There are renters who refuse to buy into home ownership.
Take a woman we'll call Jane, for example. The 36-year-old accountant arrived in Vancouver more than a dozen years ago to start her career and decided to rent. "I wasn't sure I was going to stay here in Vancouver, I wasn't sure about my job and I kind of wanted to travel," she said. "And eventually, that's what I did. When I was 25, I took a leave of absence from my job and took six months to go and travel. If I'd had a mortgage, I wouldn't have done that."
Several years later, Jane left her job as a tax auditor with the B.C. government to take over her dad's accounting practice. The move was a career-builder, but it required her to live on less income for a while. "If I had a big mortgage hanging over my head, I don't think I would have been able to do that."
High house prices in some cities are forcing the young adults of Generation Y to consider renting instead of buying a home. The pushback from parents and many in the financial and real estate industries is tremendous, though. They act as if renting is a form of ignorance, and that happiness and financial security can only be achieved as an owner.
Jane's story is told here to argue not that renting is better than owning, but rather that it's a viable lifestyle choice in housing markets where young people are increasingly being sidelined by high prices. In Vancouver last month, the average home price rose 5.4 per cent on a year-over-year basis to $814,418.
Jane contacted me earlier this month after reading my recent column urging twenty- and thirtysomethings eager to get into the housing market to consider renting a starter condo instead of buying . Her point was that she has always rented, and things have worked out fine.
Her story begins about 13 years ago, when she arrived in Vancouver. There was much less hype over home ownership at that time, but then interest rates fell and the housing market took off. By continuing to rent, Jane had the flexibility to take her six-month trip to Asia, and to step into her dad's business.
Three years ago, she married a man who was also a renter. This would seem an obvious time to get into the housing market, but Jane balked. "I'd been thinking for years and years that prices are too high," she said. "Also, I'm an accountant and I've seen a lot of financial disasters – people getting in over their heads with too much debt."
Jane and her family (they now have two kids) recently moved into a rented house. But their experience in their previous home, a rental condo, is worth exploring a bit. Built in 2007, it showed really well and generated lots of compliments from friends and family. But day-to-day living in this condo was another matter.
"The first night we moved in, we went to bed and heard the guy upstairs yawning," she recalled. "When he flushed his toilet, it was like Niagara Falls coming down our wall." Lesson learned: Condos are okay to rent, but be very careful about what you buy.
Another lesson is that while raising one child in a condo is doable, two is pushing it. That's why Jane and her family made their move into a house in Vancouver that they're renting for $2,000 per month, much less than what she estimates would be the comparable cost, if she owned, of a mortgage, property taxes and household maintenance.
Saving on these ownership costs is the renter's dividend. Invest this money and you add to your net worth in the same way as owners build equity while paying down their mortgage. Jane was able to put away $800 a month in her single days – she confesses to being cheap – and says she and her husband now have savings of $100,000. For people in their mid-30s, that's quite decent.
Jane estimates that had she bought a starter condo in her younger days, it would probably have doubled in value by now. Quite possibly, she'd now be in better financial shape. Regrets? No, she replies. "I've had so much freedom being a renter."