Home Truths: From Reality TV to Reality

September 01, 2014

Home Truths: From Reality TV to Reality

Picture this: the hosts of a home improvement show wander through the client’s home, taking careful note of the colours, room sizes, frustrations and novelties of living in this particular suburban home. They meet with everyone in the family, and watch them as they live, entertain and work in it. At the end of the episode, the couple is seated, in wobbling‑camera reality TV style, and the host explains his diagnosis.

‘It’s true that this house has its frustrations; the colour choice is poor, some rooms are too big and some too small. You could also make a lot of the view out the back with a deck. But, you know what? All things considered, you live in a decent suburb in one of the luckiest countries in the world, and we think you should think again about whether a makeover is worth it. What’s more, watching your family relate, I think you’ve got something that goes beyond the physical structure of the place. Maybe you should focus on appreciating that, and leave the house completely alone. Or, if you find the shortcomings are a distraction, what about renting something?’

It would be a short series, and guaranteed poor ratings. Perhaps it could be more interesting if the couple objected, not to the ethical thrust of the recommendation, but to its wisdom. The producers are allowed one more episode and the clients meet again with the host.

‘We’ve thought about your recommendations, and as Christians we value what lies behind them, but we have a couple of questions which make us wonder if we should go ahead with the makeover. We feel embarrassed having people over when some of the shortcomings of the house are pretty noticeable, and the layout of the kitchen really does make hospitality hard. One of our kids finds it difficult to study in her small room, and it doesn’t seem loving to allow that to go on when we can fix it. Besides all that, I thought God likes things done well, and for us to enjoy beauty?

We agree with the principle of generosity, but a lot of the changes we make will be reflected in the sale price when we eventually move on. If we can make the house more workable for us, and recoup the expense in the future, isn’t it good stewardship? We’ve heard the government encourages home ownership through favourable tax treatment, so why can’t we take advantage of that without it becoming an obsession? Renting doesn’t seem like a good idea for this reason, if it can be avoided.’

Now the program is more interesting.

Why homes?

The biblical doctrine of creation implies that human beings are creatures, and have a God-ordained time-and-place particularity. Not accepting this can result in the Scylla and Charybdis of either seeing oneself as ‘bigger’ than one’s allotted time and place, resulting in attempts to seize inappropriate control and power, or seeing oneself as ‘smaller’, unable to rise to the responsibilities of it. Part of our toolkit for taking appropriate control of our lives is our capacity to choose and alter our environment. Most adults have a bit of freedom to do this in their workplace, and substantially more in their homes.

Why should we take appropriate control of our lives? As Christians we would affirm that glorifying God with our lives, and serving others, is what we should strive for. One implication of the need to live appropriately in our time and place is that we need to nurture and value a relatively small group of people within our orb.[1] A danger of not doing so has been documented.[2] Unsurprisingly, relationships falter if the economy is organized in such a way that people are kept physically apart by, for example, spending extended times in work locations far from friends and family.

Usually, part of our time-and-place particularity involves sharing a dwelling-place with a relatively small group of people. The word ‘home’ carries all sorts of connotations, particularly in today’s fractured world, but most people in most times and places have sought a small circle of intimates, often related by family, and usually within the same dwelling-place.

This relational imperative carries a practical requirement that such a dwelling-place be purchased or rented and maintained to varying degrees. We might call these requirements the economic aspect of home-making, and our contribution to this issue will be to outline some of the relevant considerations in what follows.   

Fish bowl

What is this thing called a ‘house’?

Houses provide the people that live in them with shelter, access to water, power, gardens, a convenient location—what economists would call a ‘flow of services’ .  To work out the fundamental value of a house, we would add up the value of all flows of services given by the house from now until it becomes defunct, then deduct the costs of maintaining the house. The difference between the value of the services and the costs, worked out in ‘today’s dollars’, equals the economic value of the house.

Of course it’s hard to put a price on something like a flow of housing services, and the value of any house will differ from person to person. Since people can buy housing services by renting a house, it’s common to use an estimate of the expected flow of rent that a house could earn if it were leased, as a measure for the flow of housing services, and then work out its fundamental value. While rent is not a perfect measure of value, when changes in house prices become disconnected from changes in rental incomes, commentators begin to talk about real estate ‘speculation’.

To understand how speculation, or ‘price bubbles’ could affect house prices it helps to compare a house with a share or a bond. These financial assets typically pay off in two ways—first by paying income like dividends, interest or coupons, and second when the asset is sold for more than it cost to buy, or a ‘capital gain’. For a house, the ‘income’ component is the flow of services or stream of rent payments. For a long lasting asset like a share or a house, the income component should dominate its market price. Price changes should be related to changes in the long term outlook. For shares, these are changes in expectations of the future profitability of the company, and for houses, changes in expectations of what its flow of services will be worth.[3]  House price bubbles can occur either when markets become confused about the true value of future income, and/or when houses change hands quickly at higher and higher prices and people assume they can make a capital gain over the fundamental value by trading up quickly.

What practical considerations, tempered by a godly outlook, should help us when making housing decisions? If we are able to buy, we should consider buying something that is good to live in, soundly built, in places that are suitable or convenient for our families, near our churches and/or families and/or places we work, rather than thinking about short-term financial payoffs. Over time, fundamental valuation tends to dominate, and speculative gains tend to disappear. Not only that, the costs of buying and selling houses are very high (think about agent’s fees, legal expenses and taxes such as stamp duty, not to mention the pain of moving!).

Economically, there are significant advantages to owning a home in Australia. Owning a home:

  • Gives security and stability compared with renting, where an owner can refuse to renew a lease or sell the property, or maintain the property poorly;
  • Allows people to choose where and how they want to live, and to choose to make changes to the residence; and
  • Paying off the capital component of a home loan can be a useful discipline on savings.

Further, the government supports home ownership directly:

  • A person’s principal residence is free from capital gains tax;
  • Social security (pension) means testing does not include the value of the family home, so pension payments don’t go down if you own your house; and
  • First-home owners can sometimes access grants and concessions.

However there are significant disadvantages too:

  • Despite all the myths, house prices—even (especially!) in Sydney—do fall.[4] This is especially true of marginal suburbs (at both the top and bottom ends of the market).
  • Houses have a lot of ‘idiosyncratic risk’. Consider termites, troublesome neighbours, council planning changes… According to finance theory, idiosyncratic risk is not ‘compensated by the market’. In other words, you can’t expect the resale price to cover you for an ‘unlucky’ choice.
  • Demographic changes expected over the next few decades mean that demand for property is likely to lessen, and changes to household structures mean that smaller, higher density housing is likely to be used more in the future.
  • Houses are illiquid and expensive to buy and sell; similarly they are hard to ‘spend’ in retirement compared with most other assets.
  • Most Australian households are ‘over-invested’ in housing—holding other financial assets can generate higher returns and spread out risks.

By the standards of Scripture, but also by culture and history, home ownership is not a right. Slightly less than 70% of households in Australia are home-owners, and the proportion who have completely paid for their house is less than half of that. This is a similar rate of homeownership as in Ireland and Canada, much lower than in Italy and Greece and much higher than in Denmark and Germany. In countries with lower rates of ownership, however, the rights of renters are sometimes stronger, cushioning people against the increased insecurity of renting.

Front door

House to home

Like any other possession, financial or otherwise, a house or a home can become a competitor with God—an idol. The number of home makeover shows on television is testimony to their seemingly endless capacity to soak up our energy and creativity. Set against this is the obvious fact that at its best, a home can be a great blessing, a place of fellowship, joy, welcome, belonging, safety, rest and beauty, giving pleasure to both us and our creator. While Christians are aware that ‘home’ is something never attained fully in this life, homes can nonetheless provide us with a foretaste of heaven—albeit a partial and imperfect one—as we long for our eternal home. This knowledge protects us from the allure of the TV reality house make-over show. It sets limits on our seeking the fulfilment of our longing for home here and now in a better and better house, and prevents our identifying ‘house’ with ‘home’. Making a house a home does not depend on ownership as opposed to renting, any more than it depends on stainless steel appliances, open plan living and outdoor entertaining areas. Positively, this task of every Christian depends on the quality of the relationships beyond the front door.

[1] We realize that the dramatic advances in technology and communication in recent history make ‘place’ a more fluid concept.

[2] P Mills and M Schluter, After Capitalism: Rethinking Economic Relationships (Jubilee Centre, 2012)

[3] A positive example would be if a new public transport service was provided to a suburb, making a house location more valuable.

[4] The Year-ended growth in house prices has been negative in nominal terms around 1 year in 5 over the past three decades, and negative in real terms much more frequently. See Ellis 2013, Graph 1 http://www.rba.gov.au/speeches/2013/sp-so-230413.html .

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