In the U.S., owning your own home is seen as a personal marker of success and security. Owning property—especially the land on which a building sits—is a big part of the “American dream” we inherited from Europeans and others who came to the U.S. to start a new life. And despite all the upheaval in American real estate markets and the exposure of deceitful lending practices by banks in the past 10 years, owning a home is still touted as a safe way to invest money.
More than a year ago, my husband and I started to question some assumptions we’d made about home ownership. Ultimately we decided that it made sense for our family of three to rent the condo where we live now rather than own and maintain a single family home. That’s not a choice that would work for every household in every housing market, but I do think that making intentional choices related to housing has a big impact on all of our efforts to simplify.
Here are some of the questions we asked ourselves a year ago when we began to imagine an American dream that didn’t include home ownership.
- Do we want spaces for occasional use?
Every room in our condo is used every single day. We no longer have a dedicated guest room or home office or dining room. Hosting more than six or seven adults for dinner causes polite guests to start using the word “cozy.” Do I occasionally visit other people’s homes and gape at the charming century-old woodwork or feel grateful that they can host a party with 20 or more adults? Yes. Do I want to clean and furnish and heat and otherwise maintain a space like that? No.
- Do we want to keep paying money to “make money”?
When people talk about the benefits of owning versus renting they often cite equity. An easy definition of equity is the difference between what you could get for your house if you sold it today and how much you still owe the bank. In our case, we needed to continuously maintain our house plus make improvements so that we could enjoy living there and also build equity. Every year there were projects costing thousands of dollars, sometimes for very unglamorous or hidden things like a new sanitary sewer line. Whenever we could, we did house projects ourselves to keep the costs down, which meant we spent a considerable amount of our time doing what felt like work.When we sold our house—in a desirable neighborhood in a seller’s market—we calculated that the equity we’d built over 13 years was almost as much as what we’d spent on home improvements not including any of our time or labor. Huh.
- Where will we put stuff?
We got rid of more stuff than we realized we owned when we moved from our house to our rental condo. Some things, like most of our tools and items related to exterior home maintenance, were no longer relevant. Many other things were just extra or mysteriously accumulated. We don’t miss any of the stuff we got rid of.
- What will we do without the mortgage interest tax deduction?
The U.S. government provides an incentive to home ownership by allowing people to deduct the amount of interest they pay on a home mortgage from their federal taxable income.The U.S. government also provides an incentive to save for retirement by allowing people to contribute pre-tax income to a retirement account such as a 401(k), 403(b), or IRA. Without the mortgage interest deduction to lower our taxes, the choice to contribute more to our retirement accounts was easy: we could “lose” money each year to taxes, or we could put it into mutual funds to grow and pay our future retired selves.
- Will we miss not having a yard?
I really enjoyed tending flower gardens and hearing and watching birds at our old house. Taking care of a yard was also good exercise and a nice way to be outside and chat with neighbors. Our compromise was finding a condo with a small patio and supplementing that green space with a plot in a community garden about a mile and a half away, where I’ve met some very nice fellow gardeners. I’m okay with trading the size, beauty, and convenience of our former yard for a lot less work and expense.
- Will we miss having a place that is truly ours?
If we owned the condo where we live, we would have replaced the washer and dryer right away with high efficiency ones, and we would have seriously considered upgrading the refrigerator and dishwasher. We would have installed undercabinet lighting in the kitchen to make the space more usable. We probably would have painted all of the walls since they show wear and tear, and we might have started talking about a variety of other cosmetic projects. Even though we haven’t done any of those things (sigh of relief), we still consider the condo home. It’s where we go to relax and take care of ourselves and each other, and where we host friends and family. Our things are here too to mark this place as ours.
What are your thoughts about housing and simplifying? Are you considering a move to a smaller home, or renting versus owning?
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March 9, 2015: we just did our taxes for 2014, our first full year without the mortgage interest tax deduction, and even though we significantly increased our pre-tax retirement contributions it was not enough to save us from having to write a check now for last year’s federal taxes. For 2015 we’ll make larger paycheck contributions to federal taxes so that we don’t have to pay a lump sum at the end of the year.
For those who argue that this particular tax issue is another reason to own rather than rent, I would clarify that the comparison is between being a mortgage holder/paying interest to a bank and not having debt (people who own their homes free and clear also miss the mortgage interest tax deduction).