimination of interest deductibility for everything except mortgages encouraged the misallocation of capital into housing, as well. Americans well aware of major tax changes went on a binge. With the user-friendly financial climate provided by the Federal Reserve, the market was on a tear with many houses doubling in value in short order.

When Congress forced the banks to loosen credit standards for certain markets, encouraging subprime loans, the systemic breakdown became inevitable. It was hastened by the new application of the old mark-to-market accounting treatment, which even France and Germany have now amended. But it remains in effect here, an additional burden on our banks.

Richard P. Urfer

Morristown, N.J.

[da#1skinsfan]

To rent a 2 bedroom apartment in a livable part of town here is more than my house payment. And for the apartments I was looking at, I found out my neighbor had lived there and the rent on the same size apartment had gone up $200 in two years. That's something I don't have to worry about with my fixed house payment. Also, if your apartment neighbor has bugs so do you or if they set the place on fire, you and what you own are in jeopardy.

I've decided to stay a home owner.

Thats what it comes down to...when youre comparing a $800/month bland 1BR apartment to a $1800 house payment, yes, some consideration is needed.

But when you want to enjoy your house a bit, and you start looking at renting for around $1500/month when you can buy a house for $1800/month and enjoy the benefit of tax breaks, building equity, etc....it starts to make sense.

Especially in areas like the above, where a rental is as expensive or more expensive than a house these days given low interest rates.

[Kosher Ham]

Do you strictly lease cars ?

[Rudechain]

Well there are benefits to home ownership that go beyond writing off interest. ( although writing off the interest has been very helpful to me)

First and foremost. It's your property and every time you make a payment, your money is actually going towards something rather than in a land lord's pocket.

Insurance rates are historically lower for home owners than renters. Call it a stability factor if you wish.

With that home ownership comes payments and with those payments, comes a better credit rating and equity in that home if you need it. ( I would not encourage any home equity loans right now, but owning a home does give you alternatives.

I did rent for a long time, and am married with no kids. The taxes took a big bite out of us, but purchasing a home certainly made income tax time more palatable.

Perhaps a rental credit should be looked further into.

[jpillian]

I've owned the home we're living in since 2004. Do my taxes with TurboTax online. I see pretty good change in my tax return for other deductions (it recalculates after each deduction added), but I've never seen a change in my tax return after I've put my mortgage interest in. :whoknows:

That being said, I'm paying virtually nothing in taxes with a average single income and three kids -- so perhaps that plays into it as well.

[GibbsFactor]

Renting is only a good idea if you are saving something elsewhere or paying down debt.

If you are renting and just blowing your money on cars or going out, you aren't doing yourself any favors.

I don't think renters need to get breaks. The incentive should be to own property, not to rent. Renters get the breaks as stated above.

[Mark The Homer]

Renting beats owning in the short term.

Owning beats renting in the long term.

[da#1skinsfan]

Define short term though?

With the tax breaks one could get by buying a stable house, even if the market dips a bit more, they could still benefit after 2-3 years ownership.

[Elessar78]

My wife and I are weighing this very same question and the factor that is giving us pause is that we're not sure if we're going to stay in our area for five years (my research says that buying a house is not the right move unless you're willing to commit to staying for 3-5 years).

If we lived in a more metropolitan area where there were other job opportunities—yes, buying would make sense.

[Elessar78]

The incentive should be to own property, not to rent.

Why should the gov't care whether people own or rent?

[GibbsFactor]

Why should the gov't care whether people own or rent?

Because it's wealth building. Renting is just building some other person's wealth.

[Mark The Homer]

Define short term though?

With the tax breaks one could get by buying a stable house, even if the market dips a bit more, they could still benefit after 2-3 years ownership.

I guess it depends somewhat on what the buyer's income tax bracket is. It's my understanding that, within a typical historic housing market trend, assuming no anomaly, monthly mortgage payments of a newly purchased house would typically be higher than the monthly rent payments would be on that same house. When you factor in closing costs and other associated expenses of ownership, seems to me it would be hard to justify buying vs renting within three years.

I am not a real estate expert though.

[GibbsFactor]

Yep, homeownership is no longer a "get rich quick" scheme, as it should be. It should be your home.

[TMK9973]

Start with the basic premise - Does the government "OWE" someone tax breaks for either?

Answer is no. (Before you get on do we owe the government taxes, the answer is yes. At least for infrastructure and safety).

So then the question comes does the government have a incentive if people owning, rather then renting?

Once again, the answer is yes. TON"s of studies show that people that own, stay in the house longer then those that rent (common sense). In neighborhoods where most people own, and less turnover, there is less crime. School dropout is lower. The upkeep is better. Less public services are needed. Schools are better with more community involvement.

So, the government has a interest in people owning homes. The citizens are better off, and the government spends less. Therefore, the government, does what it can (such as tax breaks) for those that own.

[Kosher Ham]

Start with the basic premise - Does the government "OWE" someone tax breaks for either?

Answer is no. (Before you get on do we owe the government taxes, the answer is yes. At least for infrastructure and safety).

So then the question comes does the government have a incentive if people owning, rather then renting?

Once again, the answer is yes. TON"s of studies show that people that own, stay in the house longer then those that rent (common sense). In neighborhoods where most people own, and less turnover, there is less crime. School dropout is lower. The upkeep is better. Less public services are needed. Schools are better with more community involvement.

So, the government has a interest in people owning homes. The citizens are better off, and the government spends less. Therefore, the government, does what it can (such as tax breaks) for those that own.

And that is a great point. Thank you.

[LaxBuddy21]

My wife and I had to weigh this same argument just recently as our lease on our apartment expired at the end of February. We looked at what we would pay for rent to move to Gaithersburg versus what we would pay for our mortgage. Our rent for the same size townhouse we ended up buying was about $1500-1600 a month. Our mortgage payment with taxes and insurance rolled in is $1720 a month but we also get a discount on our car insurance and with the tax deductions and the new first time home buyer credit, we are able to pay off our credit cards and a personal loan I had giving us an extra $200 a month. I also was able to adjust my pay check for 2009 and am bringing in an extra $400 a month. All that together made the decision quite easy as owning a home ended up being cheaper for us and we are not throwing money away any more on rent but we are investing it in our home.

[Elessar78]

Start with the basic premise - Does the government "OWE" someone tax breaks for either?

Answer is no. (Before you get on do we owe the government taxes, the answer is yes. At least for infrastructure and safety).

So then the question comes does the government have a incentive if people owning, rather then renting?

Once again, the answer is yes. TON"s of studies show that people that own, stay in the house longer then those that rent (common sense). In neighborhoods where most people own, and less turnover, there is less crime. School dropout is lower. The upkeep is better. Less public services are needed. Schools are better with more community involvement.

So, the government has a interest in people owning homes. The citizens are better off, and the government spends less. Therefore, the government, does what it can (such as tax breaks) for those that own.

Good point!

[Fergasun]

I don't believe we live in a time where one and their spouse can expect to have the same job security over 20-30 years as people did 10-20 years ago. Also, you don't really own the home; but you own the mortgage until it is paid off.