>Probably want to allow for the possibility of rent rises over time.
Most definitely, my apartment before buying a home was ~$100/month less than my current mortgage, now (3 years later) the rent for the exact same apartment is ~$300/month more than my mortgage.
>it seems the reason is mostly to cover mortgage + have income
That isn't how rent works. It is a market and buyers won't just pay any price the landlord sets. If prices went up, it means people were willing to pay those prices.
I wish I could charge $5k per month for a 600 sqft unit, but no one will pay that.
> This argument only makes sense if the (monthly) rent payments are more than mortgage payments + maintenance costs.
> In most cases, that's not true.
In most cases, that's not true initially.
Over time, rents rise substantially but mortgages are fixed and can go lower by refinancing.
When I bought a house, the monthly cost was a bit over 200% of my rent at the time (of a roughly similar-sized rental unit). Yes it was painful in that first year.
It only took ~3 years for the rents in the area to become similar to my then already lowered mortgage via refinance.
Fast forward a couple decades and my housing costs are ~20% of rental rates in the area.
By the time I retire the mortgage will be long gone. It is heartbreaking to watch older people on fixed income having to deal with ever-rising rents.
> Rent shouldn’t be anywhere near comparable to mortgages?
why not? rent probably should not be egregiously larger than the mortgage payment, but rent needs to at least price in the risks related to owning a property long term.
> Would you feel the same if the landlord of your month-to-month rental upgraded you to a more expensive house?
I mean, if they renovated my unit or even the common areas, and told me I could stay at a higher rent I'd think that was just fine. It happened to me at least once already, come to think of it.
But yeah, they raised the rent on people without term commitments effective immediately, and anyone on a term contract could keep their old rate until it expired.
Again if you don't like the risk of this changing out from under you, sign a term contract, right?
> This is generally not the case. Rents on a property take a long time to catch up to the mortgage payment.
Over the last 10 years, though, I think this has been a pretty common occurrence in a lot of areas. My mortgage + property tax is right around $1k/month - admittedly I bought near the housing market bottom. Rent on similar properties in my location is getting close to $2k/month. My mortgage will be paid off in about 2 years (15 year mortgage with some extra principal payments)
Don't you have a 30 year fixed-rate mortgage? The increase in rent every year over the next 30 years is going to be way more than whatever maintenance costs you have.
Rent is "steady" in the short term, but every year you are exposed to market volatility and inflation.
> Before you bought the house, were you renting previously at 1800/mo?
I was renting a 2-bedroom, 1 bath, 800 sq foot apartment for $900/month which would have been going up to $1,100/month if I had signed a new lease instead of buying the house.
The house is 3 bedroom, 2.5 bath, 1850 sq feet.
> In any case, where do you live? 615 is so cheap that I suspect the economics here aren't comparable to my situation. Maybe I'll move! Haha
> When you rent, if you secure a 12 month lease, you know exactly how much you’re spending in housing over the next year.
Only for exactly 12 months though. After that, your rent could double for all you know, and there’d be nothing you could do. You can move, of course, but now you’ve been forced to upend your life.
I live in a rent stablized apartment, and I feel lucky not just because my current price is lower than market rate overall. But of course, that’s not a scalable economic solution.
> all the carrying costs of owning come out to less than renting something similar.
From my experience this is really dependent on the market. When I lived in Vancouver, Canada, the opposite was true: for $X/month I could rent a much nicer place than I could afford to buy with $X/month mortgage payments. My landlord would probably have been better off selling (for redevelopment) but the market was going up fast and she didn't want to get off the ride too early.
Then I moved to a different city with 40% higher rents and 30% lower housing prices, and the equation flipped. Suddenly buying made a lot more sense. Even now though, I suspect it's pretty close to break-even financially. Most of the benefits are less tangible: customization of my house, the ability to invest in improvements, the security of knowing that my monthly payment will never go up. (Technically, taxes could go up, but that means the valuation has gone up and my equity is worth more.)
> Why pay to rent when you could pay an equivalent mortgage?
I was always under the impression that a lot of people can't scrape together the 3.5% downpayment or don't have good enough credit.
Plus, I think most landlords who rent out houses are looking for a profit. So it would theoretically always be their expenses (mortgage + taxes/insurance + some repairs) + profit, making rent the more expensive option by nature I figured.
> how could renting ever be reasonable priced in a system that requires those without capital to pay those with capital just because those with money already have enough money.
landlords aren't guaranteed to make money. it's true that monthly rent is almost always higher than the monthly mortgage payment on that property, but the landlord can only profit if, in the long run, the difference between the rent and the mortgage is greater than the overall cost of maintenance and possible devaluation of the property.
personally, I could afford to put a down payment on a mortgage if I really wanted a house where I live, but for now I am happy to pay extra for the ability to relocate at the end of the lease and to avoid the risk of actually owning a house.
>Higher prices for new tenants make developing new housing more attractive, not less.
I think you have switched cause and effect. Developers have to charge higher prices because they have to subsidize rent controlled units. Without rent control you may get away with charging $1000 per month to cover your costs and then slowly increasing prices as inflation picks up over the years.
If you expect 3% inflation but rent control only allows a 1% increase then only charging $1000 will result in a net loss over time so you will have to adjust the rent upward. Assuming a tenant in a rent controlled unit stays for 20 years then the land lord has to charge the tenant $1400 from day one.
> Rent shouldn’t be anywhere near the cost of a mortgage
Rent (for the same property) should be MORE than the cost of a mortgage (for the same property).
The owner is taking on both risk and maintenance costs.
Now, if you're saying "monthly rent on a 2 bedroom apartment should be cheaper than a monthly mortgage payment on a 5 bedroom house", that's different...
> most tenancies involve occupants who permanently live in the area and would buy if it were financially feasible.
What exactly do you mean by “if it were financially feasible”? Like yeah, if a mortgage were cheaper than rent, of course renters would do the cheaper thing.
Most definitely, my apartment before buying a home was ~$100/month less than my current mortgage, now (3 years later) the rent for the exact same apartment is ~$300/month more than my mortgage.
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