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Originally Posted by 1990C4S
I think the primary benefit is forced savings, the mortgage payment can't be missed. Renting and investing wisely would also work, but people lack discipline.
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Renting and investing wisely doesn’t get the huge subsidies that home ownership gets. Your can’t deduct rent from taxes. You can’t invest $80 of borrowed money for every $20 of your own money. Even if you could, you couldn’t borrow that money at a fixed rate for 30 years, loans guaranteed by government and pegged to Treasuries that are the most liquid, safe securities in the world, and non-recourse to you. And you can’t live in a stock and bond portfolio.
Home ownership is heavily subsidized in the US, it is intentional and a good thing, to promote home ownership by ordinary folks.
Institutional ownership reduces the availability of houses for people to buy, pits ordinary buyers against institutions able to pay cash and raise money at institutional rates, and over the long run will reduce home ownership.
It is also bad for mom and pop landlord investors. Institutional home investors have lots of advantages, due to their scale. Maintenance, legal, leasing is in-house. The institution’s borrowing cost is much lower than mom and pop.
It is also bad for communities. When most of the houses in a neighborhood are rentals, there is less skin in the game, people have less reason to care about the community, schools, taxes, etc.
Finally, it’s not great for tenants. Institutional owners are aggressive about raising rents, they have software that lets them push rent increases to the max every year. Their business model favors tenants who turn over every few years, they don’t want families to stay in the house for decades.
It is pretty good for investors. For all that I bemoan the societal effect of institutional home fleets, I like the stocks pretty well.