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I had an idea that would allow people to buy their own homes that they are currently renting:
- Every home gets appraised to determine what it would sell for. This is done by the county and is used for property taxes too.
- Every renter is allowed to buy a percentage of their primary residence from the owner. The owner has no choice in this. It's a requirement for being able to rent a property. Edit: Since people are confused about this, the renter is not required to buy anything. They have an option to buy.
- Renters can pay as little as $100 extra per month and the county puts their percentage ownership on the deed. If the home is sold, the renter can't be kicked out involuntarily. If they do leave, they get the percentage of home value they own.
Pros:
- This would avoid the issue of high interest rates hurting primary homeownership.
- This would blunt the impact of corporate landlords having a monopoly where they refuse to sell. They are forced to sell at a fair price.
- This would create a simple decision between owning their home and spending money on luxuries or eating out.
Cons:
- This would hurt small landlords who would have their property bought out from under them. This is actually a good thing because the benefits of rising property values are now shared.
- The implementation is hard. This is actually a good thing because bad landlords would sell property they didn't want to manage, lowering prices for renters who want to buy.
- It would cost the county money to hire appraisers. But this could be paid for by increased property taxes due to better appraisals.
- Property taxes would go up for landlords. But this would be good, as it encourages them to sell the property. This appraisal process and increased property taxes wouldn't affect people who just lived in their home without charging rent.
Unless you have strong rent control, expect proportionate increase in rent for any tenant who exercises that option.
Oh, you have $100/mo extra to spend burdening my equity? Your rent just went up by $200.
True, but don't underestimate the value of finding a good tenant. Most landlords would rather have a stable tenant than a few extra $100s. It costs a month or more in rent to find a new person.
Someone devaluing the investment is a bad tenant.
They are paying you for the property. If you don't want that, why do you rent it out? You can't use it once they lease it from you. You're a financial owner, not a resident anymore.
Why would one more person who's interested in buying the property hurt? When you sell a home are you upset that people want to hand you money? No, because you are moving out and it's now a financial decision.
You just invented a scheme to transfer equity from landlords to tenants and you don’t see why landlords might not like that?
The socialist’s prayer:
Individuals and corporations both rent out houses/apartments to get more money out of it than by selling it again. Your model would absolutely lower the return on renting property out. So increasing the rent would be a logical decision for them. Or if your rules make renting unprofitable, noone will build more houses/apartments than their own. Sure, the house market might see low prices, but at some point it might be more logical to hold the property than to sell for a very big loss, hoping for better times. So a lower limit would be there. Then you have many non-sellable homes sitting around and still many people, who cannot afford to buy but also cannot rent (since nobody rents out anymore).
One interesting thing in your scenario would also be, how to handle the part ownerships. Lets take a student at the university renting a small room/apartment for the time of their studies. They might make payments towards ownership for a few years, accumulating something like a few percent of ownership. Then their studies are finished, they move and another student comes in. Rinse and repeat. You will get property owned by tens of persons this way, even when not every tenant wants to do the payments. Would be a hell to administer. Nothing would work anymore regarding decisions and work relating the property.
I think nothing can work around the fact, that we need many and good publicly owned properties for renters, where the rent is no driven by the profit motive and in effect is decided in democratic structures (like city government). Maybe in your scenario you would also want public entities buying homes to then rent without profit.