The American household is changing as homeownership is not a priority for everyone, especially not for Millennials and Gen Zs. The share of affluent Americans choosing to live in rental homes has ballooned in recent years according to a new analysis by RentCafe. 43 million families are currently living in apartments, the highest level in half a century, and renting is proving popular even among high-earners who are able to buy but prefer to rent their home instead.
The Rent Cafe analysis of IPUMS (Integrated Public Use Microdata Series), which provides census and survey data from around the world, showed that 2.6 million Americans who were pulling in more than $150,000 a year lived in rentals in 2020—a segment that has grown 82% since 2015, compared to renters overall, which inched up just 3.2 percent in the same time frame. 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.
According to the data, there are now 2.6 million high-earners living in rentals in the U.S. and among them is a new ritzy kind of tenant: the millionaire renter. The share of renter households with incomes exceeding $1 million tripled from 2015 to 2020, growing from 1,068 millionaire renters to 3,381.
While home prices could be considered an obstacle even for high-income renters, what stops some millionaires from stepping on the homeownership ladder? According to Rent Cafe, it might be an issue of comfort and smart investing. Often homebuyers are struck with the realization that their new property needs more maintenance than expected. Couple this with the flexibility of moving between cities to pursue new career opportunities and you can see why even the most affluent sometimes choose to rent their home. Additionally, some high-earners, including some millionaires, prefer to funnel their cash into other types of assets that hold value.
According to a survey from Charles Schwab, Americans consider that an average net worth of 1.1 million represents being “financially comfortable”. And 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. This mindset is mirrored among millionaire Millennials, too, who, unlike their Baby Boomer parents, decide to rent despite having the financial resources to own.
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.
So, what do millionaire renters do for a living? 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).
Wealthy renters live mainly on the coasts, specifically in California, New York and Washington, D.C. San Francisco, CA held second place in the number of millionaire renter households, but had the biggest spike between 2015 and 2020. Bt high-income renters — those who earn at least $150,000 per year — are also growing nationwide. 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, WA taking the lead as the fastest-growing high-income renter hotspot, followed closely by Miami, FL and Portland, OR.
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