I don't think you pay less for decades by renting. Absent strict rent control, it will inevitably become more costly per month than owning.
I could be wrong, all real estate is local after all, but I'm just not seeing it when you contrast buying X against renting X over a lifetime.
Perhaps a realistic example will help this discussion.
Imagine there are three brothers (triplets) named Bob, Mike and Alex. All three work similar jobs and live in the same area. After taxes, they bring home $45,000/year and by age 25 they each have saved an impressive $50,000. Each lives in a similar 3 bedroom, 2 bathroom home valued at $250,000. Home ownership includes 1.25% property tax, 0.35% insurance and 0.75% maintenance costs. Renting a similar home costs $1,100/mo and renters insurance is $300/year. Each brother can retire once they have enough money to support $21,800/year spending plus any additional housing costs.
To keep things simple we'll keep everything real-adjusted and assume that housing prices and job raises just keep up with inflation.
Money invested earns the historical inflation-adjusted 7%.Mike
goes the traditional 30yr mortgage route with a 4% mortgage rate. He puts 20% down (-$50,000) but his monthly mortgage is just $954/mo, or $146 less than a rental payment. He's pleased because his mortgage payment is less than renting, but he pays an additional $2,664/year for insurance and taxes, and on average $1,875 for maintenance (just 0.75% of the property value). On the very first year he notices that he's paid off $3,894 in principle. "Equity in my home!" he says with a grin.
He can retire once he can safely withdraw $27,671/year from his investments ($21,800 spending + continued insurance, taxes and maintenance of $5871). Using the 4% WR, that's just shy of $700k.
With Mike's mortgage he's able to save $10,000 every year.Bob
really wants a paid off house, and figures he'll do great once the mortgage is gone. He opts for a 15yr mortgage, and his rate at 3.5% is even lower than Mike's, and uses the same 20% down payment. His monthly mortgage is $1430, just 50% more than Mike's payment. He has the same property tax and insurance fees. At the end of the year, Mike has an extra $268, and he puts that towards the mortgage too. He kills his mortgage in 14 years, 9 months and then starts saving every available penny - an impressive $21,465 per year. like Mike, Bob can retire when he has $700k in income-producing assets.Alex
decides not to rent. He keeps his $50k in savings and finds a nice home for $1,100/month. He takes out renters insurance for $25/month ($300/year) and lets the landlords worry about maintenance, taxes and homeowners insurance. He's able to save $9,700 each month. His brothers laugh at him, saying he's throwing away his money each month in rent. Worse, he has to plan on spending $13,200 every year for his rent even after retiring, bringing his FI number up to $875,000. That's $175,000 more than his brothers.So.... how did each brother do?
took the full 30 years to pay off his mortgage, but because he kept saving he his his FI number at age 52... with enough to spare to pay off his remaining mortgage. If Mike had decided to keep working until age 62, he would have $1.6MMBob
axed his mortgage in just under 14 years and paid far less in interest... but because his savings was so delayed, he couldn't retire until six months after his 55th birthday. Working until age 62 Mike would have just $1.25MMAlex
never used the $50k his brothers put down as downpayments in their homes. Even though he needed nearly $900k to retire and continue renting, he managed to retire a month before his 47th birthday, all because he was able to save an additional $319 more per month and never used up his original $50k. Working until age 62, Alex amassed an astonishing $2.82MM - more than double his brother Bob.
This of course is just a simulation, but the numbers I chose (mortgage rates, taxes, insurance (both homeowners and renters) and maintenance) are fairly average.