There is a fairly standard image people have of someone who rents. For decades, we would imagine a renter to be a single person or a young couple just starting out. Owning a home was always considered the ultimate end goal, especially for people starting families.
However, that changed over the past few years. With affordable housing no longer readily available in the US, many families were choosing to continue renting indefinitely. It did not help that homeownership no longer seemed like a great way of investing your money. Alternative ways of investing funds offered much higher returns. In light of the housing bubble crash of the 2000s, they also seemed safer.
Associated costs of renting are also cheaper. How much renters insurance you need depends on the size of your family and the value of your possessions, but it will always be many times less than homeowners insurance.
Renting was becoming a popular choice even for people who could afford to buy homes. But the past two years have changed the world significantly. What was once considered a smart financial decision may now no longer make sense. Does this apply to rent as well?
The problems with renting in 2023
There are a number of reasons renting in 2023 is no longer as attractive as it was a few years ago. These include the following.
COVID-19 put many people out of work. Millions of Americans who were renting homes no longer had any source of income. This could have led to mass evictions, but the government put a moratorium in place to prevent a surge of homelessness. While this angered landlords, it was necessary to keep people safely housed.
That eventually had to come to an end, and with unemployment going down, people could once again pay rent. The problem was that many landlords had missed out on months of rental income. The rent they were charging before the pandemic no longer made sense if they were to make ends meet.
This is one of the reasons rent has gone up over the past year or so. People now have to pay a higher proportion of their income towards rent, and paying such high prices for a home that will never be yours is not the best financial approach. With record high inflation, rent may go up at an even faster rate.
The pandemic showed many people another disadvantage of renting. When renting, you do not have the same stability as you do when you own your home. Technically, most people are paying off their homes for decades and will lose their homes if they stop paying. But you get to treat the home as your own.
When people had to start working from home, homeowners could renovate a space into a home office. When landlords were demanding rent, banks and other mortgage providers could take a step back and apply a gentler touch. There is a sense of stability that comes with owning your home, and that is very attractive in such an uncertain world.
Inflation is just one reason why many people are now struggling to pay the bills. Finding extra income sources has become imperative for millions of Americans. When you own your home, you can rent parts of it out.
There are landlords who will allow you to sub-let, but it is much more difficult and you will earn less than you would with your own place. Renting out parts of the home you are living in is no one’s idea of a dream life, but it is a way to bring in much-needed cash.
Reasons to rent
However, that does not mean there are no reasons for families to continue renting in 2022. For many, buying a home is just not possible, as they do not have the savings to make a downpayment or the credit score to get a loan. It’s also true that the price of housing in the US has been soaring for the past year-and-a-half. Property is more expensive than ever before.
Most people would prefer to be in a situation of homeownership in 2022, even if renting seemed appealing a couple of years ago. The unfortunate reality is that this is just not possible for millions of Americans.