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.
You are assuming that market rent is not already as high as demand allows. That’s not true. It is. That’s the definition of market rent.
Market rent is as high as the market allows. Demand is not the only factor in pricing.
When you make something less valuable for investors to provide to the market, this reduces supply. Reducing supply while keeping demand constant results in higher prices.
Supply of homes is not dynamic like a factory, it can’t respond quickly to prices. Investors will grumble about whatever they want, but the alternative is a time consuming and expensive sale.
Even then those homes don’t disappear . If they are removed from the rental market they will just end up sold to the very group of people who were renting them, thus reducing demand. Rents would not move much, although there will probably be more real estate sales than usual as the rental market sheds the lazier real estate investors.