When I make the case for renting as a viable option for Canadians, I’m usually told that even if I’m right on the finances, life as an owner is just better.
I’m skeptical. I lived happily as a renter in Ottawa for 10 years before I bought my first home at age 33, when the pandemic propelled me to move to a rural area with no available rentals.
I have no counterargument if an individual says they are happier owning than renting. Personal preferences matter. But I’m not convinced this is a universal truth. Should people really expect owning a home to make them happier?
Renting certainly has its issues: Rising rents, bad landlords and unexpected renovictions are major drivers of stress and headaches. But homeownership is not a walk in the park, either. Being your own landlord can often feel like a second job.
Homeownership offers some people feelings of control, security and pride, while for others, the hands-off nature and flexibility of renting are more valuable. It’s not obvious that we should expect owning a home to make people happier.
The only way to truly answer this question is empirically. Fortunately, this has been studied using large datasets from Canada, the U.S. and Germany.
The 2021 study “Homeownership and happiness: evidence from Canada” uses data from the Canadian National Population Health Survey to examine the impact of homeownership on individual happiness.
The study – which controls for individual effects that influence happiness, such as personality traits – finds that owning a home has no significant impact on happiness. In fact, in the lowest-income category, the study suggests that owning a home negatively affects happiness.
Similarly, 2024 data from Statistics Canada suggest that, controlling for comparable individuals living in comparable dwellings and neighbourhoods, renters and owners report similar levels of satisfaction. It means that holding constant factors such as dwelling type, dwelling quality, financial health and marital status, the impact of ownership on satisfaction, if there is any, is small.
The 2011 study, “The American Dream or the American Delusion?” used data about U.S. women to find that, after controlling for income, housing quality and health, homeowners in the sample are no better off than renters by multiple measures of well-being.
Instead, the owners derive significantly more pain from their home, potentially because of time-use differences between renters and owners in the sample. Homeowners tended to spend more time on housework and less time on active leisure activities.
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, but debt can take a psychological toll.
The 2024 study “In Debt but Still Happy?” uses data from Germany to find a positive relationship between housing satisfaction and homeownership, but no significant positive effects of a home purchase on life satisfaction in the long-term.
The authors also show that mortgage debt negatively affects 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 effect of homeownership.
The evidence so far is somewhere between neutral and negative for the relationship between homeownership and happiness, but many Canadians still view owning a home as a major financial goal. Unfortunately, they may be overestimating its well-being benefits.
Buying a home is an extrinsic goal. Compared with people with intrinsic goals, such as personal growth, intimacy and community, extrinsically motivated people are less happy in general, and, importantly, they overestimate the emotional benefits of achieving their goals.
The 2022 study “Does the Dream of Home Ownership Rest Upon Biased Beliefs?” finds, using German individual data, that while homeownership is associated with higher life satisfaction in the sample, homebuyers overestimate the extent of the effect.
This means that while there is some benefit, it is not as strong as many people expect when they make the decision to purchase a home. This bias is stronger for homebuyers who value extrinsic things such as income, success and the ability to buy stuff.
Choosing how to pay for housing is an important life decision with financial and non-financial implications. Financially, renting is often an attractive option, but many people believe that life will simply be better as an owner.
Owning a home is unlikely to increase your life satisfaction, and, if it does, it probably won’t increase as much as you expected. In some cases, owning a home may decrease satisfaction by soaking up your active leisure time with home maintenance-related tasks.
There can still be good reasons to own a home. For example, an owned home is a hedge against rising rents, but buying a home on the expectation that it will make you happier is likely to lead to disappointment.
Benjamin Felix is the chief investment officer and a portfolio manager at PWL Capital. He co-hosts the Rational Reminder podcast and has a YouTube channel. He is a CFP® professional and a CFA® charterholder.
