Will the Rental Industry Survive an Economic Downturn?
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What is the episode's focus on the rental economy and who is speaking?
Here's your Money Briefing. I'm Anne-Marie Fertoli at The Wall Street Journal in New York. Renting homes, leasing cars, streaming music. More and more people are opting out of owning their stuff. The Wall Street Journal's J.R. Whelan talks with Heard on the Street columnist Justin Lehart about the new rental economy and what an economic downturn could mean for those business models. But first, here are some money and market headlines. A number of Democratic presidential candidates have proposed a wealth tax, and that might have a positive ripple effect for charities. Potentially facing an annual tax that would eat into their returns and shrink wealth, billionaires would have an incentive to give their money to avoid taxes.
which could spark a short-term boom in billionaires donating to charities. Senator Elizabeth Warren is calling for a 6 percent wealth tax rate, while Senator Bernie Sanders' plan calls for 8 percent a year. But the long-term effects of the wealth tax proposals would be much more uncertain, dependent on individuals' giving strategies and on whether the tax prevents accumulations of wealth in the first place. Having a job license could soon be the ticket to a loan. Credit scores used to just reflect a person's history of paying off debt. But a new credit score called LIFT will soon factor in other things like professional licenses in real estate, hairstyling, or plumbing. LIFT, that's L-I-F-T, was created by the credit reporting firm Experian.
How did the 2008 housing crash kickstart the shift toward renting homes?
It's aimed at helping lenders make loans available to consumers with no or limited borrowing histories by providing the lenders with more data to help identify good credit risks they otherwise might overlook. And speaking of taking out loans, more people in the U.S. are facing the financial realities of being in debt, whether it's a car loan, credit cards, or student loans. Consumer debt has climbed to $4 trillion. With stagnant wages and rising costs, many people are turning to loans or credit, even for purchases like a car or a sweater. In an ongoing series, the Wall Street Journal is looking into debt in America and how some families are maintaining their middle-class lifestyle. If you want to share a story about dealing with debt, go to WSJ.com.
Coming up, a look at people who are opting out of owning in the rental economy.
Renting is in. Whether it be homes or cars, renting provides consumers flexibility and in some cases financial peace of mind. But will consumers continue to rent when the economy turns downward? That's a big question facing investors. And Wall Street Journal Heard on the Street columnist Justin Layhart is here to discuss. So, Justin, the area where the rental industry has seen substantial growth is in housing.
The first thing that drove the shift to renting was the financial crisis. And let's start out with the most obvious thing, which is the housing market. So after the housing market crashed, a lot of people lost their homes. A lot of people were deeply underwater on their mortgages. Banks were less willing to lend. And people didn't see housing as this surefire way of stockpiling savings like they did before.
Why has homeownership fallen and how are millennials driving rental growth?
So what we've seen since the housing crisis is that the ownership rate in the US has gone down, and it hasn't really come back up. So more and more people, particularly in the millennial generation, are renting now. That has drawbacks. One drawback is now really it is a good way or it was a way that people save money. Even if housing prices aren't guaranteed to go up, but it was a way of stockpiling money.
Kind of get on your feet, rental place for a couple of years.
Yeah, then you own a place, and that was good. But there are downsides to homeownership. You're not flexible. You can't just pack up and move if your little neck of the United States is having a tough time. You can't move to someplace else where things are better as easily as you can. If you rent, you can't downsize very quickly if the economy turns sour. And that's something that's available to renters.
The current economic boom has created what's been called the asset-light consumer.
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Chapters
4 chapters
1
What is the episode's focus on the rental economy and who is speaking?
0:05–1:27
2
How did the 2008 housing crash kickstart the shift toward renting homes?
1:27–3:20
3
Why has homeownership fallen and how are millennials driving rental growth?
3:20–6:11
4
What are the financial advantages and downsides of renting versus owning?
6:11–9:20
Speakers
3 identifiedMore from WSJ Your Money Briefing
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