“There are tremendous emotional and financial benefits to renting,” says Jill Schlesinger, a certified financial planner and CBS News business analyst. “Renters have a blissful peace of mind. They never have to worry about the boiler imploding or the roof leaking or an appliance that stops working. All of those problems are easily solved with a quick call to a landlord, who has to deal with the hassle of repairs. It took a housing crisis for us to realize this.”
As appealing as this stress-free, no-strings-attached life is, though, it does have its drawbacks. Schlesinger herself is not immune to the societal pressures of home ownership, likening it to achieving grown-up status. “While renting can instill a sense of freedom, many homeowners will tell you about the great psychic benefits of owning their own homes, of nesting and creating a ‘home’ rather than simply a place to hang your hat for a while,” she says. If you’re thinking about buying a home merely as an investment, however, you might want to think again. Schlesinger explains, “When you really get down to it, housing is not exactly a financial asset — there are better ways to build wealth.”
Ken H. Johnson, a faculty director of Hollo School of Real Estate at Florida International University and one of the nation’s leading experts on the buy-versus-rent debate, agrees. “Home ownership is a tool for people who like to force themselves to save,” Johnson says. “Paying down a house is the No. 1 way most Americans acquire wealth. Not all, but most should own rather than rent, due to ownership’s embedded commitment to save.” And while getting people to invest in something that retains value is a good thing, it’s not an across-the-board strategy. According to Johnson’s research, there are two groups who find renting advantageous over buying as a strategy for wealth creation: excellent savers, which Johnson defines as those who save 50 percent of every dollar above expenses, and millennials.
Why millennials? Because millennials move a lot to maximize their income through better jobs, and they lose wealth through the transaction costs associated with home buying.
“We need to tell our parents, our friends, our neighbors that there’s nothing wrong if you’re a tenant,” Johnson concludes. “I went 10 years without owning a house — renting for me was a sound financial decision. Now I think buying is a sound financial decision.”
Josh Hartmann, the vice president of Phoenix-based NEXMetro, is banking on the new class of voluntary renters. His company is building upscale, detached, single-family, leased-home neighborhoods in desirable suburban Sun Belt cities. To date, NEXMetro has gated communities completed or under construction in Tucson, Goodyear and Chandler, Ariz., and in McKinney, Texas, outside Dallas. Hartmann says units are leasing briskly, with an average occupancy of 90 to 95 percent. Renters run the gamut from new graduates and millennials to empty nesters and retirees.
“There’s been an ideological shift in lifestyle and demographics since the great recession,” Hartmann says. “We are filling a niche that didn’t exist, reaching a customer who wasn’t being served by more traditional multifamily housing options. Demand is really strong for this product. It’s like having a private residence without the obligations — landscaping, HOAs, maintenance — of ownership.”