Debtorship Society Derailed, But Clouded Thinking Persists

The New York Times reports that the percentage of people renting is rising in the wake the of the housing bust.

The article dances around the idea that the bust is reminding people that increasing rates of home debtorship is not a solution to social problems.

Nationally, rents have increased about 11 percent since 2005, when homeownership rates started to decline, though that growth is slowing, according to the Bureau of Labor Statistics.

If these are nominal numbers, it means they've kept pace with inflation. You can go to the Bureau of Labor and Statistics CPI Inflation Calculator and verify this by asking to convert the value of $100 in 2005 into 2008 dollars. It's $111.

That means despite the recent increases in the number of people renting, real rent prices have stayed the same. If there were more people than places to live, we would expect rents to rise. Thanks to the 2000-2006 boom, though, there is a surplus of places to live. That's why the rent price "growth is slowing" while inflation is rising, i.e. real rent prices are falling.

The article mentions a 68 y/o woman with low income, weak credit, and no significant down payment who wanted to buy a house with some friends. She and the non-profit who tried to help her become a homedebtor lament that it was easier to qualify a few years ago. It mentions this after several stories of how going deeply into debt to buy a house destroyed people's lives. The article leaves it to the reader to realize this woman was lucky not be able to get herself into this same situation.

The confluence of factors has largely derailed what Mr. Bush called “the ownership society."

The so-called ownership society is a good idea. A debtorship society is a bad idea. We need to focus on things that help people increase their income and net worth. It's an easier path to get into debt than to improve net worth. The easy path leads to the horror stories in this article. We need to be on the hard path.