Who Needs Home Ownership?

Home ownership subsidies have imposed costs that are large and clear. The benefits of such subsidies are, at best, small and vague.

In the wake of the financial crisis, U.S. housing policy is in need of overhaul. In this series of essays, I will look at the issues involved.
This first essay will set the stage by looking at the economic fundamentals of home ownership. For those who do not have time to read this entire essay, it can be summarized simply: if you want good housing policy, then you should listen to the recommendations of the National Association of Realtors®, the Mortgage Bankers Association, and their allies… and do the opposite.
What If We Were All Renters?
As a thought experiment, suppose that all households were renters. Picture a scenario in which all types of housing, including single-family detached homes, are owned by various real estate mutual funds and managed by competitive property management companies.
What would this mean for individual investment in real estate? Ultimately, assets belong to households. As individuals, we would own residential real estate; however, we would own it in the form of shares in mutual funds rather than in the form of title to the house in which we live.
One positive aspect of this scenario is that our real estate holdings would be diversified. Our wealth would be less subject to the whims of our local housing markets and the evolution of our local neighborhoods.
The flip side of diversification is that, with renting, there emerge principal-agent problems. The tenant may not act in the interest of the owner, and vice-versa.
For example, when it comes to maintenance, the tenant may be negligent — or worse. To address this, property management companies would have to use security deposits and other contractual terms, just as they do now.

Read more: http://www.american.com/archive/2012/october/who-needs-home-ownership