How Leasing a Home Can Help Residents Improve Financial Stability and Build a Strong Financial Future

Housing Market Highlights:

• While owning a home remains a hallmark of the American dream, it’s not the only housing option or path to creating wealth over time.

• Renting is cheaper than owning a home with a mortgage in the 100 largest metropolitan areas across the U.S., according to recent data from LendingTree.

• The share of people ages 25 to 39 making transfers to investment accounts, excluding 401(k)s, more than tripled between 2013 and 2023 to 14.4% , outpacing increases among those 40 and over.

• In a hypothetical by Moody’s , an individual who chose to invest the money saved by renting would be wealthier – by $1,194,126 – after 30 years of monthly payments compared to a homeowner.

Alternative Avenues to Building Wealth

The long-awaited housing market rebound has yet to materialize, with many Americans facing high barriers to entry amid steep interest rates and elevated home prices. As a result, many people are exploring alternative pathways to establish and improve financial stability that don’t involve a mortgage. Leasing a home remains a viable strategy for building wealth, as it provides residents with a menu of options: saving their money, building up their credit, and reinvesting capital into the stock market.

A recent Wall Street Journal article highlights how a growing share of young people in Gen Z are redirecting their wealth toward the stock market, uncertain that homeownership remains the best strategy for building long-term wealth. Between 2013 and 2023, the share of people aged 25 to 39 making annual transfers to investment accounts, excluding 401(k)s, increased more than threefold to 14.4%. For many of these young investors, renting a home and investing in the stock market is more accessible and shows more immediate returns than becoming a first-time homebuyer.

The Pros of Renting Under Current Market Constraints

Source: Axios graph with data from a recent LendingTree analysis

In today’s increasingly competitive housing market, renting is a more accessible and affordable option than owning a home with a mortgage across many major U.S. metropolitan areas. According to a recent analysis by LendingTree , an online lending marketplace, U.S. homeowners with a mortgage pay 36.9% more per month than renters.

Renting is increasingly a preferred option for many individuals and families, as it affords them greater flexibility with their home and finances. Purchasing a home involves high upfront costs, such as large down payments, high closing costs, and, often, immediate repair costs or unexpected maintenance expenses. Residents who lease their homes are not responsible for as many initial costs and therefore have more opportunities to spend their money as they choose – whether that’s saving or investing it – and can ultimately improve their financial stability over time. Individuals who lease their homes can use any extra capital to pay off outstanding debt and maximize their income and savings, according to CNBC . In fact, a hypothetical by Moody’s shows that an individual who chose to invest the money saved when renting would be $1,194,126 wealthier than a homeowner after 30 years of monthly payments, albeit under specific assumptions.

Building Credit while Renting

For many people, it can take several years to save up for a down payment so they can afford to purchase a home. Some potential homebuyers face even higher obstacles to accessing mortgages due to minimum credit score requirements that have historically shut many people out of the housing market. For those who rent, many property management companies use rent reporting services to notify the major credit bureaus of on-time rent payments. A report published by the Urban Institute confirms that positive rent reporting (many property management companies report only on-time payments) ultimately helps residents establish a payment history that contributes to their credit scores and enables them to improve or achieve financial stability.

Building on this evidence, and the opportunity to turn on-time rent into a financial stepping stone, Invitation Homes proudly partners with the rental reporting platform and fintech company Esusu to help our residents improve their credit scores and put more money toward their goals, whether that’s homeownership or investing. Through this partnership, we have helped nearly 12,000 of our residents establish credit scores for the first time and have seen about 45% of participating residents improve their credit over time, with an average increase of 50+ credit points and with 8% moving their credit score from subprime to prime.[A1] [A2] It’s a win-win for our residents since we do not report late rent, and we’re proud of the impact that we’ve had in helping to build and enhance our residents’ credit scores, and thus their wealth, in recent years.