Buying the house I rent would cost me $20,350 a month. My rent is $7,200. Same house, same address, same school district. Owning costs nearly three times renting, before a dollar of principal. That’s not a close call. It’s an arbitrage.
The math, honestly accounted. Buying the house would cost about $2.8 million. With 20% down and an interest-only loan at 6.75%, the monthly unrecoverable cost of owning is roughly $12,600 of interest, $2,800 of property tax, $350 of insurance, $2,300 of upkeep, and $2,300 of opportunity cost on the $560,000 down payment. Call it $20,350 a month, against $7,200 of rent.
Run those numbers through the NYT rent-vs-buy calculator and it says rent, by a mile. And here’s the thing: the calculator works beautifully. Its logic is honest - add up the unrecoverable costs of owning and compare them to rent. In most of America the answer is sane: price-to-rent of 15 or 20, and buying wins if you stay long enough. The tool isn’t broken. My market is just that imbalanced. The calculator assumes rent and purchase price come from the same cost structure, and in California they don’t: your rent is priced off your landlord’s 1988 tax basis, while the purchase price is 2026 retail with a 2026 tax bill attached.
Here’s why: Prop 13. My landlord’s property tax is assessed on a basis set decades ago - maybe $13,000 a year. A buyer today pays 1.2% of today’s price: $33,600. That $20,000-a-year gap is baked into my rent. In premium California suburbs where the typical home hasn’t sold in ten years, the entire rental stock is priced off ancient tax bases while the entire for-sale stock is priced at retail. And the asymmetry feeds itself: owners can’t move without resetting their own basis, so they stay, so turnover drops, so every rental that exists carries the old economics.
Which means the real arbitrage isn’t renting versus buying. It’s inheriting someone’s 1988 tax basis versus resetting it to 2026. A 100-year lease would capture it perfectly - ownership economics without the reset. Nobody offers one, but a long tenancy in a Prop 13 state is exactly that, informally, renewed every year the landlord doesn’t sell.
To be fair, the house doesn’t sit still. Give the buyer 3.5% annual appreciation - generous but sane for a premium suburb - and run both balance sheets in cash. The owner pays $18,050 a month in cash carrying costs. Five years in, the house is worth $3.33 million; against the $2.24 million loan, that’s $1.09 million of equity. The renter kept the $560,000 and invested it, plus the $10,850 monthly cash difference, at 7%: $1.56 million. Ten years: $1.71 million of equity against $2.98 million. The renter is ahead by $475,000 at five years and $1.27 million at ten - the carrying costs compound faster than the house.
Appreciation narrows the gap; it doesn’t close it. Breakeven takes about 6.3% annual appreciation, sustained for a decade, on a $2.8 million house. That’s not an argument for buying. That’s a bet that the hottest housing market in the country stays the hottest.
And renting has real costs: rent rises while mortgages don’t, there’s no forced savings, and a landlord sale can end the arrangement. Where the ratio isn’t broken, buying wins on schedule in most of the country. This arbitrage exists in specific zip codes, not everywhere.
So the full play in those zip codes: rent the $2.8 million house for $7,200, and invest the difference. That’s $10,850 a month in cash savings, plus the $560,000 that never became a down payment, and that compounds. If I rent this house for 5 years with market returns - 7% assumed - that’s $1.56 million. For 10 years, that’s $2.98 million: more than the house, paid to yourself instead of to interest and taxes. If you want to own housing, own it where rent covers the asset - not where you’re buying someone else’s tax reset. Let the landlord keep his 1988 basis. He’s earning less than he thinks. You’re paying less than you should.
And if you buy anyway? It’s a luxury to pay for the right to personalize your home. Just like a monogrammed Birkin, it’s not a sound financial decision. But it’s a luxury you’re welcome to treat yourself to.
Assumptions
This is a specific rent-versus-buy scenario, not a verdict on every house. The return assumptions and cash-flow rules decide the result.
- Monthly cost: $2.8 million price x 20% down = $560,000; loan = $2.24 million. Interest-only at 6.75% costs $12,600 monthly. Tax at 1.2% of price is $33,600 annually/$2,800 monthly. Add $350 insurance and $2,300 upkeep: $18,050 monthly cash cost. Add $2,300 assumed opportunity cost: $20,350 unrecoverable cost, 2.83 times $7,200 rent. The opportunity-cost input corresponds to about 4.93% annually on the down payment; it is not the later 7% portfolio assumption.
- Cash invested: $18,050 - $7,200 = $10,850 monthly. The renter invests that difference plus the $560,000 down payment. Do not also deduct opportunity cost in the portfolio simulation: that would count it twice. The interest-only debt remains $2.24 million; no principal repayment is modeled.
- House growth: $2.8 million x 1.035^5 = about $3.326 million; less debt = $1.086 million equity. At ten years, value is about $3.950 million and equity $1.710 million. The model uses constant 3.5% appreciation, not a forecast.
- Portfolio growth and rounding: The stated $1.56 million/$2.98 million renter balances and $475,000/$1.27 million leads depend on the exact compounding and contribution timing, which are not specified in the original calculation. With 7% effective annual return and end-of-month deposits, the balances are about $1.558 million and $2.958 million and the leads about $472,000 and $1.248 million. Using 7%/12 as the monthly rate instead gives about $1.571 million/$3.003 million. These nearby conventions do not reproduce every displayed figure exactly.
- Breakeven: Under the 7%-effective-annual/end-of-month version, equal ten-year terminal balances require about 6.38% annual home appreciation before sale costs and taxes, close to the article’s roughly 6.3%. The result changes with rent growth, maintenance, mortgage terms and return assumptions.
- What is outside the base case: Purchase/sale costs, income and capital-gains taxes, deductions, rent increases, property-tax assessment growth, inflation and portfolio volatility are not modeled in the displayed fixed-cash-flow calculation. A proper sensitivity test must include them. The landlord’s 1988 basis and roughly $13,000 tax bill are illustrative, not a verified property record. $33,600 - $13,000 = $20,600, rounded to $20,000. The 15-20 price-to-rent examples, ten-year turnover claim and hypothetical 100-year lease are context, not measured forecasts for this property. Annual rent of $86,400 puts this home’s price-to-rent ratio at about 32.4.
- Calculator: The NYT calculator is a comparison tool, not a saved reproduction of our inputs. The article does not provide a saved calculator run.
Have better inputs, a missing cost or evidence that changes the result? Share it . We will update our assumptions and conclusions to reflect the most accurate representation.