Why is the "buy vs rent" debate framed in terms of "buy a house vs. rent an apartment"?

Question

Most coverage of the "buy vs rent" debate in North American popular financial media (see here for an example) frames the debate as a simple dichotomy: either renting an apartment (i.e. renting a unit in a multi-unit building owned by a landlord), or buying a single-family house on its own plot, likely with the aid of a mortgage on the property. Generally, the tradeoff is "mobility vs. privacy":

• Renting provides mobility and is easier to manage financially, but is seen as costing privacy and security,
• while given sound financials, homebuying provides a more private and secure living situation, and gives you a long-term stake in the property market in an area, but makes TCO trickier to calculate (especially for "fixer upper" houses), and forces you into a more difficult position if you need to relocate.

However, this is actually a false dichotomy -- it collapses the "buy vs. rent" axis with the "single-family vs. multi-family" axis, when they are really rather orthogonal to each other: buying a unit in a multi-unit building is quite possible in many urban areas with active condominium markets, and on the other side of the coin, many houses in urban and inner-suburban areas are not owner-occupied, but rental houses, owned by largely-local (at this point in time -- there is some consolidation of the residential single-family landlord world in some markets, though) landlords and typically rented to long-term tenants on a month-to-month basis.

Why is it that these options are ignored in North American discussions of "buy vs. rent"? It seems that adding these options in gives a far more complete and nuanced picture of the situation:

• condominiums can provide a degree of property-market vestment in urban areas too dense for single-family housing,
• while renting a house can provide a degree of privacy and solitude for those whose life situation prevents them from putting a long-term stake in any given parcel of property.

Yet, writers seem content with the oversimplified form of the debate, only occasionally mentioning condos in passing and basically excluding renting a house right off the bat.

Answer 1

I don't think people actually having these discussions are ignoring any of the alternatives to houses and apartments. What you might see are attempts to reduce a multivariate issue down to just two variables that you can nest the more complex issues in. We do that a lot in data analysis, with (pick your flavor) MDS/PCA/tSNE/SOM and so forth. No one is going to look at an issue that has 10 variables, and some of those variables have multiple levels, and try to make an at-a-glance guess about the underlying structure of the data. At least not in a short period of time. The quick fix is to reduce the dimensions down to something manageable, i.e. something you can write about without losing your reader's attention.

Here's the conversation I had when I was buying a house in Florida: houses are expensive in some areas and cheap in others, just like anywhere else. I didn't want to share a wall with anyone, and I wanted to spend less, so condos and apartments were out due to shared walls. Rental houses were also out, because people were pushing what I'd deem hovels lower than an average apartment for apartment prices, and normal houses for premiums. So, I decided on buying a single-family home because I had a good payment, a good commute and a locale I could agree with. And I didn't base any of that off an article.

Answer 2

Renting a house is generally discarded out of hand because it rarely makes sense long term. Very few people are going to be renting out a single family home for less than what you'd pay on a mortgage for that home plus whatever the landlord expects to pay for maintenance. And very few people that want a single family home are particularly mobile-- they're families with kids in school that aren't going to be picking up and moving regularly. Single family home rental is generally something that people do for the short term because they're moving to a new area and want to spend a few month looking for a new place or because they're building a new house and need to live somewhere during construction or something that people do because they need the space but don't have the ability to get a mortgage.

Plenty of articles talk about buying a condo or a townhouse rather than a detached residence. Condos in particular, though, tend to add a number of layers of complexity. You can get horror stories, for example, of people that bought a condo that they now can't sell because the condo's HOA is in trouble or that they can't rent out like they expected because the building hit the rental cap. That's something that's definitely worth discussing but it is generally something that you'd want to start looking at only after making the build vs. buy decision. If you decided to buy then it makes sense to look at the pros and cons of different types of homes that you could buy.

Answer 3

If the argument is "stability vs mobility" then you are right that multi-family vs single family is not the right way to think about it.

However, this is a financial Q&A site, and financially there should be no distinction between single- and multi-family when asking about "rent-vs-buy". The financial variables for renting are cost of rent, utilities, renters insurance, and maintenance (when applicable). The variables for buying are interest, homeowners insurance, maintenance, taxes, neighborhood/condo dues, etc. Many people just look at rent vs mortgage and don't consider the other variables.

There might be other non-financial variables to consider, like neighborhood, personal preference, size, choice, etc., but financially the math is roughly the same.

Answer 4

Even assuming your statement to be completely true, I'm not sure what the benefit is of discussing WHY people gloss over these other distinctions. Who cares why? How does it change your analysis and decision making?

That said, to the extent that this is true, I'd guess that it is because those are the most common options. Many more people rent apartments than rent houses. Many more people buy single-family houses than buy condos.

Almost all of the discussions of rent vs buy that I have read discuss the dichotomy as: By renting you have the flexibility to move out on short notice with little or no penalty, and you have the security that someone else is responsible for maintenance so you don't have to worry about a large unexpected expense. By buying you build equity so that your long term cost is lower, and you have the right to make whatever changes to the property you want.

If someone starts talking about rent vs buy and then veers into privacy versus community, yeah, that's an entirely different question only tangentially related. As you say, one could rent a house in the country, or one could buy a condo.

I read an article on rent vs buy once that I considered deeply flawed for reasons analogous to what you discuss. The writer said that a disadvantage of buying is that houses are typically bigger than apartments so if you buy you must also buy more furniture and heat and cool a larger space. But this has nothing to do with rent vs buy. This is about living in a small space vs living in a large space. There are plenty of 3 bedroom apartments out there and there are plenty of 1 bedroom houses: the last apartment I lived in was substantially larger than my first house. Hey, once my wife and I went on a trip, I got us a nice suite, and she said that our hotel suite was bigger than the house she lived in before we were married. :-) In any case, the concern was nonsense: If I bought a house with more room than I had use for -- whether I was expecting to need more space in the future, maybe because I planned on having children, or if I just got a good deal on this big house, or whatever -- there's nothing that would force me to buy furniture for all the rooms I wouldn't be using. Or if you assume you would use the extra space, we're still not comparing like with like. If you're getting more, you normally expect to pay more.

So yes, if you decide that it is better to buy than to rent, whether you buy a single-family house or half a duplex or a townhouse or a condo is a separate question involving different decisions. The two decisions may be related by the reality of the market. Like if there are no condos available in the area where you want to live, the fact that you would like to buy a condo rather than a house becomes something of a moot point. Relative prices of houses and condos would be relevant. Etc. But if all combinations of options were available to you, then sure, those are completely separate questions.