Kiss
In simpler terms,. if I take out a mortgage at age 25 as 30% of my income, the monthly cost is flat over 30 years. If I rent an equivalent single family home, I have many of the same maintenance responsibilities, and expenses, but the rent increases every time I renew the lease. As an owner with fixed costs the % of income decreases and I have more disposable income. As a renter, my disposable income may grow, but at a substantially lower rate than the owner's. Thirty years later, the mortgage is paid and the owner has a major increase in disposable income. The renter, thirty years later, has to renew the lease at an ever increasing amount.
Assuming the owner and the renter are equally adept investors, the owner has more disposable income to invest and should come out ahead. The owner also has equity which can be leveraged favorably to improve his standard of living. The renter has no equity to leverage and must withdraw from his investments and pay capital gains taxes. From a slightly different perspective, banks and real estate interests have strong lobbies. Who lobbies in DC for tenants? Who do you think will win that race? Obvious example: Mortgage interest is tax favored, rent is not.
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