A Canadian's random thoughts on personal finance

Apr 23, 2011

The incredible benefits of house ownership

The financial media, as always, are exuberant over the prospects of higher housing prices—an attitude I've never quite understood.

Housing is a basic human need. If the cost of bread were to rise 8.9% year-over-year, would the media proclaim a "bread boom" and paint a glowing picture of the strong bread market? If people viewed the cost of housing as they view the cost of gas, we'd all be talking about how we're being ripped off, and there would be calls for the government to intervene to keep prices lower. I've always found it rather puzzling that houses are given this special treatment.

Thankfully, a pamphlet from the National Association of Realtors arrived in my mailbox to explain the pro-side of house ownership. This is a document I must share with you. I found it very entertaining, and even enlightening (though probably not in the way the authors intended).

The first thing I learn from this pamphlet is that homeownership provides 5, count 'em 5, "substantial social benefits for families, communities, and the country as a whole":
  1. Higher Academic Achievement
  2. More Cohesive Communities
  3. Better Connected Families
  4. Improved Health and Safety
  5. Stronger Economy
Under section 1, Higher Academic Achievement, they reference a number of rather esoteric statistical studies that I'm not capable of criticizing, though if I trust their motives and methods, their conclusions do seem to support a causal relationship between owning one's home and higher academic achievement for children. All I can say here is that in my own community of rented townhouses, we have about 30 school-aged children. In that population, one would expect to find 0.6 children in the 98th percentile, yet there are actually three children in the gifted program. It's hard to draw a conclusion from this one data point, but it's safe to say not all communities of renters are populated by academic underachievers.

However, my favourite part of section is the following chart:

As you can see by the axis labels, this chart clearly shows that the more Renter you are, the more Homeowner you are too!

Sections 2 and 3 describe More Cohesive Communities and Better Connected Families, using statistics from Cincinnati telling us that homeowners are "9% more likely to know who their school board representatives are" or "are less likely to have alcohol and substance abuse problems". These are clearly confusing correlation for causation, and so they'd bear no more thought if they weren't so entertainingly ironic or irrelevant in my particular situation.

For example, apparently homeowners are "28% more likely to repair or improve their home". I can tell you my odds of repairing my home are zero, because all I do is walk to the management office and fill out a work order, and the repair is done for me, for free. Likewise, they are "1.3 times more likely to read newspapers". I guess rentership explains why I never read newspapers. I suppose if I bought a house, I'd be more likely to stop getting my news online and order a subscription for a daily dead tree.

Homeowners are also "16% more likely to belong to parent-teacher organizations, book clubs, etc." My wife belonged to a book club at one time; I guess renting made her quit? And both my wife and I have belonged to our school council (which I currently co-chair) since the first year our older son started kindergarten, which doesn't particularly prove anything except that participation in such things is an individual choice.

The sizable Muslim population in our area may be alarmed to find that homeowners are "10% more likely to attend church". There's a rather narrow-minded implication there that we're all Christians, but homeowners are better Christians than renters.

My personal favourite is that homeowners are "59% more likely to own a home within 10 years of moving from parents [sic] household". Beyond the obvious reversal of causality in this statement, there's also an insidious circular argument that homeowners are better because they're homeowners. I've heard this a number of times in arguments such as "I don't want my kids growing up around renters", and I just don't know how to respond to that kind of statement.

Section 4, Improved Health and Safety describes how renters who buy a house suddenly experience higher self-esteem and perceived control over their lives. I'm sure taking up cigarette smoking would have a similar effect, but surely that doesn't make for a strong argument.

The pamphlet saves the best for last:

It's nice to think that the economy benefits from $60k out of my pocket when I buy a house, but it does tend to contradict the statistic in that green bubble that "a home owner's net worth is 45.9 times that of a renter's [sic]". Apparently, buying a house will reduce my net worth by $60k initially, and it will do very little (aside from forced saving) to help me recover that amount.

All in all, if I were a member of the National Association of Realtors, I'd be pretty embarrassed that this document is being used to represent the argument in favour of house ownership.