A significant component of the American Dream has been homeownership, where individuals opt to rent primarily to save towards a down payment on their future home. However, with the cost of current housing skyrocketing across the nation, the wealthiest Americans are a rising faction in the renting market, and developers and designers are starting to take notice and cater to the whims of these millionaire renters.
According to data from IPUMS at the University of Minnesota, from 2017 to 2022, the share of “forever renters” with an annual income of $750,000 rose to 10.5 percent, marking the highest level of wealthy renters since the survey tracking began in the mid-2000s.
Another historic marking for wealthy renters is, for households with a net worth ranked in the top 5 percent, the share of renters jumped to 3.7 percent in 2022 – a record high dating back to the 1990s – according to the Federal Reserve’s Survey of Consumer Finance.
While individual states have not broken down recent data, the rise of millionaire renters is playing out nationwide. According to Bankrate, there is no single market among the top 50 in the country where buying is currently cheaper than renting.
Several macroeconomic trends may help better understand the surge in luxury home rentals over homeownership.
The switch to renting among the wealthiest Americans is due to many of the same challenges other Americans face: housing affordability struggles, though to a much lesser degree. As mortgage rates and prices continue to jump, America’s wealthiest are choosing to rent, opting to put their money into stocks and investments rather than housing costs. Other factors scarring this group away are property taxes and insurance premiums.
Fewer Homes on the Market
With fewer available homes on the market due to homeowners who made the big purchase during ultra-low raters during the pandemic and are reluctant to sell, the wealthy are finding better opportunities among luxury rentals. Market options are also limited due to the construction of new developments slowing down during the pandemic; however, according to BNC, construction is ramping up, but it may take some time before current demands can be met.
As wealthy would-be buyers can afford to wait to purchase their dream homes, many of these individuals may be waiting for rates to lower and see an increase in housing options before they make such an investment—choosing to avoid overpaying for a property now that may ultimately lose its value.
As affluent renters select to lock in monthly rates while waiting for a better deal, developers are tasked with these shifting winds. One developer, Philadelphia-based firm Post Brothers, is creating properties with more extensive floor plans and playrooms that may better cater to wealthier renters looking to stay for an extended period.
A Whirlwind Market
Other changes in market winds include high-net-worth individuals who split their time between different properties and probably don’t want to deal with the headaches and commitment of buying a home.
“Think of it like choosing a car for a road trip — sometimes you want the sleek convertible because it suits the journey better,” said Don Wede, president of Heartland Funding, a real estate company. “Renting allows them the freedom to switch homes as easily as trying out different cars. Plus, it’s like having a chauffeur for home repairs — the landlord takes care of the maintenance, so they can focus on enjoying their living experience.”
Even if you can afford a home, it doesn’t mean that you should, mainly as renting relieves you of paying for the maintenance, insurance, property taxes, and other home ownership costs. With the average rent payment in the country currently standing at just over $1,700, as opposed to the average mortgage payment of $2,317, many wealthy individuals recognize the advantages of renting, preferring to save money by renting and putting their money to work elsewhere.
