According to RentCafe, the annual increase in the number of high-income renter-occupied households has been consistently faster compared to owner-occupied households. Why do you think this shift has occurred? Keep reading this article by RentCafe to learn why.
A relatively new breed of renter challenges homeownership bias among top-earners in the U.S. The most recent U.S. Census data tells us that the annual increase in the number of high-income renter-occupied households – defined here as those earning $150,000 or more – has been consistently faster than owner-occupied households. As a matter of fact, from 2007 to 2017, the numbers of those rich enough to own, yet who still prefer to rent grew by 175%. That’s compared to a decade-long increase of 67% in homeowners within the same income bracket.
So why do those who have the means to buy still opt for renting? Be it a post-housing crisis mentality or a new millennial approach to housing and accommodation, it becomes more and more obvious that there is a shift in renter demographics and the way the real estate industry is responding. For some, it’s a lifestyle choice — monthly rent is a smaller price to pay for having more flexibility or for being able to live closer to jobs, hip city centers, and art districts. For others, not even their pretty paycheck can keep up with the fast-paced increase in home prices.
Top-Earning Renters Are Growing Faster than Any Other Renter Income Bracket
Of the 43.3 million renters nationwide, 2.1 million are top earners. High-income renters represent the demographic that experienced the largest boom across the U.S. given that, back in 2007, there were only 774,000.
Below is the breakdown of changes by income in the number of renter households from 2007 to 2017:
- over $150K — ↑175%
- $100K – $150K — ↑111%
- $75K – $100K — ↑66%
- $50K – $75K — ↑32%
- less than $50K —↓0.2%
Top Cities that Saw the Highest Increase in Wealthy Renter Households
According to the U.S. Census Bureau, the following 20 cities have seen the most significant increase in the number of wealthy renter-occupied households in the last decade. Here are those values compared to changes in the number of homeowners in the same income group:
In Seattle, WA, renter-occupied households earning over $150K per year multiplied 7.4 times, the most spectacular increase in the country. Thanks to a constantly growing, highly-paid job market in IT and quality management, the number of wealthy renters in the decade’s fastest-growing big city went from 2,900 in 2007 to 21,300 ten years later. Meanwhile, owner-occupied households making $150K or more have doubled, from 31,400 to 63,300, in the same period of time.
A strong STEM job growth in Charlotte, NC placed the city second on the list. The number of high-income households living in rentals has multiplied by 5 in 10 years (1,600 in 2007 vs 8,100 in 2017). As for wealthy homeowners, in 2017 they had increased 1.5 times over 2007, from 26,600 to 40,600.
In third place comes Baltimore, MD, where wealthy renter-occupied households multiplied by 5 in the past decade. The actual numbers show us that the richer population in Baltimore prefers to own since there are more than twice as many wealthy owners than renters – 19,000 homeowners (up from 11,300) as opposed to 5,700 renters (up from 1,100). That being said, wealthy owner-occupied households within the same income bracket multiplied by a much more modest 1.7.
Top Urban Areas with the Highest Numbers of Wealthy Renter Households
This trend of high-income renter-occupied households is best represented in urban areas where the median incomes are the highest in the U.S. Arguably, $150K may not be enough to qualify as high-income in places like San Francisco or New York City, which is probably why the two cities have the largest numbers of renter-occupied households inside this bracket.
NYC’s upper-bracket renters outpace owners not only in net numbers but also in the rate of increase. Wealthy renter-occupied households in New York doubled in the course of a decade, going from 125,000 in 2007 to the largest number of wealthy renters in the U.S. today — 249,000. As for people earning $150K or more who own a home in the Big Apple, their numbers have increased by a lesser 63% over the course of a decade (189,000 in 2007 to 306,000 ten years later).
Next up is San Francisco with 71,000, and L.A. comes in third with 67,000 families making $150K or more who choose to rent.
San Francisco’s Wealthy Renters Outnumber Wealthy Owners
The share of upper-bracket renters nationwide has more than doubled in 2017 compared to a decade before, going from 2% to 4.9% of all renters. But in some markets like San Francisco and San Jose, that share is much larger. The two West-Coast cities boasting the top two biggest slices of the top-earning renter demographic.
The largest share of high-income renters in the U.S. is reserved for San Francisco, where 31% of renter households earn over $150,000 annually. In fact, the only other renter demographic that holds a larger share is that of San Franciscans who make less than $50,000 per year (33.9%).
San Francisco is home to more wealthy renters than homeowners, with the 71,400 top-earning renter households outnumbering the 62,400 high-income owners. The number of wealthy owner-occupied households went from 40,100 in 2007 to 62,400 in 2017. That translates into a respectable 56% increase, but it pales in comparison to the 240% increase experienced by wealthy renter-occupied households (from 21,000 in 2007 to 71,400 in 2017).
Boston and San Diego Enjoy a Bigger Share of Rich Renters than L.A.
Urban areas are the preferred rental playground among top earners, however, Los Angeles seems to be the exception. You can find a bigger share of high-income renter households in cities like Washington, D.C. or Seattle than you will in Los Angeles. As a matter of fact, there are seven other cities that hold a bigger share of wealthy renters than the popular City of Angels, where only 7.6% of those who rent a home have an income above $150K. For example, 13.9% of Washington, D.C. renters and 12% of those renting in Seattle earn over $150K. The same goes for Boston (11%) and San Diego (10%).
Between 2013 and 2017, the median rent price in Los Angeles increased by 23%, whereas the median sale price increased by 43% in the same five-year period. By contrast, as much as 54% of renters in L.A. earn less than $50,000. This goes to show that, despite astronomic rent prices in expensive urban centers, for most people, it’s still costlier to buy, regardless of income. The fact that overall home prices have been rising faster than rents remains one of the main factors that keeps even higher-earning families in rent for longer.
The attitude toward renting at any income level is changing. With renters becoming the majority population in many U.S. cities, the spike in the national population of wealthy renter households could mean a change in attitude toward an American Dream that no longer belongs to this generation of renters.
Contact Jeff Cline at SVN | SFRhub Advisors
SVN | SFRhub Advisors, LLC
2400 E. Arizona Biltmore Circle
Phoenix, AZ 85016