Home Ownership vs. Renting: Happiness and Financial Outcomes

Homeownership does not guarantee increased happiness compared to renting, often leading to disappointment and added stress.

### The Reality of Homeownership: Happiness vs. Renting
* 🏠 "Renting and owning a home can be financially comparable," as historical data in the US and Canada suggests **similar outcomes for both**.
* 💰 While renters must be disciplined savers to accumulate wealth, the expected financial outcomes from renting and owning are similar, with a **slight edge for renters over time**.
* 🤔 The question of whether homeowners are happier than renters is intriguing, as many romanticize homeownership as **essential for happiness**, despite my personal experience indicating **no significant difference**.
* 🔍 Studies, including a 2021 Canadian survey, reveal that **homeownership does not significantly impact happiness**, and in some cases, can **negatively affect lower-income individuals** due to financial burdens.
* 📊 Research from Switzerland and Germany supports these findings, showing that factors like **financial status and health** have a **more substantial influence on happiness** than homeownership itself.
* 📉 A 2024 study highlights that the mortgage burden can **offset any positive psychological effects** of owning a home, suggesting that potential homeowners may **overestimate the emotional benefits**.
* 🛠 Home maintenance tasks can detract from enjoyable activities, further complicating the happiness equation for homeowners, who often spend **less time on leisure**.
* 💡 Ultimately, while owning a home can provide security, the decision should not be made with the expectation that it will **significantly enhance life satisfaction**, as the reality may lead to **disappointment**.

All right, guys. Before I start the video, I know I have hair. Yes, it's real. No, it's not a transplant. I do appreciate all the compliments, and I'm sorry about your girlfriend. Let's try to stay focused on the content of the video. Renting and owning a home can be financially comparable. This has been the case in historical data in the US and Canada, and forward-looking estimates suggest it will be similar in the future. Renters need to be disciplined savers and investors to make it work, but the expected financial outcomes from renting and owning are similar. People will want to argue with me on that point, but let's just take it as a given for now and discuss what I think is an even more interesting question: finances aside, are homeowners happier than renters? I'm Ben Felix, portfolio manager at PWL Capital, and I'm going to tell you how home ownership is related to happiness. Choosing whether to rent or own a home is a huge financial decision. Owning has the benefit of security of tenure. Nobody

will Ren aict you or jack up the rent, but it comes with significant idiosyncratic risk, like major structural problems with the home, and market risk, the RIS RIS of the real estate market dropping. Renting can be less secure, especially when housing costs are rising rapidly, and it requires more discipline with saving to accumulate wealth. But it's also a lot more flexible and doesn't require owning a big, illiquid, risky asset. Based on their unique attributes, depending on your situation, either renting or owning can make sense. On average, over a long period of time, financial outcomes for renters and owners should be similar in an efficient market, and models show they have been similar in Canada and the US for decades, with a slight edge for renters. I think it's a reasonable starting point to say that renting and owning are financially comparable. Even when people agree with me on that point, I'm usually told that life as an owner is just better. A lot of people seem to believe that owning a home is necessary for living a good life.

being a homeowner is romanticized as a means to happiness, while renting is painted as misery. I'm skeptical. I have owned my home for the last three years, but rented for many years before that, and personally, I'm no happier as an owner. I'm probably a little less happy because I find home maintenance tasks to be really annoying. If someone is truly happier owning than renting, that's great. Personal preferences matter, but I'm not convinced that owning a home should be prescribed as a path to contentment. Renting can certainly have its issues: rising rents, unattentive landlords, and unexpected evictions are sure to cause headaches, but homeownership can cause headaches too. Being your own landlord is time-consuming and often stressful. I bought a house because we moved to a rural area without a lot of rental options. I really like where we live now because I can go mountain biking, kayaking, and skiing all within a 15-minute walk from my house. But if I could have found a single-family home

for rent in the same area. I would have done that instead to be fair to homeownership. An owned home can offer feelings of control, security, and even pride, but renting has its own well-being benefits and its relatively hands-off nature and flexibility. Taken together, it's not obvious whether we should expect owning a home to make people happier on average. My personal experience and opinion only take this conversation so far, but the good news is that the question of whether homeowners are happier than renters has been studied extensively using large data sets from Canada, Switzerland, the US, and Germany, and the results are pretty insightful. The 2021 study Home Ownership and Happiness: Evidence from Canada uses panel data from the Canadian National Population Health Survey to examine the impact of home ownership on individual happiness. The study controls for individual effects that influence happiness, like personality traits, and finds that owning a home has no significant impact on happiness. This Canadian study does find that in the lowest income category, owning a home negatively impacts happiness, likely due

to the financial burden that home ownership creates for lower-income people. Similarly, 2024 data from Statistics Canada suggests that for comparable individuals living in comparable dwellings and neighborhoods, renters and owners report similar levels of satisfaction. This means that holding things like the type and quality of the dwelling, financial health, and marital status of the individual constant, the impact of home ownership on life satisfaction, if there is any, is small. This makes sense to me; all else equal, why would owning rather than renting a home make people happier on average? Moving outside of Canada, the 2019 paper Home Ownership and Happiness: Evidence for Switzerland uses data from the Swiss household panel to find that there is no or even a negative relationship for home ownership making people happy in Switzerland. The authors find that other factors such as the financial status of the household, health, age, and partnership have a much stronger impact on happiness. While the happiness gains that I am told exist seem elusive in the data, future homeowners often overestimate the psychological benefits of owning a home. The 2022 study does the

dream of home ownership rests on biased beliefs. Findings for over 800 future homeowners in Germany indicate that while home ownership does elevate life satisfaction in their sample, it does so much less than people anticipate when they purchase a home. This is not surprising because people tend to adapt to their circumstances. The upward bias in expected happiness is stronger for home buyers who value extrinsic things like status and money. For these people, buying a home may be a status symbol compared to people with intrinsic goals like personal growth, intimacy, and community. Extrinsically motivated people are less happy in general, and they overestimate the emotional benefits of achieving their extrinsic goals. This study suggests that careful thought about why you want to own a home and how it will affect your life is worthwhile. One important consideration is how owning a home will affect how you spend your time. Day-to-day happiness is largely shaped by how we spend our time minute to minute, rather than more stable life circumstances that we adapt to. The 2011 study, The American Dream or the American

delusion uses data on us women to find that after controlling four income housing quality and health homeowners in the sample are no better off than renters by multiple measures of well-being. Instead, owners derive significantly more pain from their homes. A potential explanation is time use differences. Homeowners in the sample spend less time on enjoyable activities like active leisure, which are associated with elevated well-being. As a homeowner myself, I can tell you that home maintenance tasks have stopped me from doing fun stuff on many occasions. The other reality for homeowners is that in most cases, they will need a large mortgage to finance their purchase. Mortgages are a great way for young people to access leverage, which can be a good thing financially, but a big pile of debt can take a psychological toll. The 2024 study In Debt but Still Happy uses panel data from Germany to find a positive relationship between housing satisfaction and home ownership, but no significant positive effects of a home purchase on life satisfaction in the long term. The authors show that mortgage debt negatively impacts life

satisfaction, and increasingly so with larger mortgages relative to incomes. They conclude that the mortgage burden of owning a home can offset any positive psychological effect of home ownership. This is particularly relevant in Canada right now, where the government has relaxed mortgage rules to allow people to borrow more money to purchase homes. If people incorrectly believe that buying a home will make them happy or overestimate the happiness benefits of owning a home and take on a huge amount of debt to do it, they may end up less happy overall. Choosing how to pay for housing is an important life decision with financial and non-financial implications. Financially, renting and owning should have similar long-term wealth outcomes. Non-financially, owning a home is unlikely to increase your life satisfaction, and if it does, it probably won't increase it as much as you expected. In some cases, owning a home may even decrease happiness by soaking up your active leisure time with home maintenance tasks and saddling you with a big pile of debt. There are good reasons to buy a home, like wanting to

Secure your housing in the specific location that you want to settle in. But buying a home on the expectation that it will make you happier is likely to lead to disappointment. Thanks for watching. I'm Ben Felix, portfolio manager at PWL Capital. If you want to learn more about how PWL helps people make important financial decisions, you can book a meeting with us below.

No… Homeowners are NOT Happier than Renters

I post videos on investing, financial decision-making, and living a good life.

My name is Ben Felix. I am a Portfolio Manager and the Head of Research at PWL Capital. I am a CFA charterholder and CFP professional. I am securities licensed in Canada by CIRO.

All channel content is produced and owned by PWL Capital Inc.


Ben Felix

The Financial Comparison of Renting and Owning a Home

Renting and owning a home have historically shown similar financial outcomes in the US and Canada, with forward-looking estimates suggesting this will continue.

Homeownership offers security of tenure but comes with significant risks, while renting provides flexibility and requires disciplined saving.

Ultimately, either option can make sense depending on individual circumstances, and the financial outcomes for renters and owners have been comparable over the decades, with a slight edge for renters.

Homeownership is often romanticized as the key to happiness, but the author's personal experience suggests otherwise.

Both owning and renting have their own set of challenges and benefits, making it unclear which path leads to greater happiness.

Extensive studies, including one from Canada, show that homeownership has no significant impact on individual happiness, and in some cases, it may even have a negative effect for those in the lowest income category.

The Impact of Home Ownership on Happiness

Home ownership creates a financial burden for lower-income individuals, with renters and owners reporting similar levels of satisfaction.

Studies from Switzerland and Germany show that the relationship between home ownership and happiness is weak, with other factors having a stronger impact on well-being.

Future homeowners often overestimate the psychological benefits of owning a home, and those motivated by extrinsic factors like status and money tend to be less happy overall.

The Impact of Homeownership on Well-Being

Homeowners and renters experience similar levels of well-being, with homeowners deriving more pain from their homes.

Time use differences, such as less time spent on enjoyable activities, may contribute to the negative impact of homeownership on well-being.

Mortgage debt and the psychological toll of large loans can offset any positive effects of owning a home, challenging the common belief that homeownership leads to greater happiness.

Securing housing in your desired location is crucial.

Buying a home with the expectation of increased happiness may lead to disappointment.

PWL Capital, led by Ben Felix, offers assistance in making important financial decisions.