“The increased spending from the increase in disposable income is a solution to the short-term crisis,” they say. “Long term, the One-Percent Solution does even more. It creates wealth through equity. A 1% mortgage rate lets more families move from renting to owning, giving more families an opportunity to accumulate wealth for retirement or for their children’s education. A homeowner accumulates equity in a home as the principle is paid off year by year and also as the value of the property increases. Mortgage payments end when the mortgage is paid off. Rent payments never end. When mortgage payments end, the homeowner has even more disposable income, and also equity in the house. Renters do not have that accumulated wealth. And because rents are virtually guaranteed to increase over time, the difference between a homeowner and a renter in retirement is massive. That’s why we need more people to be owners, not renters, if we want to increase incomes, profits, and economic growth over time.”
Ulrich and Paulaha know there are financial experts out there who claim renters can also build wealth by investing the difference between rents and mortgage payments that include property taxes and insurance. But they say that argument assumes rents, which also include property taxes and insurance, will be lower for comparable properties and will not increase over time.