Benefits of Home Ownership Versus Renting

With mortgage loans seemingly impossible to get, most people who would otherwise be interested in purchasing their own home are left with the prospect of renting or leasing. Purchasing a home using owner financing is not usually considered an option, even though in this economic environment it makes the most sense for most people who are considering buying or renting a home.

At Owner Finance Homes, we feel that home ownership contributes greatly to the stability and the success of your family and your children. Because the lending institutions in this country are not willing to lend the money for the average family to purchase and own their own home, Owner Finance Homes has chosen to offer all their homes on an owner-financing basis.

I worked most of my career in the financial arena in corporate America and have always known that owning your own home makes better financial sense than renting. I have also always believed and have said many times that children thrive and are more successful in their lives when they live in the home their parents own rather than living in a rental place. The sense of permanence, security, stability, and having your own “home” rather than just living somewhere would allow the younger set to feel a stronger foundation in their lives. In addition, this foundation then translates into being stronger, more confident and more success while they are growing up. It was only when I was doing some research for this webpage did I find out just how much more home ownership was beneficial in so many different ways than was renting, and I was amazed and surprised.

Here is just some of the research from reports that look at the benefits of home ownership versus those of renting. If you are considering purchasing a home or renting / leasing it, then please consider the following information when making your decision. Home ownership has many advantages over renting or leasing a house, some of them are:

Generates wealth:

What most people involved with real estate will tell you that when you rent or lease you are throwing your money away and when you buy, you are building for your future. Is this true, or are they saying this because they want you to buy their house?

It is true. You can use any rent versus buy calculator on the web and it will tell you the same story. If you plan to stay in your home less than 2 – 3 years, then it is a wiser financial decision to rent the home. However, if you plan to stay longer than 3 years, it is wiser financially to purchase your home rather than leasing or renting it. The average person stays in their home for 7 years, which means that for the average person owning their own home makes more financial sense than does renting or leasing.

Using the New York Times rent versus buy calculator, it generally makes more sense to buy your house if you plan to stay in it for at least 2 years.

Simply stated, for an average house in the DFW metroplex, owning your own home over 7 years will save you over $51,000, or an average of $7,300 per year. Between building equity in your house, the slight appreciation of the home value that might occur over the next several years, and the reduction of your personal income taxes that arise from being eligible to deduct your property taxes paid and the mortgage loan interest paid, home ownership makes far more financial sense than renting or leasing.

The Cincinnati office of the Neighborhood Reinvestment Corporation looked at the value of home ownership from those that purchased their houses from the Cincinnati Habitat for Humanity organization in April of 2003. Their findings were consistent with previous studies and yet were eye opening.

When comparing renters (of the same age, income, race, etc.) to homeowners in the lower income range, they found that homeowners were:

  • 12 times wealthier,
  • have 66% of their wealth in their homes,
  • accumulate an average of $44,000 in home equity during the first 10 years of home ownership (wealth that becomes the basis for first-generation college graduates and small business owners), and
  • one study found that if two identical families invested $16,800 – one in a house and the other in the stock market (while remaining in a rental home), the net return of the homeowner will be more than 2 times that of the renter.

The New York Habitat for Humanity found that homeowners are three times as likely to own their business, as are renters.

Builds More Successful Children:

Looking at the research done in Cincinnati, comparing children of renters (same age, income, race, etc.) with the children of homeowners, the children of homeowners were:

  • 25% more likely to graduate from high school,
  • 116 more likely to graduate from college,
  • 20% less likely to become teenage mothers,
  • 59% more likely to own their own home within 10 years of moving from their parent’s household,
  • have 9% higher math scores,
  • have 7% higher reading scores, and
  • have 3% fewer behavior problems.

According to the studies done by the New York Habitat for Humanity, homeowner’s children are

  • twice as likely to acquire some post-secondary education,
  • 40% less likely to give birth as an unmarried teenage than renter’s children,
  • earn on average a dollar more an hour,
  • half as likely to be idle at age 20 and to rely on welfare as an adult, and
  • are 59% more likely to own their own homes in in 10 years.

The US Department of Housing and Urban Development (HUD) released a Policy Brief examining home ownership and its benefits, some of the benefits included:

  • better self-esteem – ownership is often viewed as a measure of personal success
  • life satisfaction – Chicago based research found that children of homeowners are significantly less likely to drop out of school, have children while a teenage, and to be arrested before the age of 18.

A 2002 study by Ohio State University found that owning a home compared to renting led to greater cognitive ability and fewer behavior problems. Math achievement was up to 9% higher, reading achievement was up to 7% higher, and children behavioral problems were 1 – 3% lower.

Builds stronger families:

The same research done on the homeowners in Cincinnati state those homeowners typically have stronger families than do renters. Compared to renters (of the same age, income, race, etc.), homeowners are:

  • 10% more likely to attend church,
  • 16% more likely to belong to parent-teacher organizations, block clubs, etc.,
  • 1.3 times more likely to read newspapers, and
  • are less likely to have alcohol and substance abuse issues.

The New York Habitat for Humanity found that when comparing homeowners to renters, homeowners:

  • the parental income of homeowners are twice the income of rental parents,
  • are half as likely to have their children grow up in single-parent households or be on welfare, and
  • report a 13 – 23% higher quality home environmental than do renters.

Builds stronger communities:

Once again, looking at the Cincinnati research, homeowners (of the same age, income, race, etc.) are:

  • 28% more likely to repair or improve their homes,
  • 12% more likely to maintain a garden outside their home,
  • 10% more likely to report they have worked to solve local problems,
  • live 4 times longer in a community,
  • are 11% more likely to know who represents them in Congress,
  • are 9% more likely to know who their school-board representative is,
  • are 15% more likely to vote, and
  • save the tax payers an estimated $34,000 in public expenditures (i.e., the cost of juvenile delinquency, teenage pregnancy) that would have been spent if they remained in rented housing