Proposing an Alternative To Renting or Owning a House: Publicly-Owned Housing

"Renting is terrible. Owning is worse. A third option is necessary," argues a recent article in the Atlantic, "a way to rent without making someone else rich." It's written by Shane Phillips, who's the Housing Inititiative Project Manager at UCLA's Lewis Center for Regional Policy Studies: Largely as a consequence of housing prices, Generation X held less than half as much wealth in 2019 as Baby Boomers of the same age did two decades earlier, and Millennials are on course to hold even less. Something has gone catastrophically wrong, and the problem won't be solved by doubling down on homeownership; we've seen where that leads. But our current model of renting — a lifetime of uncertainty only to make someone else rich — won't do the job either. We need something new, an innovation on par with the government's development of 30-year mortgages nearly a century ago. We need a housing option that combines the accessibility, flexibility, and limited risk of renting with some of the stability and wealth-generating potential of homeownership. His suggested solutiion? A public-ownership rental option: The foundation of the program would be quite simple: public ownership of housing, acquired or built with government loans — though run by local for-profit or nonprofit property managers — and rented at market prices. No saving for a down payment (or being given one by family) and no qualifying for a mortgage. The only requirements for participation in the public-ownership option would be (1) move in, and (2) pay rent. As the loans were paid down, the equity would accrue to the tenants, minus the cost of operating and maintaining the building, administrative costs, and so on. Unlike rent-to-own programs, however, this option would never require that the tenant take out a mortgage. A renter would never truly "own" her unit. But she would claim a stake in the public portfolio of properties and be able to draw on that asset, perhaps in the form of monthly payments after a few years of renting, or larger dividends later in life, much like Social Security. The benefit could be transferred to any publicly owned apartment, allowing tenants to build wealth without being locked in place. After 35 or 40 years, a tenant might no longer owe any rent at all... Renting in a public-ownership building would be an option for the large number of middle-income individuals who lack the resources or the immediate desire to become homeowners.

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