Year-by-year snapshot (sold-today net worth)
Owner net worth = home equity (home value − mortgage − selling costs − home capital gains tax) + after-tax investment account.
Renter net worth = down payment + closing costs + every monthly cost differential, all compounded at the S&P return and reduced by investment capital gains tax at exit.
Both lines assume the renter starts with the same liquid wealth the owner spent on the down payment + closing.
Assumptions & limitations
Included: mortgage amortization, Prop 13 assessed-value growth at the lower of inflation or the cap, monthly cost differential reinvested at the S&P return, mortgage interest deduction (with $750K loan limit) and SALT-capped property-tax deduction, selling costs and capital gains taxes at exit (with the $250K/$500K primary-residence exclusion).
How "Inflation" is used: only grows the owner-side recurring costs that scale with general prices — insurance, HOA, maintenance — and is the lower bound for Prop 13 reassessment. Rent growth, home appreciation, and S&P return are independent inputs you must coordinate yourself if you want a self-consistent inflation scenario (e.g., if you set inflation to 5%, you probably also want to bump rent growth and appreciation).
Not included: PMI for <20% down (add ~0.5–1.0%/yr of loan to the owner's costs if applicable), mortgage points, earthquake insurance (CEA: $1,250–2,750/yr per $500K coverage; ~90% of CA owners skip it due to high deductibles), renter's insurance (~$15–30/mo, small), rent control benefits (units built before 1979 in SF), moving costs, basis adjustments for capital improvements, dividend tax drag on the S&P account (the 7% input is assumed to already be net of typical drag), and CA state capital gains tax (currently federal-only — set the CG rate to ~33% to approximate combined fed+CA).
SALT cap timeline: $40,400 for 2026, growing 1%/yr through 2029, then reverts to $10,000 in 2030. Phases down for MAGI > $505K MFJ at a 30% rate, with a $10K floor. Set the SALT cap input manually if your situation doesn't match the default.
Beyond the loan term: if your horizon extends past the loan term, the owner's housing cost drops to just tax + insurance + maintenance, and they begin investing the freed-up cash flow. Bump the horizon to 35–50 years to see this kick in.
Nominal vs real: all dollar amounts are nominal. The relative comparison between owner and renter is unaffected by inflation, but absolute future dollars will buy less.
Sanity checks against expert rules: Ben Felix's "5% rule" approximates owning's annual unrecoverable cost as 1% prop tax + 1% maintenance + 3% cost of capital ≈ 5% of home value. For a $1M home that's ~$4,200/mo — if you can rent the same place for less, renting wins on cash flow before tax effects and appreciation. The NYTimes calculator follows the same renter-invests-the-differential framework used here.