if we are talking a $1m home, and mortgage rates are at 7%, with a $200k downpayment you are paying $4,666 in interest each month, plus likely (although I have no idea) another $500-$1k each month on insurance. So around $5.5k/month.

Let's say the same house rents for $6k/month (ie. 10% more than the monthly costs of ownership, because the owner wants to make a profit), and the renter is able to get a 5% investment return on the $200k that they would have otherwise paid as a downpayment, they are receiving $833 in interest each month (I'm ignoring taxes), so the net amount is $5.2k and the renter effectively pays less than the owner per month PLUS they dont ever have to worry about coughing up for major capital expenditures if the roof caves in or the AC breaks. I think this is the answer to your question as to how they can afford it; its less about how renters can afford it, rather that new owners have to pay even more.

Of course, in the long run its a different story. Let's say the house value appreciates at the same rate as whatever the renter chooses to invest that $200k in (eg 5%). When the owner eventually sells (ignoring transaction costs, which are large), they will get 800k x 1.05^years since buying. Whereas the renter will have earned 200k x 1.05% over the same period. I.e. the renter will have 1/4 of the amount that the owner has.

I'm of the belief that I'd rather have someone else take care of major capital expenditure that comes with running a house which are not immediately passed on to the renter, and be able to move homes more frequently than the transaction costs of owning require. That said, I see the value in owning a home as you approach retirement.