Home-ownership, race, and household type in the United States

[All Along The Watchtower]

According to Wikipedia, as of 2009:

White non-Hispanic Americans had the highest home-ownership rate, at 74.8%, followed by Asian-Americans (59.3%), Native Americans (56.2%), Latino or Hispanic (48.4%),and African Americans (46.2%).

In terms of household type:

Married couples are by far number 1 when it comes to home-ownership (84.2%), dwarfing all the other household types (all of which are between 50%-60% in their  home-ownership rates).

So...

The greatest correlations, in terms of race and household type, for home ownership are, by far, being white and having a married-couple family.

I'll leave it to others to comment on what this means for political leanings and the correlation between particular leanings and home-ownership (not to mention, why such a correlation would exist!)

[memphis]

It is supremely farcical to call somebody with an enormous mortgage to home value a home owner. The percent is people who own their own homes in all races is miniscule.

[All Along The Watchtower]

It is supremely farcical to call somebody with an enormous mortgage to home value a home owner. The percent is people who own their own homes in all races is miniscule.

True, but even all those people with large mortgages that they have yet to pay off tend to have different mentalities than renters, and I'd appreciate discussion as to why this is.

[Indy Texas]

It is supremely farcical to call somebody with an enormous mortgage to home value a home owner. The percent is people who own their own homes in all races is miniscule.

True, but even all those people with large mortgages that they have yet to pay off tend to have different mentalities than renters, and I'd appreciate discussion as to why this is.

I had to write a paper in college about this for an urban planning class. Basically, the economic incentives for owners and renters differ because homeowners capture a larger portion of the returns to their investment in their residence than renters do. That investment can be spending actual money to do things like keep your house nicely painted and landscaped, or it can be "social capital" in the sense of getting to know and having good relations with your neighbors and investing in semi-public goods like a neighborhood Little League team or a book club or a local church.

Homeowners ostensibly want their home to go up in value, so they're willing to invest economic capital that will do that. If you borrowed $200K to buy a $250K house, you'd ideally like the value of the house to increase at least by more than the interest rate on the mortgage. (If the house is still worth $250K ten years later, you lost money because taking the interest into account, you paid more than $250K for something that is still worth $250K. If it's worth $350K, you're delighted.) But they also probably intend to live there for at least a few years, so they're willing to invest in social capital as well because it will make their time there more enjoyable. (You could also get into income effects and the work-leisure trade off. Someone who works two jobs logistically can't make the same social capital investment as a stay-at-home mother.)

Renters for the most part don't care about anything other than how much their paying in rent and what they're getting for it. Their landlord could opt not to renew their lease at any time, so they don't really know how long they'll be staying there. They don't benefit from their house/apartment's appraised value going up (in fact, if it does go up, that will likely either mean their rent gets raised or they get their lease terminated so the owner can sell it).

[memphis]

My anecdotal experience of living in a respectable but working class neighborhood has been quite the opposite. The landlords of the rental houses do a pretty good job maintaining their properties because renters come and go quickly and properties need to be ready to show on a minute's notice. A vacant rental house is a financial black hole. Landlords are also a lot more savvy regarding what sort of maintenance is needed on a house and how frequently. On the other hand, the homeowners often are not as well versed in what is required to maintain property and have in any case stretched themselves thin financially to buy their little houses. They don't have the money for things like new roofs and landscaping. And most home renovations are money losers. You sink 20k into a completely remodeled kitchen, and it's not going to increase the value of your home 20k because for that much money, one could buy a bigger house or one in a more desirable area. It's not an "investment." Much like buying a new car, it's a treat that you give yourself to make life more pleasant.
And, of course, people in multifamily housing, most of whom are renters, are far more likely to know their neighbors than those who have a big yard and fence between the next family. Proximity encourages familiarity. My dad downsized into a one bedroom apartment after he retired and he can tell you everybody in his building and all their personal business to boot. I can't tell you a thing about my neighbors except that the house next door was recently rented to a Mexican family and they are constantly working on the yard, putting in flowers and such. It makes my home look rather shabby in comparison. Though I'll readily concede finding renters who are so enthusiastic about yard work is extremely rare. I've seen quite a few people come and go through that house. I very much hope the Mexican family sticks around.

[opebo]

Memphis makes an excellent point here - oftentimes at a given economic level, landlords keep properties up better than homeowners, due to knowledge/skill levels and deeper pockets.  I can verify that all my family members who are landlords (mainly my now deceased father, but several others in the family have a few houses/apartments/small trailer parks here and there) all keep up their properties much better than would be (I think) the automatic assumption regarding slumlords.  Then again, their tenants are working class whites, not blacks.

For someone like my father to oversee a crew of semi-skilled henchmen to slap on a coat of paint or re-do a floor, ceiling, roof, a toilet, what-have-you, was tremendously cheaper than for a working-class home-owner to have professionals do it.  Dad kept those henchmen around pretty much continuously for next to nothing (typically $10-15/hour 20-30 hrs/week), while any professional contractor would cost far, far more per job.

However, it is obvious that upper-middle class homeowners will maintain their homes better than either the landlord or the owners of working class housing.

[Torie]

Except up in Oregon, I rent to upper middle class types myself. The economic incentives to maintain one's properties well, and upgrade, are enormous, particularly under the rent control regime in LA, where you can only charge market rent on a turnover. The result is that you upgrade to try to get the highest rent on a turnover that you can, because that will set the new rent control baseline. That incentive to improve, come to think of it, is actually a benefit of an otherwise economically indefensible construct, where by law longer term renters are subsidized by landlords on a non means tested basis.

I over-improve anyway, for the psychic income. I don't own anything that I don't like architecturally, and that I would not be willing to live in myself.

[Small Business Owner of Any Repute]

I over-improve anyway, for the psychic income. I don't own anything that I don't like architecturally, and that I would not be willing to live in myself.

This has always been my mindset with my little investment property. The more you improve and the nicer the property, the more you can charge. And by charging more, you tend to get a more reliable type of renter -- and a renter that's typically eager to stick around after the lease is up.

[Torie]

I over-improve anyway, for the psychic income. I don't own anything that I don't like architecturally, and that I would not be willing to live in myself.

This has always been my mindset with my little investment property. The more you improve and the nicer the property, the more you can charge. And by charging more, you tend to get a more reliable type of renter -- and a renter that's typically eager to stick around after the lease is up.

You bought something in LA?

[Small Business Owner of Any Repute]

I over-improve anyway, for the psychic income. I don't own anything that I don't like architecturally, and that I would not be willing to live in myself.

This has always been my mindset with my little investment property. The more you improve and the nicer the property, the more you can charge. And by charging more, you tend to get a more reliable type of renter -- and a renter that's typically eager to stick around after the lease is up.

You bought something in LA?

In Boston. Without a reliable stream of income from somewhere, I'd never be able to make a career as a writer work.

[bgwah]

How did you afford the property then?

[Small Business Owner of Any Repute]

How did you afford the property then?

I don't think you quite understand how easy it was to get a home right before the mortgage market collapsed.

[memphis]

I wish you the best of luck Mr. M. Financing a property based on the projected rent of a tenant is a ballsy way to live. Especially in an expensive place like Boston. I'm also curious how you and Torie and opie's families find good tenants. Hardly needs to be said that it makes all the difference in the world. So many people are destructive or unwilling/unable to pay rent on time. People with higher incomes overextend themselves and fall into financial traps just like everybody else. I don't anticipate having the funds to become a landlord. Just nosey.

[bgwah]

How did you afford the property then?

I don't think you quite understand how easy it was to get a home right before the mortgage market collapsed.

Are your mortgage payments really low enough that you can make a large enough profit to live off of from rental income?

Is it a condo or a house?

[Torie]

I wish you the best of luck Mr. M. Financing a property based on the projected rent of a tenant is a ballsy way to live. Especially in an expensive place like Boston. I'm also curious how you and Torie and opie's families find good tenants. Hardly needs to be said that it makes all the difference in the world. So many people are destructive or unwilling/unable to pay rent on time. People with higher incomes overextend themselves and fall into financial traps just like everybody else. I don't anticipate having the funds to become a landlord. Just nosey.

Oh, I advertise on Craigslist, have them fill out an application, run a credit check, verify their bank deposits, check their prior landlord, and verify their employment and salary, sometimes ask for tax returns if self employed, and meet them personally to assess their temperament. I have learned to be very careful. I tend now to avoid renting to lawyers. They are just bad news in general, and it is legal to discriminate against them (their is a CA Appellate Court case on that as precedent), believe it or not.

[opebo]

I'm also curious how you and Torie and opie's families find good tenants. Hardly needs to be said that it makes all the difference in the world. So many people are destructive or unwilling/unable to pay rent on time. People with higher incomes overextend themselves and fall into financial traps just like everybody else. I don't anticipate having the funds to become a landlord. Just nosey.

Haha, the way my family find renters has traditionally been - effortlessly.  As far as I know they never advertised or anything like that.  They only rented through extended networks in the community or simply people who dropped in.  As far as I know my father never even owned a 'for rent' sign. 

Several factors probably helped - 1) he was always enormously cheaper than the 'market rate', 2) he kept everything up much better than average, and 3) he had a curious personal reputation - a rather complex one, but one which was quite attractive to most renters.

[Small Business Owner of Any Repute]

How did you afford the property then?

I don't think you quite understand how easy it was to get a home right before the mortgage market collapsed.

Are your mortgage payments really low enough that you can make a large enough profit to live off of from rental income?

Is it a condo or a house?

It's a two-family house that's divided as a condo. It's right near Tufts University, so there's always strong rental demand. And after taking a look at the other rental properties in the area, it's unusually nice for what it is.

Mortgage payments are slightly less, all considered, than the rent. But you have to consider that a good portion of that payment goes towards building equity in the house, and you have to further consider the enormous tax benefits from owning a home. That part comes in incredibly handy thanks to the ugly double taxation I suffer as a freelancer.

I don't live off of just the rental income. It's a supplement to what I make through writing. Writing income is spotty -- one month I can get paid a lot, the next I might get nothing. The rental income is always a solid, reliable check every month that at least keeps some money flowing through my bank account.

I'm also curious how you and Torie and opie's families find good tenants. Hardly needs to be said that it makes all the difference in the world. So many people are destructive or unwilling/unable to pay rent on time. People with higher incomes overextend themselves and fall into financial traps just like everybody else. I don't anticipate having the funds to become a landlord. Just nosey.

Haha, the way my family find renters has traditionally been - effortlessly.  As far as I know they never advertised or anything like that.  They only rented through extended networks in the community or simply people who dropped in.  As far as I know my father never even owned a 'for rent' sign. 

Several factors probably helped - 1) he was always enormously cheaper than the 'market rate', 2) he kept everything up much better than average, and 3) he had a curious personal reputation - a rather complex one, but one which was quite attractive to most renters.

My current renter is actually someone that I knew prior. I was moving to Los Angeles, and he was in need of a new place. I already knew first hand that he was a responsible, reliable person. It worked out quite well, really.

Of course, I follow the Torie tact -- my rent is cheaper than market and the property is much better kept than average. We have a yearly landscaping expense built in and everything.