I'm convinced there are two types of people who read the Wall Street Journal. The first is a very narrow group within the 1% of the wage earners for whom the news of a new addition to the Board of Directors at Product & Gamble or the formation of a new CSX subsidiary may actually be of some interest and relevance, and the remainder who feel that simply by reading (or being seen reading) the paper will somehow increase their net worth by osmosis.
In all honesty, I find the paper incredibly boring. I've made game attempts at reading it regularly, but try as I might I can't get excited about its subject matter, and it hasn't made me any richer, any more than reading about George Clooney's villa in Lake Como in Vanity Fair has made me the world's most eligible bachelor.
One of the most striking features about the Journal is the disconnect between its highly regarded news division and the unbridled extremism of its Editorial page. The poisonous bile that flows from the Editorial page sometimes seems otherworldly. There is almost never a positive statement about the President or the Democratic Party, and the contributers of the page run the gamut back and forth, encompassing pet racist extremism to apocalyptic, foaming-at-the-mouth Zionism. When the right wing crawls back under its rock, the Wall Street Editorial Page is that rock. Its editorials generally don't appear in wide circulation, possibly because sane publications simply won't have them. One has to wonder what the impact of such corrosive, hateful rhetoric is upon the day-to-day mindset of the uberwealthy, but that's the subject of another Diary.
One penchant among its Opinionaters seems to be offering "helpful" economic analysis to those of us who haven't yet gotten rich by osmosis through reading its pages. That is evidently the aim of Daniel Gross, "Editor of Yahoo Finance," whose piece published this Saturday's Essay section of the Journal heralds the demise of home ownership as a good thing for the country and praises the benefits of renting until death.
Americans are getting used to the idea of renting the good life, from cars to couture to homes. Daniel Gross explores our shift from a nation of owners to an economy permanently on the move—and how it will lead to the next boom.
An economy
"permanently on the move." Such
dynamic language, until you stop and consider what that means.
The U.S. economy needs the dynamism that renting enables as much as—if not more than—it needs the stability that ownership engenders. In the current economy, there are vast gulfs between the employment pictures in different regions and states, from 12% unemployment in Nevada to 3% unemployment in North Dakota. But a steelworker in Buffalo, or an underemployed construction worker in Las Vegas, can't easily take his skills to where they are needed in North Dakota or Wyoming if he's underwater on his mortgage. Economists, in fact, have found that there is frequently a correlation between persistently high local unemployment rates and high levels of homeownership.
In other words, the catacalysmic effects of the economic depression and chronic unemployment on Americans' livelihoods are recast here through Gross' lens as a net positive, an opportunity for workers to "take their skills where they are needed."
Because statistics "frequently" show a "correlation" between home ownership and unemployment, uprooting your life and family to relocate to '"where your job is needed" can really be a positive thing, a boon for the economy, no less. But what Gross is really basing his premise on here is not "renting" per se, but a forced, unwilling transiency and the desperate inability for people to find lasting employment. Renting is a symptom, a byproduct of that,
not a positive catalyst, and for Gross to omit that basic fact renders his premise preposterous. As is his gushing assertion that this is all about
efficiency:
Americans are increasingly acclimating to the idea of giving up the stability of being an owner for the flexibility of being a renter. This may sound like a decline in living standards. But the new realities of our increasingly mobile economy make it more likely that this transition from an Ownership Society to what might be called a Rentership Society, far from being a drag, will unleash a wave of economic efficiency
The answer lies in consumers following the example of corporations—that is, becoming more efficient. The reaction to extended leverage and foolish borrowing isn't to stop consuming and buying; it is to consume and buy more intelligently. That's what the Rentership Society is all about. And it starts at home.
* * *
In the post-bust climate, renting has emerged as a much more economically efficient way to pay for housing. A one-year lease represents a far less onerous financial obligation than a 30-year mortgage. It's difficult to get into too much financial trouble as a renter.
It is difficult to get into too much financial trouble as a renter (unless you run out of money or the owner of your property gets foreclosed). It's also impossible to accumulate equity or guarantee your children will have an appreciable asset to either live in or rely upon after you're gone. More to the point, though, it's less likely that the bank that owns the property will be less likely to "get into too much financial trouble." After all, fewer people seeking home ownership, the fewer potential pesky defaulting homeowners there will be. The banks will be paid regardless, but they will be paid by a "better class" of property owner from their standpoint, one with the wherewithal to purchase properties solely for investment. These people are far less likely to default, and there will be no end to the supply of potential renters of their properties. And the last thing the banks need or want is another "painstaking" crisis involving mortgage defaults:
Home builders and property owners have caught on to the economic opportunity presented by the move toward rental. Fannie Mae and Freddie Mac have become reluctant owners of more than 200,000 properties thanks to the foreclosure crisis, working through the backlog, one painstaking foreclosure sale at a time. But in February, Fannie Mae said it would put up for sale some 2,490 homes as a package, asking for $321 million. The Wall Street Journal reported that an assortment of real estate companies and private-equity investors were considering making bids. The presumption was that these sophisticated investors would turn the homes into rental properties. No less a sage than Warren Buffett told CNBC in February that he'd love to buy "a couple hundred thousand" single-family homes for rentals.
Here we get to the crux of the matter. It's the lenders and the homebuilding industry that will benefit by Gross's "Rentership Society." The happy language about the joys of renting in perpetuity are really just paeans to what lending institutions would like us to accept as "the new normal." Gross then goes on to draw some absurd examples of what he sees as a trend towards "renting," from college textbooks to women's fashions. How he extrapolates the economic impact of "renting" a textbook to renting one's dwelling space is not explained.
Many people are compelled by circumstances to rent nearly all of their lives, but most regard home ownership as someting positive even if they haven't the means to attain it. Few renters consider it an ideal for life. And there are less obvious problems that arise from perpetual renting. By its nature owning a property confers a vested interest in maintaining that property, more than if the property is simply rented. Owning a property also inspires and facilitates a sense of community because property owners are there for the long term. Property owners get to know their neighbors because it's in their interest to do so. They become involved with local political and social matters because it's in their economic self-interest as property owners to do so.
The author doesn't even bother to acknowledge obvious glaring drawbacks to his premise, namely that the reduction of America to a population of renters would further exacerbate a two-tier society divided between those who own the properties and profit, and those who rent them and pay. He doesn't acknowledge the catastrophic impact his theory would have on elderly citizens, who having rented all their lives would have to devote the entirety of their Social Security payments towards rent, because they have no home equity to rely upon. Nor does Gross acknowledge the obvious fact that even with present-day stagnant home values home ownership and equity provide a vehicle for saving, as well as for establishing creditworthiness. Renting does neither of these things. Owning a home provides at least an opportunity to provide something to one's children, while renting provides no such opportunity.
This article is an example of an insidious tendency to treat the root causes of the economic crisis as simply something we need to passively accept and deal with, and to treat the resultant substandard of living to millions of Americans as a permanent feature, even to the point of re-branding it as something positive. It's the language of capitulation and resignation, which is exactly the mindset that those responsible for the economic collapse would like us to adopt.
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