What if we just outlawed renting?

ETA: This is probably a dumb idea. Let’s consign it to the realm of “thought experiments.”

I admit, it’d be a big change.

So I was reading this sociology article about eviction and the poor, and got to thinking about what a drain rent is. Month by month, renting is cheaper than owning, but in the long term, it’s likely to be more expensive. (The same is likely true for taking out loans vs paying cash.) So the poorest people are hit with extra expenses just because they’re poor.

The article discussed how after the 2008 housing crash, many people lost their jobs or ended up with greatly reduced wages, but rents didn’t go down. (Working class people formerly employed building houses were particularly hard hit, of course.) The article didn’t mention that immigration helps keep housing prices up, of course.

After thirty years of house payments, an “owner” will have generally paid off their loan and own their house outright, owing only property taxes. A renter of thirty years, by contrast, owns nothing and can still get evicted. Moving is expensive, difficult, and takes time. Moving frequently often means losing one’s possessions because they are just to heavy/expensive to transport. (Not to mention the psychological stress.)

But I got to thinking, what if we outlawed renting?

Suppose we passed a law that only the person on the title deed (and their family,) is allowed to live in a house/condo? (With perhaps an exception for people who need temporary housing, like folks who are just going to be in town for a month.)

Yes, obviously the first thing that would happen is that all of the rental properties would go off the market. But second, everyone who owns rental properties would have to sell, because they would no longer be able to make money by renting them out. The sudden influx of properties onto the market would force prices down to a level the poor can afford.

Even if people lost their jobs, say, and then couldn’t make their mortgage payments, (assuming we still have mortgages,) they could sell their homes and get some money back.

Then, even if they ended up in a position where they couldn’t afford their house payments anymore, they could at least sell the house and get some of their money back. Eviction would be less likely, and people would have more long-term interest in maintaining and caring for their property. (In my experience, people care more for things they own than for things they are merely renting.)

Long-term, developers might have to scale back the size of the houses they build in order to sell them to poorer people who want to live in them rather than wealthy people who want to rent them out.

What would happen to the inner cities if there were no money in being a slumlord?

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12 thoughts on “What if we just outlawed renting?

  1. I have had similar thoughts before. The method I was thinking of was limiting the number of houses someone could own to one or two.

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  2. I think Christopher Alexander mentioned something like this in one of his books from the 70s.
    I think he was okay with people renting out a room. He might even be okay with the old style boarding homes that used to be in America before they were regulated out of existence. The family that ran the home lived there, usually fed their tenants, and insisted on particular standards of behavior.

    To a large extent, they sold more than just room and board, but time preference as well.

    So, a big question is how much time preference is today’s landlord providing? May not seem like much, but it could be a larger factor than we think. From Alexander’s perspective, renting allowed for the atomization of people, as well as a poorer built environment- if the people who make the decisions aren’t living with the outcomes of their decisions, then the decisions are likely to be poorer.

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  3. Do recall that the average net wealth of NAMs in America is around $12000. They are perhaps 30% of the population. I might guess that 15% of the population has a net worth of zero or less. Such people can rent, but cannot afford real estate.

    So, you’d throw a few tens of million people into the street. And then… what? Are you assuming a God-Emperor who can hold out against mass misery? Eventually I suppose the situation would stabilize. But then with God-Emperor power, why do you need to worry about renting? Let the market be and concentrate on what matters.

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  4. Renting housing instead of owning it is VERY low on the list of the causes of poverty.

    In fact, owning housing instead of renting is often extremely expensive. Mortgage interest of just 5.3% means that a $300,000 house requires $600,000 in mortgage payments over 30 years.

    Not to mention property taxes, which are on the rise. At 1.5%, property taxes cost the owner 100% of the value of the house every 66 years.

    And, American homeowners move every 7 years on average. Each time, they have to spend about 10% of the cost of the house on taxes, fees, and commissions to real estate agents. So that’s another 40% of the value of the house gone in moving costs above and beyond those paid by renters who move.

    Homeownership has also been shown to correlate with unemployment, as it hinders labor mobility. Owning instead of renting would be a great way to get STUCK in the ghetto.

    The reason rents are so high is that there isn’t enough housing available near jobs. This is due to: 1) local NotInMyBackYard barriers to new construction; and 2) government regulations outlawing boarding houses, outlawing tiny apartments, mandating all kinds of expensive construction to “be up to code,” etc.

    The real solution is cheaper housing. If federal, state, and local governments (and the profiteers who control them) got out of the way, there would be millions of housing units available for sale at $10,000 OR for rent at $75/month. THEN we’d be cooking with gas.

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  5. If you prevent people from suffering the consequences of their poor decisions, evolution of relevant traits, such as time preference stops and goes in reverse.

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  6. The ostensible miseries associated with renting are, when they are fixable at all, generally a result of market distortions imposed by government well-meaning and winner-picking. These are not, I think, likely to repaired by even more gross market distortions, like banning renting. The table is already objectively tilted heavily toward home-ownership (mortgage interest deduction and subsidization of 30 year debt market). We could do with less of it, IMO.

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    • I don’t think it would be a good idea, either. It’s jut a thought experiment in trying to re-align incentives and increase stability.

      The owner’s interest is for the value of the neighborhood to go up (gentrify,) resulting in higher rents or the possibility of selling the property for a profit (which, in turn, tends to displace the renters.) The renter’s interest is for the value of the neighborhood to stay the same or go down slightly. A renter stands a good chance of losing whatever efforts or investments they might make to improve their house/neighborhood–say, volunteering their time to clean up trash that spilled in the street–because improvement leads to higher rents. So we end up with cases where renters try to actively make neighborhoods worse or drive out developers. Seems less than ideal.

      Plus, to be honest, it seems like people are buying much larger houses than they actually need, (I know two-person families living in 4 or 5 bedroom houses,) which seems like a very non-productive use of funds/good way to get mortgaged out the wazoo.

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  7. Muammar Gaddafi actually performed this experiment in 1978 when he outlawed home rental and instantly made all tenants into homeowners, with no compensation to their former landlords. One effect was a lower native birthrate, because very few couples could afford to buy even a small apartment, but foreigners could afford to rent one, as the you-live-in-you-own-it law did not apply to them.

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