User Cost of Housing
How we calculate the true annual cost of ownership vs. renting using the Poterba framework.
User Cost of Housing Model
Based on the Poterba (1984) framework, we compute the annual user cost of ownership as:
Buy Cost = Mortgage + Property Tax + Insurance + Maintenance + HOA - Tax Deductions - Principal Buildup - Appreciation
This is compared against the annual rent cost (monthly rent x 12 + renter's insurance) escalated at the local BLS CPI Shelter rate. The model captures the full economic cost of both options, not just the monthly payment.