NCPA - National Center for Policy Analysis

Who Needs Home Ownership?

November 5, 2012

Suppose that all households were renters, what would be the unfolding impact on society? What would this mean for individual investment in real estate, asks Arnold Kling, a member of the Financial Markets Working Group at the Mercatus Center.

One tempting aspect of this scenario is that our real estate holding would be diversified. The wealth would be less subject to the whims of the local housing markets and the evolution of our local communities.

In Kling's view, the distribution of wealth does not have to be contingent on the rate of home ownership. A democratic distribution of wealth and development can be achieved without the need for widespread home ownership.

The essence of Kling's argument is that the freedom that comes with being a renter, specifically the "exit option," provides for a better reality.

  • Citizens (renters) have the freedom to leave a decaying community.
  • A parallel analogy, if a local grocery does not have the produce one prefers, the best solution would be to go to a competing grocer. Kling feels the same ways about schools and local governments.
  • Kling asserts, compared with choosing a competing supplier, that writing complaint letters and participating in election is a weak way to bring change.
  • The local competition is an effective way to stimulate governments to provide a desirable mix of services in a cost-effective manner.
  • Thus, if being a renter weakens one's dedication toward the local government and nurtures competition, then that is good thing.

Kling is not stating that society aims for a situation where everyone is a renter, but rather, we should not characterize the national score card criterion on only home ownership rates.

Source: Arnold Kling, "Who Needs Home Ownership?" The American, October 30, 2012.


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