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It’s been awhile since I yelled at the Home Boners, mostly because I’ve just been so happy travelling around the world lately that I just have better things to do than argue with Internet trolls. But today I thought I’d take a trip down memory lane and talk about something that has always irked me: So-called “Pride of Ownership.”
Here’s how an argument about housing usually goes: I call them an idiot, they call me a cunt. I break down their “real estate math” showing how the real estate industry tricks them into thinking their house is a good investment when it’s actually not, then they say something about “It’s all about PRIDE OF OWNERSHIP!” Then they say something racist and the conversation is over. Good times are had by all.
ANYHOO, the concept of Pride of Ownership always puzzled me, since it’s something that every homeowner innately feels, yet few of them can explain what it is. So I thought I’d dive into this in a bit more detail today.
So what is Pride of Ownership?
While there’s no formal definition of Pride of Ownership, from what I can tell Pride of Ownership is a combination of the following 3 factors:
Factor #1: Control
Owning a home gives you control. Renting makes you your landlord’s bitch.
This actually does have some basis in reality. When you’re renting, a landlord can do shady things like threaten to evict you for no reason, but if you own your own place nobody can tell you to get out. You’re the landlord now, so you’re nobody’s bitch!
And anecdotally, I have seen this happen in practice. I have friends who’ve had the misfortune of trying to rent one of those glossy condos in downtown Toronto, and they’ve spent the last few years being evicted from one place after another whenever the landlord decides to sell their unit. This particular friend has been evicted 4 times in 8 years through no fault of their own! So I definitely understand their frustration with renting and the lack of control it brings.
Factor #2: Class Status
There seems to be this weird undertone of class warfare when it comes to housing. The unspoken belief is that owning a home is the ticket to upper-middle class status, while renting is what poor lower class people do. In the US, there even seems to be a racial component to this, where access to mortgages was restricted by the Federal Housing Agency based on race and ethnicity in a practice known as redlining. I’ll let you hazard a guess which races had access and which ones were excluded.
But even without the racial stuff, you hear over and over again how owning a home is something “grown-ups” do while renting is something that “losers” do. And to prove it they’ll point to studies that show homeowners often have far greater net worth built up than their loser renter counterparts. A 2013 housing survey showed that homeowners have an average net worth 36X higher than renters! Clearly owning a home is better for your bottom line than renting.
Factor #3: Pathway to Wealth
And finally, the “forced savings plan” argument. The idea is that if you’re renting you’re throwing money away, while if you own you’re building your own net worth and making yourself richer. Housing always goes up, FOMO, all that crap. You get the picture.
So now here’s why these are all bullshit.
BS #1: Owning Gives You the Illusion of Control
While it’s true that you no longer have to deal with a landlord, that’s a long ways off from being nobody’s bitch. As every homeowner I know has eventually discovered, just because you own your own home doesn’t mean you can do whatever you want with it.
If a pipe breaks or the roof starts leaking, you have to pay to fix it and there’s nothing you can do about it. No whining to the landlord anymore.
You’re still the city’s bitch when it comes to property taxes, and if they choose to raise it based on your city’s soaring property values, there’s very little you can do about it.
If your bank decides to raise interest rates (which they’ve already started doing), you’ve just gotta bend over and take it come renewal time.
If some douchnozzle moves in next to you and starts making your life a living Hell, too bad! You can’t even pack up and move because your property value just took a hit through no fault of your own!
And if you were dumb enough to buy one of those concrete-and-glass condos, then congrats! You will now have to deal with the additional seventh circle of Hell known as the condo board, who will spend all their time telling you what you can and can’t do with your own property, while hitting you with special assessments because they don’t know how to properly maintain buildings, all while charging you a monthly fee that can be as much as rent for the privilege.
So yes, when you own you no longer have to deal with a landlord, but you’ve essentially replaced one person bossing you around with the bank, your neighbours, your contractors, your condo board, etc. In theory, owning should give you more control but I have yet to meet a person who’s overall stress level has gone down because they chose to buy a home.
BS #2: Your Job Determines Your Class, Not Your House
That study showing homeowners’ net worth being so much higher than renters gets thrown around all over the place, mainly by people in the real estate industry. The implication is that homeowners are richer, therefore you need to become a homeowner if you want to become richer! But this is a classic case of confusing correlation with causation.
First of all, the author of that article admits that there’s also an age bias when counting home ownership. Homeownership rates among 65+ year olds is 80%, while homeownership rates of people under 25 is just 23%, so if most homeowners are older than renters, then OF COURSE their net worth would be higher.
Also, that same study shows the higher your income, the more likely you are to be a homeowner. Because if you make more, you’re likely to qualify for a bigger mortgage, therefore the more likely you are to buy a home.
So in other words, rather than concluding that homeowners are richer because homes are great, it’s more accurate to conclude that higher income and being older makes you more likely to have more money, to which we would respond WELL DUH.
BS #3: Your Home is a Wealth Trap
And finally, the idea that your home will make you wealthy relies on the fact that the equity of your home is usually counted as part of your net worth. However, just because it’s part of your net worth doesn’t mean it’s USEFUL.
Your ability to retire is determined by your INVESTABLE net worth, meaning stocks, bonds, preferred shares, etc. It has to be able to produce an income and be liquid to be considered Investable, and unfortunately your primary residence is neither of those things.
In order to actually use that wealth to retire, you have to sell it. But if you sell it, where will you live? You’d have to buy another house, in which case…hmmm…uh-oh…
Pride of Ownership Is How Scammers Trick You
See the problem of using Pride of Ownership to justify a housing purchase now? Factor #1 makes you feel better about seizing back control, and Factor #2 convinces you that renting is for losers. Then add in Factor #3, the promise of future wealth, and it causes people to jump with both feet into a purchase no matter how much debt they have to take on.
Then when Factor #1 turns out to not be true, people find ways of justifying their decision or just silently complaining, but they’re not going to admit they’re wrong because what other option is there? Renting? That’s for losers!
And finally, in the best case scenario, 25-30 years down the road your mortgage is all paid off and you’re sitting on a big capital gain, you can’t sell and go back to renting. You’d have to give up your Pride of Ownership! And that’s the whole reason you bought this house to begin with!
So if you want to buy a house, buy a house. But run the numbers, understand the costs, and math shit up first.
But if you bought a house purely for Pride of Ownership?
You got scammed. Sorry.
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