Have you recently seen this headline or something similar to it? According to a study (there have been a few studies over the years linking these two ideas), countries with lower home ownership have lower unemployment. The study compared Switzerland in particular with 34% of their population being home owners to a low unemployment rate of 3%. The idea is that a more mobile work force can move when needed for employment.
Of course, with all studies, there’s a devil’s advocate perspective: perhaps there’s absolutely no correlation between the two rates or maybe something else is going on in countries like Switzerland and Germany where the percentage of renters is high and unemployment low. For example, owning a home in Switzerland is expensive. Not only is property pricey, but the Swiss are taxed on the amount they could be making to “rent” their property.
Here in America, depending on which state you live in, property prices and taxes vary allowing many people the luxury of owning a home. Since the 1920’s there’s also been a big push from the government towards home ownership in the United States. It was seen as a gateway to wealth and savings. (*side note: think about how the government benefited from more people owning homes.)
Yet, this isn’t the case with all sectors of the population. In particular, lower income families may not reap the benefits of owning a home due to various factors: spending too much of their income on housing, buying in a low-income area that doesn’t see much appreciation, or losing a job.
Getting back to the idea of home ownership as a means to building wealth, it’s not the be all, end all of saving money. Looking at the Swiss culture, their population of renters seem to do just fine with saving a large portion of their income. And that’s the key to building wealth: saving money!
From a personal perspective as a renter, I’m consumed by the idea that “I must own a home” to be viewed as successful. But the truth is I live in an incredibly expensive area where homes are more than six times my income (and my income is much more than the national average). My take away from all of this information is that maybe owning a home is out of reach, but saving isn’t. There are various ways to build wealth such as:
- Investing in mutual funds and stocks. I like to play it safe, so I lean more towards mutual funds.
- Earning passive income from P2P lending. This is something I’m investigating and would like to do in the near future.
- Saving at least 15% of my income. I’m working on this one. I’ll soon be able to do this early next year when my debt is paid off.
- Stay out of debt! This is the biggest hurdle for many Americans and limits the amount they are able to save.
I don’t think the concept of home ownership will fade in America any time soon, it’s too ingrained in our belief of the “American Dream.” But perhaps in time renters won’t be seen as irresponsible. And if the government wants to get in on changing the perspective on saving more money (like they did about owning a home in the 1920’s), they could offer more education on saving money and investing, they’d just have to figure out a way to financially benefit from people’s savings accounts.
Do you think renter’s can be as financially successful as home owners? Is owning a home the only way to build wealth?