This scenario is true only if you're paying significantly lower in rent than in mortgage, and you have rent control. The increase in the costs of homeownership - i.e. property taxes and insurance - are something that will be passed on to the renter. If I'm renting to you, and my taxes go up, so does your rent. A lot of your assumptions seem to work off of the idea that a rent is stagnant and low while a mortgage is high and variable. I know mortgages are different everywhere (in Canada, all mortgages reset after a certain time, iirc), but in the US, that's not the case. Our mortgage will stay the same for the entire length of the loan. It will be paid off when we're 56 if we don't prepay, which we plan to begin in the next few years.
Our insurance and taxes combined are less than $2,000 a year. We do pay $275 more per month than when we rented, though we have a larger home and yard now. I calculated a 5% return (which I know is low but trusty) assuming that we put in $3,300 (275*12) annually until we're 56. I then assumed a 5% growth rate through 34 years (or until we're 90). We would make $13,539.77 annually from that money. Will that be enough to live on until 2070? Rent here is low - $600-$700 for a basic 2BR apartment. If that number stayed pretty steady, we'd be able to pay rent from our interest. If we look at a historical calculation, however, something that cost $600 30 years ago would cost $1700 today based on inflation. Under that likely scenario, then no, we wouldn't be able to continue to pay rent until we're 90 simply by saving the difference between renting and owning (nevermind things we can do to add savings by owning, such as deducting interest, installing energy efficient appliances, windows, etc.). I don't see how your calculations showed that was possible in 10 years unless there's a massive difference in rental prices vs. mortgage prices.
Another piece to consider that likely informs many people's views is that in middle-class America, passing on the primary residence often is the largest part of one's children's inheritance. If people don't accumulate anything else, the idea is that they will pay off their house. Their children then can sell the house and keep that money. Our house was built in 1938. A couple bought it then for $12,000. Their heirs sold it in 2002 for $90,000. With no mortgage on the property any longer, they made out really well. Now, I understand that some people don't care about giving their children an inheritance, but I think that's an indirect factor in owning for many people.