Homeownership: How necessary is it?

I would firstly like to say that I am a homeowner and I regret it. Right now I’m tied down by a mortgage, but luckily enough I have been able to manage it well enough that it doesn’t give me headaches. But it has reached a point where I have wondered why I bought a house and more generally why do we all aim to be homeowners.

If we look back, traditionally people have moved when they have had the opportunity to seek a better place, found the least worst place, and started to grow and produce. The main issue was the land to cultivate in, not the house. Housing was secondary. With industrialisation, societies started to move into the urban settings where property was hard to come by (everything was already owned) and decided to rent. Rents were generally low and people whether they remained short or long-term, made their rented house/flat their home. Industries built those homes, because they wanted their workers close-by. Those that came and found no work, ended up in shanty or shanty-like housing in the outskirts, and this pushed in the second half of the 20th century the building of social housing by government, especially in Europe.

Banks knock on the door

The banking industry had focused on funding these industries, but something interesting started in the 1970s, the de-localisation of industries to poorer countries meant that banks loaning clients decreased. But banks, as always, needed still to invest their money to be able to give interest to their clients, and mostly to increase profits. Small loans were risky and not always sure to be paid on time, but the mortgage loan was a sure bet, it was less risky since you had a property as warranty, so banks started to promote the need for all and everyone to own a home (or two), in the US it was the translation of the American Dream, in the UK it was a sign that you were middle class (Margaret Thatcher’s government) and not working class, and each an every country found its way to introduce in the societies that owning your home was essential, was a basic right and that it needed to be fulfilled by all. And here is where trouble begins.

1960 2012
US 62,1 68
Canada 66 68
UK 42 70
France 41 57
Germany 27 43
Spain 52 80,6

Statistics show a growth in homeownership from the 1960s up to today in rich countries. Countries like the UK and Spain have had massive increases, and in France and Germany significant ones too. In the US and Canada, the change is not significant but the population in these two countries practically doubled in that time.

This means banks and governments were successful with their message.

But how true does this message ring?

Why do we need to own our home?

Because we need to live in a house and not throw money away in rent. But is paying rent throwing money away or paying for a service. But if renting is throwing money away, why don’t we also buy a school for our kids and then sell it when they are out of school? Instead of paying those horrific school fees, which following the previous train of thought is also throwing money out. Or why don’t we buy our own hospital instead of paying for those medical bills? Well perhaps it is because this would be silly, but then buying a home when we can rent it, is also questionable. For sure we have not bought our own school or hospital because multinationals haven’t figured out the way of selling it to us. Yet.

Perhaps we buy homes for our peace of mind. At the end of the day rent requires a monthly payment forever and a mortgage gives us the chance to pay for the house at once, and then conveniently repay the bank for a certain period, usually shorter than your lifespan. But then you are also stuck with that house. House prices go up or down, it might be easy or difficult to sell, if you need to move because you don’t like the area so much now or because you need/want to move elsewhere. So, ok, peace of mind is not really the right word for homeownership, since it can create a lot of stress.

Then perhaps we buy homes as a status of who we are in society. A large house demonstrates we have done well in life. But then, walking down the street, nobody knows really which house is owned and which one is rented for the long-term, do they? So you can rent a large house and provoke the same desired reaction from others. So this doesn’t really work either.

Perhaps then we buy homes to leave something to our kids, when we pass away. Once we die the house goes in our will usually to our kids, with the corresponding taxes. But our kids have already moved out, found an area they prefer to live in, and thus will not use that house. Then the grand-kids.  Ok, perhaps it can serve them or not, but really isn’t it better they choose were to live. And also the house is now old, needs repairs, needs perhaps a new house all together, needs more money. Let’s have our grand-kids take another mortgage on the house. Some more money for the bank then.

Mmmmm,… I’m running out of ideas on why it’s a good thing to own a home. And right there and then I thought it was something I needed to do, but don’t quite seem to know why. This takes me back on how banks and governments have duped  us.

They really did.

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Posted in Banks

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