Renting vs. Buying a Home: The Reckoning

Quick Overview

The analysis concludes that for the 2005-2024 period in Canada, renting generally resulted in slightly higher net worth accumulation than owning a home across 12 major cities, with an average renter/owner net worth ratio of 1.14, meaning renters ended up with 14% more wealth than owners, despite the common narrative that home ownership is always financially superior.

Key Points: The average Renter/Owner Net Worth Ratio across 12 Canadian cities from 2005-2024 was 1.14, indicating renters accumulated 14% more wealth than owners over this period. The worst price decline for inflation-adjusted home prices since 1975 occurred in the 1980s with a 31% peak-to-trough drop, while the current decline (as of Dec 2025 projection) sits at 28%. The study used a rent vs. own model comparing a hypothetical renter investing surplus cash flow in a globally diversified stock portfolio (like VEQT) against an owner paying mortgage, property tax, maintenance, and insurance. In Toronto, the Renter/Owner Net Worth Ratio was 1.37, meaning renters ended up 37% wealthier than owners over the 20-year period. Factors like high recent housing prices, rising interest rates, increased immigration, and supply shortages have made housing affordability a major issue in Canada, challenging the assumption that owning is always financially superior. The analysis noted that the cost of borrowing was extremely cheap during the period, which artificially inflated the advantage of owning a home, but this advantage has since shrunk.

Context: The video presents an updated financial analysis comparing the long-term net worth outcomes of renting versus owning a home in Canada between 2005 and 2024, updating previous work. The presenter, Ben Felix, Chief Investment Officer at PWL Capital, uses a comprehensive model that accounts for various costs associated with home ownership (mortgage, taxes, maintenance, insurance) versus investing the difference in a diversified stock portfolio for the renter. The analysis aims to challenge the common belief that owning a home is universally the wiser financial decision.