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The Rent Isn't Too Damn High

Why it's good news that more Americans are renting rather than buying homes.
By Annie Lowrey

Posted Tuesday, May 31, 2011, at 5:51 PM ET

Is renting really better? Click image to expand.Is renting really better?Today's news that national housing prices have double-dipped to a new recession-era low is grim for homeowners, home sellers, banks, builders, and the president. Prices are down in 19 of the 20 biggest metro regions—Washington, D.C., is the exception. And given the 1.9-million-house backlog in the foreclosure pipeline, nobody expects prices to rebound any time soon.
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But these data can be interpreted another way. The American economy is making a significant shift from buying to renting, and that may ultimately be good news. According to a USA Today analysis of Census data released this weekend, since 2006, the number of households that rent has grown by about 700,000 a year, while the number of households that own has fallen by about 200,000 a year. One reason is macroeconomic. The unemployment rate remains high and wages are down, meaning many people simply cannot afford to buy a house. Plus, nobody wants to take the risk of selling into a down-market. But there are also indications that Americans are electing to rent—and that is a very good sign.

Contrary to the housing-bubble dogma that a mortgaged apartment or house provides a pathway straight to the American Dream—and contrary to the tax code, which encourages buyers and discourages renters with a huge break for mortgage interest—renting is better than owning for many Americans. Indeed, dozens of recent studies have shown that, excepting the go-go bubble years, houses tend not to make very good investments at all: A prospective homebuyer would have made more money taking her down payment, parking it in inflation-adjusted Treasury bonds, and renting.
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Jordan Rappaport of the Federal Reserve Bank of Kansas City, for instance, recently looked at housing as an investment (PDF). In a few time periods, like the late 1970s and the late 1990s, buying a home "unambiguously" helped households build more wealth than investing in stocks or bonds. But overall, homeownership built more wealth in just about half of the years between 1970 and 1999.

In a paper titled "American Dream or American Obsession?" Wenli Li and Fang Yang of the Philadelphia Federal Reserve Bank draw a stronger conclusion. They examined returns on housing between 1975 and 2009. Factoring in costs like depreciation and property taxes, "the adjusted real rate of return on housing actually falls below zero … -0.575 percent!" they note. (This is the first time I can remember two Fed economists using an exclamation point.) Nationally, between 1975 and 2009, the national rate of return for homeownership was 1.3 percent, they write. For stocks, it was 3.375 percent.

A number of factors conspire to erode the possible benefits of buying a house, rather than renting it. First and foremost, buying a house means cutting a fat check for a down payment, generally 20 percent of the purchase price. That means you cannot use that money for other investments, whether an education or stocks or gold. You're stuck with your eggs in one house-sized basket.

You are also literally stuck in your home. If you receive a fantastic job offer from a firm in another state, you cannot readily sell your property and move—not without taking the time to deal with brokers, contracts, and banks. That might depress your lifetime earnings, and thus your lifetime wealth. Even worse, if housing prices decline and you want or need to sell—that is, if you are underwater on your mortgage, as about one in four homeowners currently is—you might be truly trapped. That is part of the reason that some economists theorize that high homeownership rates tend to boost unemployment rates.

On top of that, buying and owning a home comes with considerable other costs, many of which are hidden both to purchasers and to analyses that look solely at purchase prices. Closing costs tack on 2 or 3 percent of the sale price. Homeowners need to pay for title insurance, regular insurance, fees, and periodic maintenance and upkeep as well. Plus, there are property taxes. True, in many cases, those costs are factored into rental rates. But in some cases they aren't. And if your roof caves in, you would certainly rather be a renter who can skip out than a homeowner with no choice but to fix it.

Despite all of those risks and costs, of course, for many Americans—particularly those looking to put down roots and stay for a while—owning a home makes sense. (For the record, my fiance and I own our apartment, given that our mortgage is a few hundred bucks cheaper than rent would be in our neighborhood.)

But it is conclusive: Not everyone should own a home. The recession has helped erode the stigma against renting, with about 70 percent of Americans now admitting that it has advantages over buying a house. If people are making unsentimental decisions about whether homeownership is really worth it for them, that is at least one small benefit of the housing bubble bursting.

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Report

September 7, 2011 6:30am



DNAinfo.com's interactive "Crime & Safety Report" used crime and Census data to rank the city's neighborhoods. (DNAinfo/Jason Tucker)

By DNAinfo.com Staff

MANHATTAN — Washington Heights and Inwood are far safer places to live in Manhattan than Greenwich Village and the Meatpacking District, according to a new report by DNAinfo.com that examines crime and safety in the city’s neighborhoods.

The "Crime & Safety Report," which ranks every neighborhood in New York for per capita crime, found that high property crime rates are dragging down Greenwich Village, which came in 68th out of 69 neighborhoods for overall safety. Dramatic drops in crime across the board in Washington Heights and Inwood gave those neighborhoods a boost.



DNAinfo.com's "Crime & Safety Report" allows users to measure crime trends for New York City neighborhoods. (DNAinfo/Jason Tucker)

Only Midtown, which has a higher density of tourists and commuters compared to residents, had more crime per capita than the Village and the Meatpacking District. It finished last in the neighborhood rankings.

Surprisingly, Northern Manhattan fared much better than its southern counterparts. Inwood and Washington Heights are the third and fourth safest neighborhoods in Manhattan and 23rd and 24th safest in all five boroughs, respectively. East Harlem, Central Harlem and West Harlem also have much lower per capita crime than the Village.

"There were precincts I studied in the past, such as Washington Heights, where I was told to wear a bulletproof vest when I went on a ride with the police," said Thomas Reppetto, author of "The NYPD: A City and its Police" and the former president of the nonprofit group Citizens Crime Commission. "That tells you something about it then, and how much it has changed now."

Blame the thieves — property crime is by far the Village's biggest crime concern. Factor out those offenses, and the neighborhood's ranking rises to No. 32. Yet that's still below Inwood and Washington Heights, and even lower than Morris Heights in the Bronx, at 27th.

"We do have a really hard core criminal element down there," said Terri Howell, vice president of the Christopher Street Patrol.

That includes gang activity, she said, but the most common crimes Howell finds in the Village include excessive noise, fighting and drug and alcohol use.

Downtown also didn't fare well in the report, despite its resurgence since 9/11 with new condos, restaurants and skyscrapers. It finished 63rd out of 69 neighborhoods, undermined by high rates of property crime.

Still, Community Board 1 Chairwoman Julie Menin disagreed with using the neighborhood's population to determine its crime rate because Downtown sees a daily influx of tourists and commuters.

"I feel safe in lower Manhattan, because we have a very strong community. We're a community of survivors," Menin said. "I have always felt safe in lower Manhattan. It's where I chose to raise my three kids."

DNAinfo.com's interactive report, which marries crime statistics from the NYPD’s CompStat database with U.S. Census population information from 2009-2010, also found:

• Murders, rapes and robberies are all on the rise citywide. Based on 2009-2010 data, murder and rape both jumped nearly 14 percent, as robberies inched up more than 4 percent.

• The five safest neighborhoods in Manhattan are: The Upper East Side, the Upper West Side, Inwood, Washington Heights and Kips Bay.

• The least safe neighborhoods citywide are: Midtown, Greenwich Village and the Meatpacking District, Hunts Point, Brownsville, the Flatiron District and Fort Greene.

• Gentrifying neighborhoods are not necessarily the safest. Park Slope came in 12th in Brooklyn, behind Coney Island (9), Kensington (1) and Red Hook (10).

The Crime & Safety Report, which examined crime rates in New York since CompStat records began in 1993, found that although the overall crime rate went down by 1.5 percent from 2009 to 2010, murders increased for the first time in decades, by 13.8 percent.

Robberies climbed by 4.5 percent. Rapes spiked by 13.9 percent; the worst rises were in Harlem, where all three sections — East Harlem, Central Harlem and West Harlem — suffered rates that were among the highest in the city. Felony assaults edged up by 1 percent.

"This is ground-breaking and a must-read for people who want to know about the crime problem in their neighborhood," said Andrew Karmen, an expert criminologist and Sociology Professor at John Jay College of Criminal Justice.

"[DNAinfo.com] has compiled side-by-side all the different crimes and all the different neighborhoods that you can't find anywhere else."

To read the full report, visit www.dnainfo.com/crime-safety-report.


Read more: http://www.dnainfo.com/20110907/manhattan/northern-manhattan-safer-than-greenwich-village-says-new-crime-report#ixzz1XHWhyPrO