That’s true, I didn’t figure in rental yields at all. Consider it a first order approximation. Would anyone rent if it was more affordable to buy?
There’s plenty of beneficial flexibility afforded by renting, even if you can afford to do either one.
Plus, if housing doesn’t go up in value like an investment, why would you want to tie up a downpayment and tie yourself down, losing money all the while? You’d have more incentive to rent and invest your down payment money.
I’m pro owner-occupied housing. I think it’s good for families and good for the community/society. But in the hypothetical where it grows more slowly than inflation, renting starts to look a lot better than it does currently.
Whether renting or buying is more expensive depends on your market’s outlook for property prices. But in an environment where they don’t go up, I’d definitely expect renting to cost more.