So you’re a renter in Calgary. Take a couple deep breaths my friend, you’re going to be okay. I know, I know… with the city’s extremely vigorous housing market the way it is, every year our home owning pals gain thousands of dollars on their investment, while the cost of a new dwelling becomes harder for the aspiring property buyer to fathom. Not just that, but because fewer renters can afford to purchase these days and because Calgary is just so darn attractive to migrants, vacancy rates are expected to drop significantly over the next year, giving tenants less variety to choose from. And as if that weren’t enough, increasing utility, insurance and property tax costs are driving rents up, your neighbours are still practicing for the copulation Olympics and your skuzzy landlord can kick you out with only three months notice. But as it turns out, things may not be as dire as they seem for we-of-the-minimal-assets.
..tenants who can afford a mortgage, but choose to rent, are in prime position to become the rarest Calgarian of all; one that is rich with money— real money. The type made of paper, not plastic.
Even the staunchest supporter of home ownership will admit that there are benefits to renting. One of the primary advantages is location. With the exception of a small minority, few people can afford to buy anything but a condominium in the inner-city, and many people (myself included) would rather rent than buy a condo (disregarding a condominium’s pure investment value, living in a condo is like the worst of both worlds: a shared building subject to other people’s rules, monthly fees and you’re tied to a mortgage). So for people who want to live near the core, renting is a good option.
Another thing tenants can appreciate is the flexibility to move on a whim. This is crucial, because if you’re planning to buy a home, you had better be prepared to stay in it for a couple years, even in Calgary. “If you are going to sell your house within two years, I’d say you should probably rent,” says 25-year real estate development veteran and U of C corporate strategy teacher Jim Dewald. “Even if the worth of your house has increased 2% over a year, you may have to pay 4% in realtor fees and another percent of legal fees right off the bat. It doesn’t work out very well.”
There are other perks to renting. For one thing, you don’t have to mow your lawn, shovel the walks or fix a leaky tap in the kitchen. Homeowners should learn to enjoy doing that type of stuff or risk hating many hours of the week. Also, tenants need not stress about rising interest rates or renegotiating their mortgage and because they don’t have to factor in thousands of dollars worth of yearly maintenance, tenants can budget for long-term, unchanging monthly payments. Which brings me to a point that will cause hard-lined real estate investors across the city to scoff: renting can make financial sense.
Now, I’m not fool enough to try and dissuade anybody from buying a place to hang their hat in Calgary, especially because the average house price is forecasted to increase another 10 percent in 2006 (once again leading the nation in that regard). I’d say that if your dreams are filled with big backyards, rugrats or plans to build a slumlordian empire around Mount Royal College, you should purchase a domicile tout de suite; they ain’t gettin’ any cheaper. But for those of us who don’t mind being someone else’s tenant, renting isn’t the fiscal death warrant many people think it is.
Being a home owner is like being a farmer: most are rich in assets, but poor in capital. A lot of them are just straight-up in debt. The average renter on the other hand, is poor in assets and, well, not rich. But that’s the average, and a large part of the average includes people who don’t make enough to buy a house, even if they wanted to. That is a truly unfortunate situation. On the other hand, tenants who can afford a mortgage, but choose to rent, are in prime position to become the rarest Calgarian of all; one that is rich with money— real money. The type made of paper, not plastic.
Let’s say you have a good job, you don’t mind the tenant lifestyle and you’re renting an apartment in Mission for the average two-bedroom rental rate of $822 a month. Your buddy Alvin, has purchased a nice house in the ‘burbs and is getting a steal of a deal, paying only $1,200 a month in mortgage payments (The average monthly mortgage payment is around $1,500 for a house. Condominiums are a few hundred less and the finances work out differently because of condo fees, etc). Even though Alvin’s house is appreciating like mad, you’re saving an extra $400 a month and it’s not like Alvin’s $1,200 is going straight to principal. In fact the vast majority, probably even more than the price of your rent, is going to pay off interest. Your maintenance costs are nearly zero; Alvin’s are a couple grand a year (assuming his house is new and doesn’t require substantial renovation—a large assumption). He also has to pay one or two hundred dollars extra per month in utilities (even if your utility costs aren’t entirely included with the rent, they will be considerably less than Alvin’s). Plus, you’re not car dependant living in Mission—maybe you don’t even own a car. The inner-city renter pockets from $25 in gas to $600 in car loan payments there. Add lower home insurance costs and a lack of property tax expenses (over your rent anyway) and you start to get where I’m going with this. Assuming you are savvy enough to save that extra money or invest it, at the end of the year, you have about as much paper cash as Alvin has in appreciation value. Just don’t spend it all at the pub.
The crux of the renting versus buying debate is summed up by Dewald: “You know, rent or buy, it’s where you live. The decision should be firstly about lifestyle and second about investment. Otherwise you’re on the road to unhappiness.”
As good an investment as real estate may be, most homeowners are individuals who enjoy their house and community, like the idea of building a little equity in a safe investment and may or may not be addicted to MLS.com. With the exception of a few, they are not people who are turning their assets over every 5 years for profit, purchasing properties with the idea of renting them, or planning to buy down and pocketing the excess (nobody buys down).
So if you’re a renter, I’m here to tell you, everything’s going to be alright. Even in Calgary.
A version of this story originally appeared in Swerve magazine, 2006.