Potential Homebuyers Opting to Rent Rather Than Buy
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There are now 2.6 million high-earners living in rentals in the U.S. and among them are many millionaire renters.
With 43 million families living in apartments, the highest level in half a century, renting is popular even among high-earners who are able to buy but prefer to rent their home instead. According to the most recent analysis of IPUMS data from RentCafe shows that the number of renters with annual incomes of over $150,000 grew by 82% between 2015 and 2020, faster than renters overall. There are now 2.6 million high-earners living in rentals in the U.S. and among them are many millionaire renters.
High-income renters earning $150,000 or more saw rapid growth of 82% in five years — the most significant increase among all income groups — followed by renter households with annual incomes between $100,000 and $150,000. At the same time, middle-income renters grew at a slower pace, but still posted double-digit increases. The only segment to register a drop was that of households earning less than $50,000, which decreased by 11.2%. This is explained by low-income renters moving in with family members when the pandemic started, as well as households whose earnings grew and transitioned to higher income groups.
Top Cities with Biggest Increase in High-Income Renter Households
San Jose, California
Top High-Income Renter Hotspots
New York, New York
San Francisco, California
San Jose, California
What makes those who can afford to buy turn to renting?
Part of the answer may be found in high home prices, which made homeownership less attractive, especially for those well-heeled residents in pricey locations. This becomes even more obvious when comparing home prices to renter income in the cities with the highest increases in high-income renters.
The number of renter households with incomes of more than $1 million also reached a record high of 3,381 in 2020 — three times as many as there were in 2015, when 1,068 millionaires were renting their homes in the U.S., according to the most recent data from IPUMS.
According to a survey from Charles Schwab, Americans consider that an average net worth of 1.1 million represents being financially comfortable. Data also showed that it seems that being financially comfortable is a Millennial trait, with this demographic making up a majority (28%) of millionaire renters. For many Millennials of homebuying age and with above-average incomes, lifestyle renting is a better choice than owning.
Gen X follows closely behind, making up 23% of millionaire renter homes. As the first generation that redefined and broke away from the American dream of homeownership, Gen Xers initially turned to renting due to the strain brought on by the 2008 housing crisis. Today, they’re following the same lifestyle renting trends as their younger counterparts.
Data shows that the most popular jobs among millionaire renters are in management positions (1,653); followed by securities, commodities and financial services sales agents (519); chief executives and legislators (468); software developers (459); and lawyers, judges, magistrates and other judicial workers (421).
According to IPUMS data, the rental home size of millionaire households varies across the U.S., with three-bedroom homes being the national average. Millionaire renters in Washington, D.C. have the largest homes, on average, five bedrooms, followed by Jersey City, NJ with four. Alternatively, in cities like Los Angeles, San Francisco and New York, the average home size is three bedrooms.
Wealthy renters live mainly on the coasts, specifically in California, New York and Washington, D.C. San Francisco, California held second place in the number of millionaire renter households, but had the biggest spike between 2015 and 2020. The golden city’s rental homes inhabited by millionaires multiplied a whopping 17 times (1,629%), growing from 17 households in 2015 to a total of 294 in 2020. California is a millionaire magnet, as the number of seven-digit income renters also rose significantly in Los Angeles, by 361%, to 143 in 2020. Washington, D.C. has 121 renters who earn over one million dollars per year.
Major urban areas are the millionaire renter hotspots, with New York at the top of the list with the highest number. Data also found that 2,457 renter households earn over a million dollars per year, three-quarters of the national total.
Seattle, Miami & Portland boast the largest increase in high-income renters in the U.S.
High-income renters — those who earn at least $150,000 per year — are growing across the nation. According to U.S. Census data, in 14 cities across the U.S., high-income tenants more than doubled in numbers in the last five years. Specifically, the 10 cities that saw the most significant increases in the number of rich renters are scattered mostly throughout the West and the South, with Seattle, Washington taking the lead as the fastest-growing high-income renter hotspot.
To that end, high-income renters nearly tripled in Seattle (169%) compared to 2015, making it the nation’s fastest-growing area for affluent renters. As a matter of fact, 17% of renter households in Emerald City have an income of over $150,000. Here, their number increased from 12,305 to 33,111 in just five years — thanks, in part, to a healthy and diverse job market. Technology titans, such as Amazon and Microsoft, are fueling the employment needs of Seattleites, along with a booming biotech industry. Despite this, not even well-off Seattleites could keep pace with the growth of home prices in the last 5 years: 58%.
A similar spike of 166% in wealthy renters pushes Miami into second place. Granted, homeownership in Miami-Dade County has been dropping consistently even before the pandemic. So, it comes as no surprise that 2020 saw an influx of rich renters, reaching a high of 8,653 households (compared to 3,258 just five years prior).
In third place, Portland, OR registered a 148% rise in the number of high-earning renters, reaching 9,503 as of 2020. Despite salary increases rivaling home price increases, some well-off Portlanders still choose to rent.
When looking at the total number of high-income renter households, New York is the "it" place for renters that earn over $150,000 per year. The Big Apple had a total of 296,594 such households in 2020, representing a share of 11% of the national total. On the opposite coast, Los Angeles lags behind New York with 82,655 high-income renter households, despite registering considerable growth in the last five years. Two other California cities are in the top five: San Francisco and San Jose with 80,020 households and 34,585 respectively, while Chicago, IL takes fourth place with 50,999.
Overall, incomes on the West Coast are higher than elsewhere in the nation. In particular, San Francisco has the highest percentage of high-income households who rent their home, with 36% registered in 2020, compared to 19% in 2015. The Bay Area city’s high median income and high-paying jobs are the main explanation behind San Francisco’s 86% growth in rich renters in this timeframe. In a similar situation are San Jose, California and Seattle, with high-income rental homes representing 25% and 17%, respectively, of the total renter households.
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